Cell Genesys, Inc. Q4 2007 Earnings Call Transcript

Cell Genesys, Inc. (CEGE)

Q4 2007 Earnings Call

February 28, 2008 5:00 pm ET

Executives

Susan Ferris - Investor Relations

Stephen A. Sherwin, M.D. - Chairman and Chief Executive Officer

Sharon E. Tetlow - Senior Vice President and Chief Financial Officer

Analysts

Joe Pantginis - Canaccord Adams

Ren Benjamin - Rodman & Renshaw

Richard Smith - JP Morgan

Mark Monane – Needham

Pamela Bassett - Cantor Fitzgerald

Jeff Englander - Standard & Poor’s

Presentation

Operator

Welcome to the Cell Genesys fourth quarter and 2007 year end conference call. (Operator Instructions) I would now like to turn the conference over to Ms. Susan Ferris of Cell Genesys’ Investor Relations.

Susan Ferris

Good afternoon, and welcome to our fourth quarter and year end 2007 conference call. I am Susan Ferris, and with me today are Dr. Steve Sherwin, Chairman and Chief Executive Officer; and Sharon Tetlow, Senior Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that during today’s call we may make forward-looking statements about the company’s future expectations and plans, including milestones and financial projections for 2008. Such statements are subject to risks and uncertainties that could cause results to differ materially from those projected. We encourage you to consult our SEC filings regarding the risk factors that may affect Cell Genesys.

I would now like to turn the call over to Dr. Sherwin.

Stephen A. Sherwin

Hello, everybody, and welcome to the call. As usual, we are going to start with about 15 to 20 minutes of comments, and then we will be happy to answer your questions. During our comments, we will of course review our report today for the fourth quarter and year-end financial results.

I will cover some important recent developments in the business, and then as I usually do in our year-end call, I will recap the major accomplishments of the year past, and remind you of the key goals for Cell Genesys in the rest of 2008 and into 2009. And as part of that, we will give you financial guidance for the year.

So with that let me turn things over to Sharon, who will cover the financial results report that came out today.

Sharon E. Tetlow

As we reported today in our 10-K filing and press release, we ended 2007 with $147 million in cash on the balance sheet. During the fourth quarter, we received payments of about $13 million in non-dilutive funding, the bulk of which was related to the previously disclosed sale of our LentiVector technology asset to GBP Biotech, the owner of Lentigen, a company focused in this area. During the fourth quarter, we also raised $1 million in equity funding from our committed equity financing facility with Kingsbridge Capital.

Turning now to spending, we spent approximately $105 million during 2007, which was in line with our previous guidance. This $105 million was offset by the $13 million in non-dilutive funding from the fourth quarter, resulting in cash use in operations of $90 million, and net capital spending of about $2 million for the year. During the fourth quarter, our net cash use in operations was $13.5 million.

Now let me take just a moment to confirm with you, what we state in our 10-K filing with respect to exposure to securities comprised of or backed by subprime or any other mortgage obligation, our corporate cash investments do not contain any such securities. Furthermore, during the year, we had no write-downs from such securities nor from cash option failures. And back to the topic at hand, in short, we believe that we go forward into 2008 with the resources that we need to advance our product development program.

Stephen A. Sherwin

So let me start with some recent highlights from the business, before I go on to the year-end review, and review of our goals.

There were two recent developments that I want to highlight both concerning our lead product program, GVAX Immunotherapy for prostate cancer. The first of these was the completion of the pre-planned interim analysis for the VITAL-1 Phase 3 trial, and the other was the more recent report from the GU ASCO Symposium regarding the immune response data for patients treated in one of our Phase 2 trial.

Now with respect to the former, the interim analysis for the VITAL-1 Phase 3 trial, this was done in January, as you are all probably aware. This trial VITAL-1 compares GVAX to Taxotere, and enrolled 626 patients when it completed enrollment last summer.

The pre-planned interim analysis, as you would expect, was carried out by an independent data monitoring committee. The company is blinded from the detailed results of that analysis, and in fact, all we were told was the encouraging recommendation to continue the trial.

The most important thing I am able to say about this interim analysis, as I said previously and I want to emphasize again today, is that it occurred in the timeframe originally estimated, which was based on assumptions that we made when we designed the trial regarding the survival for each treatment arm. I’ll have more to say about VITAL-1, as well as the companion VITAL-2 trial later in the presentation.

