Argos Therapeutics, Inc. (NASDAQ:ARGS)
Q2 2016 Earnings Conference Call
August 10, 2016 16:30 ET
John Menditto - VP, Corporate Communications & IR
Jeff Abbey - President & CEO
Richard Katz - CFO
Lee Allen - Chief Medical Officer
Charles Nicolette - CSO & VP, R&D
Lori Harrelson - VP, Finance
Mike King - JMP Securities
Alex Schwartz - Stifel
Good day, ladies and gentlemen and welcome to the Argos Therapeutics Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference may be being recorded.
I would now like to introduce your host for today's conference, Mr. John Menditto, Vice President of Corporate Communications and Investor Relations. Sir, please go ahead.
Thank you. Good afternoon and thank you for joining us on the call today to discuss our second quarter 2016 financial results and recent highlights. Joining me on the call today are Jeff Abbey, President and Chief Executive Officer; Dr. Richard Katz, Chief Financial Officer; Dr. Lee Allen, Chief Medical Officer; Dr. Charles Nicolette, Chief Scientific Officer and Vice President of Research and Development; and Lori Harrelson, Vice President of Finance.
Before we get started, I would like to point out that an archived webcast of this conference call will be made available in the Investors section of our website following today's call. Today's press release announcing our second quarter 2016 results and highlights can also be found on the website. I would also like to point out that various remarks that we make during this call about the company's future expectations, plans and prospects, including statements about the company and other statements containing the words believes, anticipates, plans, expects and similar expressions constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of the periodic reports that we filed with the SEC from time-to-time, including our 10-K for the quarter year ended March 31, 2016.
In addition, any forward-looking statements presented on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We anticipate the subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.
At this point, I'll now turn the call over to Jeff Abbey.
Thanks, John. Good afternoon, everyone and thank you for joining us on our call today. The second quarter was an exciting one for Argos, now a proud member of the Russell 2000 Index. During this afternoon's call, I will review our second quarter and recent accomplishments and provide guidance on what to expect in the coming quarters.
Before I get started, however, I'd like to formally introduce Dr. Richard Katz, who joined us exactly one month ago as Chief Financial Officer. I know some of you have worked with Rich in the past, and several of you were introduced to him during a recent financing. Rich brings a great deal of experience in corporate finance and financial management. He has already provided an impact at Argos through our most recent capital raised, and of course we will play a leading role as we move closer to our goal of becoming a fully-integrated commercial immuno-oncology company. A little background for those of you who haven't meet Rich.
He comes to Argos with more than 20 years of experience in healthcare financing and corporate development, including Chief Financial Officer roles at Viamet Pharmaceuticals and Icagen. At Icagen, he was instrumental in the company's initial public offering and subsequent financing, the formation of several strategic collaborations and eventually sells to Pfizer. Earlier in his career, Rich spent time at Goldman Sachs & Company, overseeing a broad range of transactions for healthcare companies, including equity and debt financing, mergers and acquisitions, and corporate restructuring. The addition of Rich is another important step as we continue to build our executive management team. In a moment, Rich will walk you through the financial results for the quarter.
In early June we announced the -- that the Independent Data Monitoring Committee your IDMC for our pivotal Phase 3 ADAPT clinical trial of AGS-003 for the treatment of metastatic renal cell carcinoma or MRCC, recommended a continuation of the trial based on results from the IDMCs scheduled interim data review. Next IDMC meeting is being planned to coincide with the Genitourinary Cancers Symposium in February 2017. As Dr. Robert Figlan, a Steven Spielberg Family Chair in Hematology-Oncology, Professor of Medicine and Biomedical Sciences at the Cedars-Sinai Samuel Oschin Comprehensive Cancer Institute, and the Co-Principal Investigator for the ADAPT trial stated on the recent IDMC meeting a positive outcome of the ADAPT trial because of AGS-003's novel mechanism of action could be a game changer in the treatment of MRCC.
Based upon our internal projections, we believe that at the time -- at that time we had reached more than half of the targeted number of events for our survival endpoint, and we anticipate having a sufficient number of events to permit the primary analysis and assessment of overall survival to occur in the first half of 2017. The positive outcome from the IDMC's recent review of the ADAPT trial data triggered the approximately $30 million second tranche of the financing covered under our previously announced March 2016 securities purchase agreement. In addition, as we recently announced we raised another $50 million of gross proceeds through a follow-on offering.
We expect that with these two financing, our cash resources will fund the company through the third quarter of 2017 including funding the ADAPT trial, our share of the expected costs of building out and putting a commercial manufacturing facility, activities in preparation for our planned biologic license application with the FDA, and the expansion of Arcelis platform technology through additional clinical programs. We are currently finalizing the agreements for the commercial manufacturing facility and anticipate communicating the details within the next few weeks.
