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ImmunoGen, Inc. (NASDAQ:IMGN)

Q4 2014 Results Earnings Conference Call

August 1, 2014 8:00 a.m. ET

Executives

Carol Hausner - Executive Director, Investor Relations and Corporate Communications

Daniel Junius - President and Chief Executive Officer

Charles Morris - Executive Vice President and Chief Development Officer

David Johnston - Executive Vice President and Chief Financial Officer

Analysts

Adnan Butt – RBC Capital Markets

Brian Klein - Stifel Nicolaus

Thomas Wei - Jefferies

Andrew Peters - UBS

Matthew Harrison - Morgan Stanley

Michael Schmidt - Leerink Partners

Jason Kantor - Credit Suisse

John Newman - Canaccord Genuity

Whitney Ijem - JP Morgan

Operator

Good day and welcome everyone to this ImmunoGen Fourth Quarter Fiscal Year 2014 Financial Results Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Carol Hausner

Thank you, good morning. At 6.30 this morning, we issued a press release that summarizes our financial results for our fourth quarter and fiscal year ended June 30. I hope you've all had a chance to review it. If not, it's available on our website.

During today's call, we will make forward-looking statements. Our actual results may differ materially from such statements and descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which also can be accessed through our website.

In our call today, our Chief Executive Officer, Dan Junius, will provide an update on ImmunoGen; our Chief Development Officer Dr. Charlie Morris will discuss our wholly owned compounds in more detail, and our Chief Financial Officer, Dave Johnston, will discuss our financial results and guidance. We will then open the call to questions. Dan?

Daniel Junius

Thank you, Carol and good morning, everybody. In the few months since our last quarterly update, promising clinical data has been reported for several compounds with ImmunoGen's technology. We have made solid progress advancing wholly owned product candidates and there has been notable partner progress beyond reported clinical data.

ImmunoGen's recognized for our leadership in ADCs with multiple major companies advancing innovative therapies with our technology. There are now nine novel agents in the clinic through our partnerships, recently expanded with Sanofi's initiation of clinical testing with this ADC SAR408701, which targets CCAM, a target is on a variety of solid tumors including colorectal, lung and gastric cancer. Sanofi now has three ADCs in the clinic with our technology as well as the CD38-targeting naked antibody therapeutic SAR650984.

We are pleased to see a growing number of compounds with our technology demonstrating that they can make a difference for patients. First with Kadcyla, which favorable levels of objective responses in early clinical testing and improved progression free and overall survival with fewer tolerability issues in its lead Phase III trial. This important medicine is gaining regulatory approvals and becoming available to physicians and their patients in an increasing number of countries around the world.

Five other uses of Kadcyla are now being evaluated in Phase III trials with Roche projecting readout on the next one, MARIANNE, later this year. The oral presentation on Biotest BT-062 at ASH last December showed how this ADC was making a difference for patients with relapsed refractory multiple myeloma. It generated a high level of objective responses when used when used in combination with Revlimid and Dexamethasone, even against disease refractory to these agents. And in June, the oral presentation on Sanofi's SAR3419 at ASCO showed how this ADC, a product from ImmunoGen research was delivering high response rates in patients with hard to treat disease, relapsed diffuse large B-cell lymphoma in a Phase II trial.

Initial evidence of activity has also been reported for our lead wholly owned compounds, IMGN853 and IMGN529 during their does finding phase. We are investing to determine as quickly as possible the therapeutic potential of each of our wholly owned compounds. This involves not only properly enrolling patients in trials but also conducting the trials in a manner that provides a fair assessment of each compound. Hitting the right patients, the right does, the right schedule and so on. You will hear more of this from Charlie in a moment.

Our financials and guidance reflect this investment. Importantly, we believe that we have sufficient financial resources to advance our current clinical compounds to proof of concept. Iterating such data should markedly expand our options for pursuing each compound's full potential. I will now ask Charlie to discuss our product programs in more detail. Charlie?