The other recent development concerning GVAX prostate, as I mention, was what we consider to be a very exciting report, initial report of the immune response data that we have now for patients who got GVAX prostate in the second of our two Phase 2 trials.

What’s important about this, the real takeaway in our mind, is what it tells us about the mechanism of action of GVAX, how it’s working, and how it can benefit potentially patients with advanced prostate cancer. So let me hit a few highlights, I know there has been a lot of discussion around these results, and we can perhaps come back to it in the Q&A, if you have questions.

What we reported was that we used three different biochemical techniques to identify the antibody responses in the treated patients, and we found actually more than 400 unique antibody responses, of which approximately 90 were seen in more than one patient. So that immediately tells you that just as we have hypothesized, this product is capable of inducing a broad immune response that varies from patient to patient, and that is we think the strength of GVAX prostate.

What we have done, as you would expect, is to start to analyze these antibody responses to see if any of them are associated with clinical outcome, and clinical outcome for us has always been best measured by survival in this advanced stages of disease. This is a work in progress. We have already found, as we reported at GU ASCO, two antibodies where there is a statistically significant association with survival, but we also reported some antibodies where this is not the case.

The fact that there are some antibodies showing the association and some not is indeed the strength of the data, because it shows the specificity of the response. Moreover, where we did see an association, we did additional statistical analyses to demonstrate that this association was not dependent on the duration of treatment, and in addition on certain patient characteristics and disease factors, and that’s very important in terms of supporting the potential association.

But these kinds of data, as I said, pertain to mechanism of action convincing us that we know how this product works, and how it can potentially benefit patients. These data will provide us with the tools to go on and do much larger studies prospectively in the Phase 3 trials, where we of course have a much larger number of patients, in which to test these hypotheses.

So as I said, this is just the beginning of what we consider to be very exiting work. But the fact that we could see these associations even with these small patient numbers is really very exiting to us. So as I said, I would be happy to come back to these data in the Q&A if you have more questions.

Let me also give some highlights from the business on the business side of things. Sharon has mentioned one of them, which is the funding we received from the sale of our LentiVector technology assets, the $12 million. What’s really important about that is not just the benefit of non-diluted dollars coming into the company, but I think it is yet another example of how successful Cell Genesys had been and we believe can continue to be over the years in harvesting value from assets that are outside of our core business.

And another example of that, of course, is the potential value, hopefully increasing value of our equity stake in Ceregene, which is a former subsidiary of Cell Genesys that we spun out in 2001. We own 16% of this private company, and I am bringing them up now because they also had some important news in the fourth quarter of last year.

First of all, they reported very encouraging long-term follow-up data from their Parkinson’s disease program, which is their lead effort, and also announced that they completed enrollment in a randomized Phase 2 trial for this product that should read out in the fourth quarter of this year. And obviously, if that data is positive that could be of significant benefit to Cell Genesys with respect to the appreciation of our equity interest.

So, those are some of the recent highlights concerning our lead program, and also some of these additional business developments. Let me turn now to a recap of the year past. And I realized a lot of you are familiar with this news, but I want to just hit some of the headlines as I go through it.

And certainly, I feel very comfortable in saying again as I have in some recent investor conferences, that 2007 was a year of very significant progress for the company in arguably it’s most important effort, which is the GVAX prostate program. But that wasn’t at the expense or in the absence of pipeline news.

With respect to GVAX prostate, of course, the measures of progress are all about our Phase 3 trials, VITAL-1 and VITAL-2. I have already told you about the completed interim analysis for VITAL-1, certainly a major milestone for the program.

And I want to confirm today that we continue to believe that we will have enough events to trigger the final analysis on this study in 2009. Meanwhile, VITAL-2 is continuing to enroll patients. The majority of sites are in Europe, in EU member nations as we said previously.

Remember, this trial is complementary to VITAL-1, and is looking at symptomatic as opposed to asymptomatic patients, and is looking at GVAX plus Taxotere compared to Taxotere, rather than the head-to-head comparison in VITAL-1. Both trials are aligned with respect to the primary endpoint improvement in survival.

To confirm the timelines here that we have previously indicated, we expect to complete enrollment in this trial during the first half of 2009 that obviously should signal to you that the majority of patients are enrolled. And we also expect to have enough events to trigger an interim analysis on this study in the same timeframe.