Touching on our other clinical programs, our investigator initiated Phase 2 trial of AGS-003 in early stage RCC is continuing at Roswell Park Cancer Institute. We currently have enrolled four patients; as a reminder, this is a Single-Arm pilot trial treating patients with non-metastatic RCC or early stage RCC with AGS-003 as new age treatment. The trial is designed to enroll maximum of 10 patients who will be treated with AGS-003 before nephrectomy in order to assess AGS-003's effects on the immune system response and on the tumor. Enrolled patients undergo a core needle biopsy of their renal tumor scars in nephrectomy in order to drive material to extract patient-specific tumor mRNA for the manufacture of AGS-003.
We expect the investigator to have preliminary data from this trial, later this year or early next year with respect to safety, feasibility, tolerability and initial immunologic effects of AGS-003 including the induction of anti-tumor memory T-cells. In addition, since the tumor is removed post AGS-003 treatment, this study should enable a direct assessment for the first time of the extent to which immune cells in the peripheral blood infiltrate the primary tumor. The infiltration of the tumor via immune cells would provide a strong confirmation of the mechanism of action of AGS-003.
Also, as we announced last quarter, an investigator-sponsored Phase 2 study of AGS-003 in patients with non-small cell lung cancer has been launched. This trial is investigating AGS-003 in combination with standard platinum-doublet chemotherapy with or without radiation therapy in patients with newly diagnosed Stage 3 non-small cell lung cancer. The study is being conducted at the Cancer Research Network of Nebraska, and is targeting the enrollment of 20 patients. AGS-003 will be administered either concurrently with chemotherapy, with or without radiation therapy or sequentially with chemotherapy, again plus or minus radiation therapy according to the subject to sign treatment norm.
The rationale for this study is two-fold. First, non-small cell lung cancer is a tumor type reported to have a high number of mutated antigen for the immune system to target which should fit nicely with AGS-003's mechanism of action. And second, platinum-based chemotherapy, plus or minus radiation therapy the current standard of care down regulates regulatory T-cells which may lead to an additive or synergistic effect with AGS-003. We're excited that this study has opened for enrollment and since it is the first clinical trial of AGS-003 outside of MRCC.
Also, as we have mentioned in the past, we anticipate initiating two additional trials in the coming quarter. The first in muscle invasive bladder cancer and the second in metastatic renal cell carcinoma, in the first line starting in combination with the checkpoint inhibitor. Stay tuned as we communicate the progress and developments on each of these.
To briefly touch on AGS-004, our individualized immunotherapy for the HIV infection, we announced in July that the first patient has been dosed in the second stage of the ongoing investigator initiated adult eradication trial being conducted at the University of North Carolina in Chapel Hill. This trial, HIV infected patients are being given latency reversing therapy with the histone deacetylase inhibitor belinostat or in combination with AGS-004. The elimination of the latent virus reservoir is an essential treatment goal in any effort to eradicate HIV infection.
Research has shown that HDAC inhibitors like belinostat can reversely fed [ph] by activating latently infected cells, potentially allowing them to then be targeted by the immune system which in our case we hope to stimulate with AGS-004. This is the first clinical trial evaluating the kicking kill approach employing a validated HIV latency reversing drug combined with an individual immunotherapy. This study is being funded by a federal research grant from the division of AIDS, National Institute of Allergy and Infectious Diseases at the National Institutes of Health.
Lastly, from a research perspective, we are excited about our partnership with Adaptive Biotechnology to study precise response patterns to our investigational individualized immunotherapy. Under this agreement Adaptive who use patented immune profiling, immunoSEQ Assay to enable more in-depth characterization of the immune responses induced both by AGS-003 in RCC and AGS-004 in HIV. We look forward to providing data from this collaboration in the future.
With that I will now turn the call over to Rich who will review the financial highlights.
Thank you, Jeff. Before I begin, I would just like to say how excited I am to join Argos at such an important time in the company's evolution. In the short time that I've been here, I've developed a deep appreciation for the tremendous work that has been done to-date, as well as the tremendous possibilities for the future. I look forward to working closely with such a terrific group of people and of course with all of you.
Now let me turn briefly to the financial results for the second quarter. Revenue for the three months ended June 30, 2016 totaled $0.5 million, that was compared to $0.1 million for the same period in 2015. Revenue for the six months ended June 30, 2016 totaled $0.6 million compared to $0.3 million for the same period in 2015.
Research and development expenses for the three months ended June 30, 2016 totaled $9.2 million, that was compared to $16.1 million for the same period in 2015. Research and development expenses for the six months ended June 30, 2016 totaled $18.7 million, again compared to $30.9 million for the same period in 2015. This decrease was primarily due to a decline in costs associated with the debt clinical trial, as well as commercial manufacturing development costs related to automation.