Charles Morris

Thank you, Dan, and good morning everybody. I will start with our most advanced compound which is IMGN853, its target, folate receptor alpha is highly expressed for many ovarian and endometrial cancers. We have established the recommended Phase II dose for 853 when administered once every three weeks. We are now beginning to assessments specifically for the treatment of platinum-resistant ovarian cancer and relapsed refractory endometrial cancer. As you will recall, we saw evidence of single agent activity with 853 in both of these cancer types during dose finding.

This activity includes confirmed [pulse] responses, CA125 responses and long-term disease stabilization. And were seen in patients whose tumors highly expressed 853 target consistent with its mechanism of action. This initial evaluation of efficacy, patients will be pre-screened to ensure a high level of target expression because we believe this will be an important factor in patient selection. Analysis we have conducted suggests that administering 853 more frequently than once every three week may in fact further enhance its benefit. Specifically these analyses supported the schedule that we are looking at, 853 weekly for three weeks and then providing a rest week before returning to weekly administration.

We began assessing this modified weekly schedule earlier this year and are dose escalating. We plan to choose between this schedule and the three-weekly schedule for the next stages of 853 testing. We expect to report findings from these assessments at a package in the first half of 2015, most likely at ASCO. In the interim, we plan to provide updates on program status, such as decisions made about dosing schedule and the status of patient enrollment. Needless to say, there is a significant need for new and better treatments for both ovarian and endometrial cancers.

We recently shared the initial 853 data with opinion leaders in the field and they were impressed with this single agent activity. We now have orphan drug designation for 853 in ovarian cancer and we plant to apply it for endometrial cancer.

I will turn now to our IMGN529 compound. As reported at ASCO this year, we have also already seen clinical activity with 529, this time in the treatment of non-Hodgkin lymphoma. As you recall, 529 comprises our ADC technology used with an ImmunoGen antibody that pre-clinically demonstrated potent anti-cancer activity even without a payload.

529 started showing activity in the clinic at the dose of 0.2 milligram/kilogram, administered once every three weeks. That is well below the active doses of other ADCs with our technology, indicating the activity is likely due to 529's antibody component. We are not expecting getting the benefit of this payload at such low doses. At the time of ASCO, we were at 1 milligram/kilogram dose level and continuing to dose escalate. We believe we are now approaching doses where both the antibody and the payload will contribute to activity. We intent to report the data findings of 529 at ASH, around that time we would expect to be moving 529 into assessment in disease specific patient population. Of course, whether that is the case depends when we encounter the dose limiting toxicity needed to establish 529's maximum tolerated dose.

For IMGN289, dose escalation is also ongoing. IMGN289, you will remember, targets EGFR. Once we have established its recommended Phase II dose, we plan to assess 289 specifically for the treatment of patients who have cancers that are high expressers of EGFR and have limited options today. Specifically this would include squamous cell head and neck cancers, both squamous and non-squamous non-small cell lung cancer. It is hard to predict when we will encounter the dose limiting needed to establish maximum tolerated dose but it could be sometime in the next six months given the relatively high dose at which we started.

Behind these three clinical compounds are additional early-stage product. We reported on the most advanced of these, IMGN779, at the European Hematology Association meeting in June. 779 targets CD33 and is a potential therapy for acute myeloid leukemia. Of particular note, this is the first ADC disclosed that uses one of our new DNA acting payload agents which we call IGMs and has quite an exciting profile pre-clinically.

With that I will turn the call over to Dave to discuss the financials.

David Johnston

Thanks, Charlie. As Carol noted, we issued a press release this morning with our fourth quarter and fiscal year 2014 financial results. I will review the highlights and then provide our financial guidance for our fiscal year 2015.

For the fiscal year ended June 30, 2014, we reported a net loss of $71.4 million or $0.83 per share, inline with our net loss of $72.8 million or $0.87 per share for fiscal year 2013. Our net loss for the fourth quarter of 2014 was $26.5 million, or $0.31 per share compared to a net loss of $21.9 million or $0.26 per share for the same quarter of last year.

Revenues in our fiscal year 2014 were $59.9 million as compared to $35.5 million in fiscal 2013, with most of the increase driven by license and milestone fees and from royalties. For example, revenues from license and milestone fees were $39.5 million in fiscal '14 compared to $24.2 million last year, with the increase primarily due to the greater number of licenses taken by our partners, Novartis and Lily in fiscal 2014 and the associated amortization of their upfront fees previously received.