One important point to emphasize yet again is that these studies, both went through, completed special protocol assessments. We made all the recommended changes requested by FDA, and so therefore we believe if we meet the primary endpoint in either trial that, that would be a sufficient basis for a BLA filing. So we will keep you posted of course on the developments in our Phase 3 effort.

The past year was also an important year in terms of additional Phase 2 data. In particular, I want to remind you, it was last spring that we had the final median survival data from the second Phase 2 trial.

Just to give you some numbers here to remind you the median survival in the group of patients receiving the Phase 3 dose is 35 months, remarkably consistent with the 34.9 months from the first trial. Both of these numbers compare favorably to the published data for Taxotere, which averages about 19 months, and we have done careful analyses that I have gone through in the past indicating that there is not selection bias, it’s identifiable.

So these data of course are not a substitute for the Phase 3 program that I have commented on, but give us a lot of confidence about the design of those trials, and improving the selection of endpoints. Another area of important progress last year that will figure into our news again this year is the progress with the combination therapy trial GVAX prostrate plus CTLA-4 antibody, otherwise known as MDX-010 or ipilimumab that Bristol-Myers and Medarex are developing.

Last year, we reported the results at ASCO of the escalation phase of this trial showing remarkable anti-tumor synergy between these two immune modulating agents. We have since completed enrollment of the planned number of patients in the expansion phase, which is 16 patients, and expect to have a report on that group of patients mid-year, and when we have a conformation of which meeting and the timing of that presentation, we will let you know.

Now I also want to take a moment to remind you that there are two pipeline products that go along with GVAX prostate, this is the GVAX pancreatic and GVAX leukemia product. This time we are happily enough able to leverage a very good collaboration with Johns Hopkins. There are two different groups there, one working on each of the two products, and they are well along in additional Phase 2 trials for both products.

For GVAX pancreatic, that means a 60 patient follow-on study of GVAX pancreatic in the adjuvant setting, building on an earlier set of data that were quite encouraging to us, as well as a second trial of GVAX pancreatic in combination with Erbitux and chemotherapy in advanced disease.

In the leukemia program, where we have shown that in either AML or CML the addition of GVAX to standard therapy can reduce residual disease. The Hopkins Group is carrying out a randomized Phase 2 trial, where GVAX is added to Gleevec in CML trial designed to ask a question as to whether discontinuation of Gleevec might be possible in complete responders. And they are also doing an exploratory trial on high risk myelodysplastic disease.

Our focus at the company right now with respect to the pipeline is GVAX lung. I am sure some of you remember we had some very encouraging objective responses in earlier studies of a personalized form of GVAX lung in non small-cell lung cancer. So we want to build on that, but with the non patient-specific form of the product that we are now working on exclusively, and so formal preclinical development is underway as I said.

And for sake of completion, we also progressed in our other area of product development oncolytic virus therapy where the lead program CG0070 is enrolling in a Phase 1 trial in bladder cancer, and we will have a progress report on that program a few months from now at the American Urologic Association meeting.

Just briefly on the business side, we also think it was a pretty good year. We raised about $90 million in equity financing, over $13 million in funding from licensing agreements, and we also eliminated an old tax liability with a favorable settlement with the IRS. This relates to year 2000, sales of stock in Abgenix.

So let me take the last few minutes of my comments to recap with you our goals for the year ahead. I have mentioned several of these, and just starting with the GVAX prostate program, which of course, we can already check two boxes, the interim analysis, and the report on the Phase 2 trial with respect to immune response data. We are going to have further reports on the Phase 2 trial later this year, as well as the update on the GVAX prostate plus anti-CTLA-4 antibody trial.

And then I think it’s fair to say 2009 will be a year of significant news for the program both with respect to, first of all, completing enrollment on VITAL-2, and having enough events to trigger the interim for that study in the first half of the year, and then having enough events to trigger the final analysis for VITAL-1 in the second half of the year. So we certainly look forward to that period of time, and the progress that we expect to make in the GVAX prostate effort.

The pipeline news will continue you will hear more about the GVAX pancreatic and GVAX leukemia programs that I have just mentioned that are being pursued by our collaborators at Johns Hopkins, as well as the update that I already mentioned on the CG0070 program.

Now with respect to business goals for the year ahead, I want to take a moment to just comment again on our efforts to secure commercial partnership for GVAX prostate. What I have to say today is basically to repeat what I have said on several occasions recently, namely that we remain in very active discussions with multiple parties.