General and administrative expenses for the three months ended June 30, 2016 totaled $3.4 million, that was compared $2.9 million for the same period in '15. G&A expense for the six months ended June 30, 2016 totaled $6.4 million, that was compared to $5.3 million for the same period in '15. This increase was primarily due to increase in personnel costs, including stock-based compensation, outside services including consulting fees, legal fees, and marketing-related expenses.
Net loss for the three months ended June 30, 2016 were $12.6 million or $0.48 per share, that compared to a net loss of $19.6 million or $0.95 per share for the same period in '15. For the six months ended June 30, 2016, net loss was $25.4 million or $1.4 per share and that compared to a net loss of $37.2 million or $1.84 per share for the same period in '15. Our cash and cash equivalents and short-term investments at the end of the second quarter totaled $34.8 million, that reflected the receipt of the first two charges of our March financing.
In addition, as Jeff mentioned, we raised $50 million of best proceeds, $48.2 million of net proceeds in our recent financing which closed in early August. Of note, due to the successful execution of this financing, the final $10 million charge of the March financing to which we had access in the event that we did not raise capital separately is no longer relevant. We expect the proceeds from the August offering combined with our cash balance as of June 30 and the anticipated funding under contract with the NIH and the NIA ID will fund the company through the third quarter of '17. We expect that this will cover us through the time at which there will be a sufficient number of events to permit the primary analysis and assessment of overall survival in the ADAPT trial during the first half of 2017.
As mentioned, activities which we plan to fund with our current cash include, first the ongoing ADAPT trial of AGS-003, several ongoing and planned Phase 2 trials of AGS-003, the ongoing trial of AGS-004 for HIV eradication. And of course, the infrastructure to support all of these trials. Second, our share of the expected cost of the build out and equipping of a commercial manufacturing facility. Third, certain activities related to preparation for BLA submission. And finally, general corporate activities including initial pre-commercialization activities related to AGS-003 in metastatic renal cell carcinoma.
Of note, approximately $7 million of principal repayments with respect to our outstanding venture debt do come due between October 2016 and June of 2017. We expect to refinance these principal payments, so we have not included them in our cash runway projection.
To summarize briefly, with the proceeds of these offering, the March offering, as well as the August offering, we expect to advance all key activities such as following expected overall survival data during the first half of 2017. We are well positioned to move forward towards BLA filing and commercialization as expeditiously as possible.
Lastly, I would just like to mention that we expect to file our 10-Q with the U.S. SEC on Monday, August 15. As I mentioned earlier, I'm truly excited about the work that is going on here at Argos, I'm delighted to be here, look forward to interacting with all of you going forward.
Now I'll turn the call back to Jeff.
Thanks, Rich. To quickly summarize, as you can see there are a number of really good things happening at Argos. We look forward to continuing the going trials of our individualized therapies, and to initiating some new investigator initiated studies. We are excited to have the funding in place to continue with our operational activities related to the planned BLA filing and commercial manufacturing, and we look forward to communicating plans for a commercial manufacturing facility in the very near term.
We will keep you updated on our continued progress related to all of our activities in the coming months and hope to see many of you in person soon. Thank you for attention. And with that, operator, we can open up the call for Q&A.
Thank you. [Operator Instructions] Our first question comes from the line of Mike King with JMP Securities. Your line is open. Please go ahead.
Good afternoon, guys, thanks for taking the question and welcome Richard, it's good to reconnect with you. I know you guys get asked this question pretty much every call, but in light of -- there is some of the recent developments in the RCC space, specifically with regard to TIVO, as well as [indiscernible]. Just wondering what -- how you're thinking strategically about future developments growth for as far as combination sequentially adding these agents in the overall treatment regimen?
Yes, sure Mike. I'll let Lee Allen, our CMO, go first and then I think Charles will join in.
Lee Allen here. So we're very comfortable in our positioning in first-line therapy in combination with sunitinib. As we know, there are combination studies ongoing with nivolumab, and so let me map in the first line as well, that study is fully enrolled but data is not expected from that filing until June 2019. The other important combination study that's ongoing is Taso with bavatisomab [ph], also versus -- and that study is still enrolling, it's going to enroll over 900 patients, and data is not expected from that trial until July of 2020. So we feel pretty comfortable with our positioning of the product. You did mention combo and I know there has been a press release saying that first line combo and a Phase 2 study looks exciting but we haven't seen the data. And I'll just remind you that the combo data in second line resulted in overall survival improvement of 4.9 months. So I don't think we see anything in the relatively short-term that's going to interfere with our launch strategy for this compound. You want to assets something to that, Charles?