Royalties on sales of Kadcyla increases to $10.3 million in fiscal 2014, from $600,000 last year. Operating expenses in fiscal 2014 were $131.4 million, compared to $108.5 million in the prior year. These consisted of $107 million or R&D expenses compared with $87.1 million in fiscal 2013 and $24.5 million in G&A expenses compared to $21.5 million last year. Keep in mind that the 2014 R&D expenses included the $12.8 million non-cash charge related to technology rights received and to be received under the collaboration agreement we established with CytomX in January of 2014. R&D spending also reflects expenses related to increase staffing required as we advance our wholly owned pipeline.

We ended our fiscal year with approximately $142.3 million in cash and marketable securities compared with $195 million as of June 30, 2013 and we continue to have no debt. Cash used in operations was $53.7 million in fiscal '14, down from $60.3 million last year. Capital expenditures totaled $8.2 million in fiscal 2014 compared with $3.8 million in fiscal 2013. So our 2014 results were inline or better than our previous financial guidance.

Let's turn to our 2015 guidance. For the fiscal year ending June 30, 2015, we project revenues to be between $100 million and $105 million. Recall that our revenue is driven primarily by, one, cash milestone payments from our partners, two, Kadcyla royalties, and three, recognition of previously deferred revenue, mainly amortization of prior license fees and upfront payments. And we except to see meaningful growth in all three of these areas. We project operating expenses to be between $160 million and $165 million. Operating expenses growth next year is directly related to advancing our wholly owned pipeline and reflects both current clinical trial activity as well as material preparations for later stage trials.

With that, we expect net loss to be between $60 million and $65 million, cash used in operations to be between $55 million and $60 million. Capital expenditures to total between $7 million and $9 million and we expect to end the fiscal year between $75 million and $85 million in cash. We believe our financial resources combined with expected cash inflows from royalties and other revenue sources is enough to fund us through proof of concept for our lead programs into fiscal year 2016.

So with that, let me turn the call back over to Dan.

Daniel Junius

Thank you, Dave. So I think you can see that ImmunoGen has a lot on play this year on a number of fronts. We look forward to providing updates on our wholly owned programs as well as partner compounds over the course of this fiscal year, as we believe the ability to help patients with these therapies will become much better defined for a number of these agents during that time.

Let me recap the various activities. So I will start with our proprietary programs. For IMGN853, we are now beginning evaluation in platinum-resistant ovarian cancer and relapsed endometrial cancer patients with well defined profiles of target expression prior therapies etcetera, dosed once every three weeks. At the same time we are evaluating more frequent dosing. We plan to provide a comprehensive picture of this therapy when we next report data, most likely at ASCO in next June 2015. We expect to disclose on quarterly call major progress, such as which does schedule we have selected.

For IMGN529, we are continuing to dose escalate and we intend to report additional findings at ASH in December. The potential is there to have the recommended Phase II around that time, that would start us moving into further evaluation in disease specific patient population. For IMGN289, we are also continuing to dose escalate. The potential is there to have the recommended Phase II dose in the next six months and then to start further evaluation in disease specific populations once we have that Phase II dose. For 289 we are targeting ASCO 2015 for the presentation of clinical findings.

And finally on the proprietary side for IMGN779, we anticipate presentation of additional pre-clinical data at upcoming conferences and the first would probably be ASH and then with the IND filling sometime in the back half of 2015.

On the partner front, from Roche we understand that the readout for the MARIANNE study is expected later this year. That will leave the data presentation in 2015 and if the data supports it, a regulatory filing in 2015 as well. Similarly for gastric, the data would come out a little bit later in 2015 but again, assuming positive data, the regulatory filing would then be in 2015. And obviously we will see on a quarterly basis how the sales profile is developing for Kadcyla.

For our other partner compounds, we expect more insight into the development programs for several of these with the presentation of the next clinical data expected at ASH for one or more partner compounds, and then we would expect to see further data at subsequent medical conferences. Beyond clinical data, we look for additional compounds to move to IND, that would then lead to clinical starts over the course of this fiscal year and we do look to see several additional licenses being taken by partners over the course of 2015.

So it portends to be a very exciting year for ImmunoGen giving us the opportunity to bring forward advances for cancer patients over the course of this year and beyond. With that let me turn to Carol and we will move to the Q&A phase of the call.

Carol Hausner

Thank you, Dan. Operator, we are now ready to open the call for questions. I would like our analysts to limit their questions to one or two per person and so everyone has a chance to ask questions. You can get back into the queue. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) And we will take our first question from Adnan Butt, RBC Capital Markets.

Adnan Butt – RBC Capital Markets

Congrats on the clinical progress. I will start with a partnered compound, 650984. The partner, Sanofi, seems to imply that there could be a potential faster path. Would you be able to go over some hypothetical scenarios. How it could be accelerated and what is the anti-CD38 landscape? Also what the status is and when data is next? And then second question on guidance for revenues. Dave, would you mind breaking it out? Are you giving royalty guidance as well? Thanks.

Daniel Junius

Good morning, Adnan, it's Dan. For CD38, as it is with most, with all partner compounds, we don’t get ahead of our partners. I am not aware of -- there was extensive data on the 984 CD38 compound at ASCO, but I don’t know that Sanofi has laid out a roadmap from a development standpoint for that. Your reference to the CD38 landscape, I know that there is certainly, there is a compound that’s received breakthrough designation. That is a competitive compound, a naked antibody targeting CD38. And there is one other compound that is being developed. I don’t know whether there is breakthrough designation for that or not.

But while I am aware that Sanofi is quite excited about it, that it is prominent at ASCO not only with the data but also at their booth. As I said, I don’t know that they have necessarily a road map out there. On the revenue side, I will let Dave respond to that.

David Johnston

Yes, Adnan, we are really breaking it out by component. But I think that we are looking forward to significant growth in the royalty area as well as the milestone and amortization of prior [products] (ph).

Adnan Butt – RBC Capital Markets

Dan, would you know if they've applied for breakthrough designation?

Daniel Junius

Not, that I am aware of, Adnan. Yes, I think that would be something that companies take different approaches on, a, whether they announce if they apply or whether they announce if they have received. I wouldn’t be able to respond outside of anything that they would have disclosed.

Operator

And we will take our next question from Brian Klein, Stifel.

Brian Klein - Stifel Nicolaus

First on 853. Just wanted to get a better understanding of the goal of looking at the weekly dose versus the Q3 dose. And it seems that you might be implying that there is some potential for better efficacy, but I'm just wondering how that parlays with the side effect profile that you are seeing so far. And then secondly, in terms of the data that you might present at ASCO, will we also get a chance to see any PFS data on 853?

Charles Morris

So in terms of three-weekly and the weekly, it really comes from the PK modeling and we presented elements of this both at ASR and ASCO this year. And there are a couple of aspect to that. The peak exposures in cycle one seems to have quite a strong co-relation to the instance of some of the ocular side effect -- adverse effect. So that would have led to a lot of the work that we did around adjusting the calculation as well as to helping us identify the dose that we have gone ahead with. The other piece that we saw, there was a relationship between total exposure that was as measured by ADC zero to infinity, seem to be correlating with the initial evidence of activity that we were seeing.

So, obviously, by going to or testing a weekly schedule, seem to have at least a theoretical potential to address both sides of that equation. Because, generally speaking, you would expect to end up with a lower weekly dose than the three weekly dose, so you will peak, your Cmax, would be lower so that would theoretically lower the risk for adverse events. But your AE -- you would expect your AUC to become higher and therefore to have, again, the potential to increase efficacy. Now obviously we don’t have data on that at the moment. So these are sort of theoretical discussions. We like what we have seen with the three-weekly which is why we are continuing to explore that. But we believe that it should give us also some of the patients the opportunity to have the best of both worlds if indeed the data show that. But I don’t know that the dose limiting toxicity on a weekly schedule for example would be as on the three-weekly schedule.

In terms of data at ASCO, we will provide at that point essentially what we have which I know isn't sort of a very comprehensive response but what responses we have, the duration of those -- and I think duration of response is probably at this stage where you, Phase I or in a Phase I extension, I think duration of response is perhaps clinically informative than PFS on the entire population. But certainly we will provide an update on all information that we have at that point.