I think strategically, you laid it out nicely that it's a horse race and we're in the lead at the moment. However, Mike, just -- we're being very strategic about our thinking around, doing combinations studies with -- in particular, the checkpoint inhibitors. We have some reservations about co-administration and maybe sequencing the two agents might be the better way to go. So we're thinking about trials that would explore this and give us the best option so to maybe a small Phase 2 trial to try and get a feel for what combination strategy works best and then we'll launch into larger trials. So we're not taking for granted that we know enough to be able to deploy combination therapies without generating a little bit of clinical data.
Fair enough. I just wanted to also follow-up, you mentioned sunitinib, I'm just wondering if the recent data regarding success of agent in the adjuvant setting helps you, hurts you or has no effect?
So I'll answer first and then I'll let Charles and Lee chime in. I think just -- also before I get to that and thinking about the competition in the frontline setting, I think it's worth pointing out the failure of TIVO in the non-small cell lung cancer frontline setting, and Charles has some scientific thoughts on that, he was not surprised. So I don't think anybody should take for granted that checkpoint inhibitors in the frontline setting, especially as single agents but even in combo between toxicity and of course efficacy aren't necessarily going to become standard of care, certainly not in MRCC where we are but in other indications as well. Charles, I don't know if you want to comment on that, talk about the adjuvant?
Yes, so when I think about the checkpoint inhibitors and their movement into frontline, do we have some concerns in those shift that lung cancer frontline trial was not really a surprise because they think about it like this -- the checkpoint inhibitors reactivate pre-existing immune response, that's a fixed arsenal in size, and when you pull the trigger and deploy that, it makes a big difference in what the clinical outcome is going to be. If you deploy that in early stage disease, you use that ammunition up and you don't have it at the time of relapse. So that's my -- in a layman's terms, that's my thinking on how this works. So I have some reservations about frontline deployment where the patients generally have a longer runway to relapse or serious complications.
Okay, thanks Charles. So to answer your question directly on the adjuvant as you know, and as we've talked about with you and others, we think there is a huge opportunity for us in the adjuvant setting. We're confident that we can play a major role there for successful a maybe up study and that would be one of the first settings that we would explore going into in a major way. I think the -- again this is -- without having seen the sunitinib data yet which as you know has just top line, I think we obviously have shown our ability to combine effectively with sunitinib in our Phase 2 and now in our Phase 3. So I think it certainly doesn't hurt us if sunitinib is utilized in adjuvant setting but I would certainly think we would want to study agents [ph] so three alone as well because I don't know that we necessarily think we need any help from sunitinib in that setting. Lee, I don't know if you want to...
No, I would agree with that completely. We'll be exploring that as soon as we possibly can as resources provide the opportunities for that. Let's remember too that in our single agent trial, in advanced RCC, the outcome of that Phase 2 trial was in line with what we would have expected from the therapy, so I think we're on par as a single agent with what you would expect to see with sutin [ph] with the exception that we believe that we would have a lower toxicity level in that setting which I think is important in the adjuvant setting.
Yes, critically important.
Great, thanks for taking my question.
Anything else, Mike?
No, I'm good. Thank you.
Great, thanks Mike.
Thank you. And our next question comes from the line of Alex Schwartz with Stifel. Your line is open. Please go ahead.
Hi Jeff and Argos team, congrats on the continued progress. I just had one question if you will, I know you haven't seen the data in ADAPT but this is more of a mathematical question. At the next IDMC meeting, if you get the green light to continue your trial is that good news or is that no news -- kind of what I'm really asking is, if IDMC says continued trial will occur to have to be separated at that point?
The answer is yes, but I'll let Lee speak to that. Thanks, Alex.
Yes, I mean I would take it as a positive sign. Obviously, we'd like to see early efficacy that would be a great outcome for the trial. But we know that just in the last three months, two studies have been canceled for futility of Phase 3 study with Glencoe [ph] and then the Phase 2 study with Momenta Pharmaceutical in oncology, failed on their 50% interim analysis, and we're terminating it for futility. So the fact that we don't have futility at that point in time, I would take as a very positive sign.
Yes, there would definitely have to be some significant separation at a minimum.
Okay, that is helpful. Thank you for additional color, and congrats on the continued progress, looking forward for future.
Thanks, Alex, we'll see you soon.
Thank you. [Operator Instructions] I'm showing no further questions at this time, and I would like to turn the call back over to Jeff Abbey, President and Chief Executive Officer for closing remarks.
Thank you, operator, and thanks everybody for participating on our call today. As always I would like to express our sincere appreciation to all of the patients participating in our clinical program, as well as their families and the doctors who advise and treat those patients. Thank you for your time and attention today and we look forward to speaking with all of you soon.
This concludes today's conference call. Thank you for your participation. You may all disconnect.
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