Brian Klein - Stifel Nicolaus

Great, thanks. And then maybe just one strategy question for Dan. In terms of the Kadcyla royalty, is there any thought about monetizing that to further fund your internal pipeline?

Daniel Junius

Well, that’s one of a variety of avenues we have as things evolve, Brian. I don’t put it as our highest priority. You heard Dave comment about our ability to advance the compounds that we have with our existing resources and I think we will continue to look at what the needs will be, what avenues are there. Whether there are alternatives means of advancing that. So it's nice to have that available to us as a potential funding resource but it has to -- we have to continually look at where that might fit in the mix and what our needs are.

Operator

And we will take our next question from Thomas Wei, Jefferies.

Thomas Wei - Jefferies

I had a guidance question and then a question on the whole dosing schedule and stuff. So on guidance, you had mentioned, Dave, meaningful growth in all three components including deferred revenue. I can't remember exactly what your revenue recognition policy is like. Usually it's upfront payments that are being deferred. So does that mean that there is new deals being signed here and would that be on the proprietary pipeline side or is that more technology stuff? And then on the dosing schedules, I am curious for the compounds that are moving forward right now, like 289, are you doing this work in parallel to look at Q3W, more frequent dosing? Or is this something that will only, you know like a two-weekly schedule would come up only if there is an issue with the therapeutic window at a less frequent dosing schedule? Thanks.

Daniel Junius

Sure, Thomas. Dave, here. So let's talk about the deferred revenue. So in terms of revenue recognition, often times what happens is people will pay us an upfront license fee and what we will do -- and that the agreement is for a specified number of potential licenses that they might take and they take them over time. And so as they take them, we recognize some of that deferred revenue. So when I say that there is growth, what we are anticipating is existing partnerships taking licenses that they are entitled to under existing agreements. And at that time, we would then recognize the revenue that was deferred at the time of the signing. I hope that makes sense to you. So what it doesn’t imply is any new deals. What we don’t do generally, is include future business development activities in our guidance.

Charles Morris

And from the dosing perspective, the work that we did with 853 was clearly in response to findings that we saw. You remember there was variably in the exposure, there was some clear relationships and correlations between PK and both some of the tolerability and efficacy findings. And we will continue to do similar work with all of our compounds. Now 289 you mentioned, 289 we actually have introduced with a weekly schedule based on the pre-clinical efficacy, information and also on the historic use of EGFR antibodies. So that’s already on a weekly schedule. And using the, as we have historically, total body weight. Clearly if we see the same kind of variability and it suggests adjusted ideal body weight would be a better way to go than we will do so.

So I think what we have got to do right now is really await the data. We will collect those data. We will model the data of the PK relationships and make those decisions as we go. But for each of the other compounds as it stand today, 529, we are only currently setting a three-weekly schedule and for 289 we are only currently setting a weekly schedule. But we shouldn’t rule out anything if it suggest that it would improve things from the patient experience perspective.

David Johnston

Hey, Thomas, Dave. Circling back on the first part of the question. Just to put things in a perspective in terms of recognizing deferred revenue. I mean as of the end of fiscal '14, on the balance sheet we had almost $60 million of deferred revenue. So that's potentially upfront payments and license fees that haven't been recognized to revenue. So those will be recognized over time as licenses are then taken.

Operator

And we will take our next question from Andrew Peters, UBS.

Andrew Peters - UBS

A couple questions on 853. The first, you mentioned kind of feedback from KOLs following the data at ASCO. I was just curious, based on your conversations, if you think there is, what the acceptable and if there is an acceptable level of the ocular tox, kind of as the dosing work continues. And then you mentioned kind of choosing which dose going forward. Can you just elaborate that? It seems like you are continuing or you are starting to dose in patients, or continuing to dose in patients on the every three-week dose. What are the decisions that you're going to be making? What are the sorts of parameters that you are looking at and is there a possibility that you look at both kind of dosing profiles going forward?

Charles Morris

Thanks, Andrew. I think in terms of an acceptable of the ocular tox, it's sort of a double-edged question because it would generally depend on the level of efficacy to some extent drive the level of toxicity that you are willing to see. Obviously, we encourage to look at the different dosing schedules based on the rate that we originally saw in the 5 milligram/kilogram where 5 patients of some degree of finding at that level. We wanted to bring that down and based on the information we presented to ASCO, we think we appear to have done that. And we certainly like to have the minimum amount of grade 3 and higher that we can. So it's not a direct answer to the question but I think obviously we feel that we need to get the balance right. The good news is, it's a reversible effect. The levels that we are seeing at the moment are clearly different from when we were using total body weight and we are encouraged by the data that have.

In terms of selecting dosing schedule, it's really going to come down to, again, that balance of how the therapeutic index appears to be, what is the balance of safety and efficacy. So we are proceeding with the -- at least exploring in the initial cohorts the three-weekly schedule because we like what we have seen and now our investigators like we have seen. We believe that the three weekly is viable but as I have responded before, there's data there that if these PK relationships are true, suggests that the weekly could have other advantages. But, clearly, we don’t today know what the effect of the weekly is and we haven't tested that. So as we move through, I think we will certainly look at the efficacy and the tolerability of that weekly schedule as we proceed and when we have enough data to feel that we can make a selection of one over the other, we will do so.

Operator

And we will take our next question from Matthew Harrison, Morgan Stanley.

Matthew Harrison - Morgan Stanley

I have two pieces. So first on 853, can you just tell us what the dose that you're going to use in the Phase II portion is? And then separately on the Sanofi compounds, I don't know in the past if you've mentioned, but can you tell us if the royalty rate on the naked antibody is different from the ADC compounds and sort of what that might be or can you expound upon the single, the sort of percentage, I think you have mentioned before single-digits, I think is what you said but maybe you could clarify. Thanks.

Charles Morris

Hi Matthew, it's Charlie. We have not disclosed at this point of what the dose that we are taking forward. That would be a part of the package that we present later. But you will remember that we had looked at the 5 and 6 milligram/kilogram doses on the adjusted ideal body when we were at ASCO. So it's sort of, it narrows your range.

Daniel Junius

Matthew, it's Dan. On the royalty question, we noted in our press release this information on this. Let me take you through it. The royalty rate is not different than those on our ADCs. So under the agreement with Sanofi royalty was defined for compounds that were developed there and I think the guidance that we have given is that the tiered royalty running from the mid to high single-digits. The nuance for the CD38 compound is that that is the one naked antibody that was developed under that particular research agreement. And the reason that’s important is that under the research agreement as ImmunoGen developed technology or developed IP, an obligation was to assign that IP to Sanofi. Why it's important for the CD38 compound is that doesn’t fall under the umbrella of our ADC technology. And so for many elements of our ADC technology we have IP, it would cover development, it may cover composition of matter, for example, for the toxin. It may cover various process elements. It may cover precursors. And so we have a lot of IP that covers ADCs, whether they are proprietary to us or to partners.

When you have a naked antibody, you only have one molecule. And so despite the fact that ImmunoGen invented that particular antibody, we assign the composition of matter patent to Sanofi as part of that agreement. Now why is that important? It's not unusual under any of these license agreements for royalties to be reduced to the extent there is not IP that’s wholly owned by one party to cover the molecule. And so that then comes into play for the 984 compound with Sanofi. We assigned that composition matter patent to them. They now own that and therefore the provisions of the agreement reduce the royalty that's available to ImmunoGen. Again, it's unique because of the fact that’s a naked antibody. It has no impact on our milestones but it does, on a net basis as we indicated this morning, take us down to potential of a low-single digit royalty on that particular molecule. Does that get at the issue for you?

Matthew Harrison - Morgan Stanley

Yes. No, thank you for the clarification.

Operator

And we will take our next question from Michael Schmidt, Leerink.

Michael Schmidt - Leerink Partners

I have two. One on 289, I'm sorry, on 529. So at ASCO you presented some data on patients with treatment of steroids in addition to the drug. And I think you still saw neutropenia later in the cycle at the 1 milligram/kilogram dose. And so I was wondering where are you right now in the dose escalation? Are you beyond the 1 milligram dose and how confident are you that neutropenia later in the cycle isn't limiting in terms of dose escalation? And on 853, I guess at the ASCO data with the adjusted ideal body weight dosing there was grade 1, 2, ocular events as well at the 5 and 6 milligram dose. So I was just wondering, I guess in summary, how confident you are that the adjusted ideal body weight method actually helps in terms of improving the therapeutic index of that drug? Thank you.

Charles Morris

In terms of neutropenia, yes, steroids were introduced because of these unusual early drops in the neutrophil count which because it was so early, was really very untypical for some of the cytotoxic like effect. So we hypothesized that was likely a cytokine related redistribution of the neutrophils and therefore any release of the -- sorry, of cytokines, introduced the steroids just for a couple of days after dosing as well to cover the potential for infusion reaction. And that certainly seemed to have a positive effect and we were able to dose escalate further than we had before. We did then see some later changes in neutrophil count at a more typical point in the cycle if you like, sort of around days 8 to 10 as we got to that higher 1 milligram/kilogram dose. And we certainly believe that we couldn't dose beyond that given that we have the option of the use of growth factors which is Neupogen to keep us going. So we certainly are progressing through dose escalations and are comfortable that we have neutropenia, in modern age tends to be a manageable effect. We will continue to manage it.

With 853, the fact of the matter is of course, if you dose high enough you will see the ocular effect. So it was never going to manage it all the way away. What we were trying to do was to make the level more predictable so that you could bring patients in to a more targeted exposure. I think if you recall the data from ASCO, we certainly appear to have done that. The rate was lower. We had originally, as we mentioned earlier, 5 milligram/kilogram of total body weight for kind of broad range of exposures with some of the patients who perhaps are more overweight having ocular toxicity with 5 out of 10 patients. With the adjusted ideal bodyweight method, it's been just one of the patients who had had a grade 1 effect. So I think it's clearly something very different. We have clearly controlled that breadth of exposure. So I think what we are able to do with this is to make this -- it's not going to completely disappear, certainly not without going into what might be potentially sub-therapeutic ranges. I think what we are able to do is to make this a more controllable and therefore a manageable effect.

Daniel Junius

Yes, let me add just maybe one or two things with that. Maybe said differently, what we have been able to do with the adjusted ideal body weight is to address the inter-patient variability that existed when we were using total body weight. And to add that, Charlie reference earlier and in his comments that we met with [KOLs] (ph) on this topic, and they understood very clearly what we did and actually were very complimentary about the approach that was taken to allow us to be more consistent in what we were delivering in terms of the therapy across the range of patient population. So we recognize that the dose limiting toxicity in this particular instance is eye tox, but we have been able to do is to give us greater capability to control it across the range of patients and therefore to potentially get ourselves a better therapeutic index.

Operator

And we will take our next question from Jason Kantor, Credit Suisse.

Jason Kantor - Credit Suisse

My question is on the guidance. The revenue guidance seems really quite high relative to what you've been doing the last couple of quarters and I'm just wondering what specifically can we look forward to? I mean how much visibility do you actually have on this? Should we expect that a lot of that should be coming in the first and second quarter of the fiscal year because you have visibility on some big milestones that you might be getting? Can you give us an example of what types of milestones you might be receiving over the next 12 months? Thanks.

David Johnston

Sure, Jason. We don’t break it out by quarter but in terms of visibility, a lot of this is driven by existing partnerships that we have. And so for example, of the three components to it in terms of milestones, milestones are generally driven by a clinical progress with our partners and we have some insights as to where they are and where we would anticipate them to be. So, for example, if there is a milestone on the start of a -- on either filing of an IND, start of a phase II, start of a phase III etcetera, we have some idea generally about when those would take place. And so that provides us some confidence.

In terms of the amortization of deferred revenue, those are generally, as I said earlier, associated with taking of licenses. And we have some idea there as well working with these partners what their anticipated timing is. And then the last big component is the Kadcyla royalties. And that’s based off of a relatively conservative outlook on projected Kadcyla revenues for the next -- what turns out to be our fiscal year, so the second half of '14 into '15.

Jason Kantor - Credit Suisse

Thank you.

Daniel Junius

Jason, I would just add. Look it's probably, you are looking at quarterly. As you saw in fiscal '14, it's probably going to be lumpy. Now these things don’t come out smoothly and so it's really tough to be precise quarter by quarter so that’s why we are not going to forecast. I would like to make your model smoother but it's going to be lumpy.

Operator

And we will take our next question from John Newman, Canaccord.

John Newman - Canaccord Genuity

Just had a question on 853. I know you have gotten all other questions already, but can you give us a sense maybe qualitatively, what would cause you to make the decision to go to a once-weekly dose versus once every three weeks? And also in terms of the data next year at ASCO, what would you need to see with a once every three-week dose to take the program forward? Would you be comfortable just looking at, say, complete response rate? Would you need to see PFS? Just curious as to what you would look to see. Thanks.

Charles Morris

So qualitatively between weekly and three-weekly, I think what we would be looking for is at least one of better looking tolerability or better looking efficacy, which is kind of obvious but I think important. I think weekly schedules are not unappealing to an ovarian cancer population. There is a lot of weekly Taxol being used so I don’t think if we switch to a weekly schedule that that would be any significant disadvantage relative to what we have today. And clearly, it's not every single week. This is day, 1, 8, 15 out of a four-week schedule. So I think, if it looks like we have similar efficacy but we are not getting into that range of exposures where we have seen the ocular findings, that would bring us over. And I think if then when we have a sense, I mean it's not going to be a randomized comparative study here, but if there is sense that we are getting high levels of activity then that would also make us consider the weekly. And there may even be situations where you would have, you know you may have combinations where one is one a more intermittent schedule than another. So I think having data on both is never a bad anything.

And I am completely blank on this -- I was thinking about the question. The kind of levels of activity. I think historically if you get north of 30% in ovarian cancer, you are starting to have a very interesting drug, if you get north of 40%, you've got a very very interesting drug and perhaps one that you might want to take forward rapidly. But those are just -- but you want durability of those responses as well to bring things forward. So I think you need to look at the entirety of the picture. Endometrial cancer, the response rate for second line drugs today are really quite poor. The (indiscernible) if you don’t cycle in the second line, you are looking at 10% response rate. So even 20% to 30% type response rate, I think you have got an interesting drug. If you are higher than 30%, you probably have got a very interesting drug. So obviously we will continue to look at that and again, I think response is one thing and durable response would be very important as well. But I think we would take the totality of information, tolerability, response rates and durability of PFS before making a decision to invest solidly in a pivotal program. But the good news from everybody's perspective of course is, now that we have gone into the dose expansion portion of the ongoing study, we are getting close and closer to having that information and being able to make those decisions. So I think it's an important time for 853s development.

Operator

And we will take our next question from Cory Kasimov, JP Morgan.

Whitney Ijem - JP Morgan

This is Whitney on for Cory. I guess just following up on the revenue question, I'm just wondering if you can quantify at all maybe the revenue per license you expect to recognize or just give us any granularity there. And then I guess same question for some of the INDs you expect to be filed over the fiscal year, if you can just quantify milestones per IND.

Daniel Junius

No. First of all, the amount of milestones that we would -- in terms of revenue recognition, let's do that first. On a per license basis, even if I could define it, it varies by the agreement depending on how many licenses that they have had and how many license. And so there is no one answer. So for example, last year in 2014 we recognized about $30 million worth of deferred revenue. So I think that you will see that if you were to look at next year you will see growth from there. I think that’s about as granular as we can move on that. And in terms of milestones, so milestones also vary depending on if it's filing IND or various phases of the clinical progress. So it's really hard to provide any sort of firm guidance there and I don’t think that we would feel comfortable doing it anyway.

Operator

And we will take our next question from Mara Goldstein, Cantor Fitzgerald. And Mara has disconnected. At this time we have no further questions.

Carol Hausner

So I would like to thank everyone for their interest in ImmunoGen and if you have any additional questions, don't hesitate to give us a call. Have a good day and a good weekend. Take care.

Operator

This concludes today's conference. Thank you for your participation.

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Source: ImmunoGen's (IMGN) CEO Daniel Junius on Q4 2014 Results - Earnings Call Transcript
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