And while I can appreciate that this process may seem prolonged and deliberate to some of you, from our standpoint, this is without question, one of the most important transactions in our history, and we are absolutely committed to doing the best possible deal with the best possible partner.

And what that means, as I have said before, is to make sure that we have a deal where the company can participate in the downstream success of this product in a significant way, and that we have a partner that would prioritize GVAX prostate as much as we would, if we were able to commercialize it on our own.

We have continued to progress in these discussions, even since the last time that I commented on our partnering efforts, and we look forward to keeping you posted.

Well, with that let me turn things back to Sharon to comment on our financial guidance for 2008, and then I will say some things in conclusion.

Sharon E. Tetlow

With respect to the financial guidance for 2008, we began the year with the resources needed to move our business forward, and we intend to maintain this favorable circumstance by managing our resources carefully and taking advantage of the company’s diversified assets.

Today, we are providing the following guidance for 2008. We are forecasting approximately $100 to $105 million in net use of cash in operations for the full year, which is essentially flat with 2007. In interpreting this financial guidance for 2008, it is important to point out that this forecast does not include any potential funding from corporate partnerships or other diversified asset sales.

It’s also important to emphasize both the infrastructure and personnel are in place to conduct and complete our Phase 3 trial, including the necessary manufacturing facility, and we plan essentially no organizational growth this year. Again, we believe we have the resources to move our business forward in 2008.

Stephen A. Sherwin

So just to conclude, I hope that the review of the last couple of months and in fact the year past was helpful, and I hope that it has in someway managed to communicate to all of you the confidence that we feel here at the company about our prospects, going forward. That confidence comes from not only our progress in Phase 3, but also the recent reports from the Phase 2 trial for GVAX prostrate, and also the pipeline efforts that I have mentioned today.

And we are glad that we have been able to do this, while maintaining our balance sheet strength, even in this challenging capital market environment. And maybe the most important thing I could say to all of you today is that I know I am speaking not just for myself and Sharon, but the entire management team here in saying that we remain committed and our confidence about going forward has never been stronger.

So with that, let me turn things over to Susan, who will review our upcoming investor conference schedule, and then we will be happy to answer your questions.

Susan Ferris

Sharon will be presenting at Cowen and Company’s 28th Annual Health Care Conference in Boston, March 18 to 20; and on Tuesday, March 18, Steve will be presenting at the 11th Annual Lehman Brothers Global Healthcare Conference in Miami; and then later in the month, on March 27, Sharon will be presenting at BioCentury’s Future Leaders in the Biotech Industry Conference being held in New York. You can access these presentations via the investor section of our website, www.cellgenesys.com.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Joe Pantginis - Canaccord Adams.

Joe Pantginis - Canaccord Adams

Steve, the added immunological data at ASCO GU were obviously very promising. You identified some control antigens that you talked about, and then two antigens that appeared to correlate with survival.

I was seeing, if somewhat you can elaborate on this, and maybe touch upon why this is really important in the assumption that there are most likely other antigens as well that you still have yet to identify that could show the same or even better correlation with survival? And of course, I would love to just wrap up with the obligatory question about partnering, but I respect your policy on that.

Stephen A. Sherwin

I will focus on your questions about the recent immune response data. So, let me repeat for the sake of those of you listening in, who maybe don’t have all the details in front of you, what we consider to be important about these findings.

Again, we have with GVAX prostate, a multi-antigen product, it’s multi-antigen because its cell based. And what we have hypothesized is that this product can induce a wide range of immune responses. We can let the patient’s immune system react individually, which is what we know happens in nature, and we expect that that will capture the best possible immune response in the largest number of patients.

And that we have clearly documented now and is part of what we reported at the GU ASCO meeting, very broad response that varies from patient to patient. So, that’s one important takeaway. And it’s very consistent with what we have assumed to be the case.

Now in looking at the immune response in more detail, we would hope to be able to find a pattern of antibodies that are associated with improved outcome as measured by survival and some that won’t. And it’s possible that the antibodies that are associated with improved outcome will differ from patient to patient, again because our immune systems all react differently.

And if you develop a product that depends on one single antigen, you have greatly limited your ability to reach across the varying immune responses that exist among men with prostate cancer, or for that matter, patients with any type of cancer.

So, it is encouraging for us to see even in this early work with a limited number of patients that we can identify some prostate cancer patients, who respond to the product in a way that shows an association with survival. And that those same patients may not respond to other antigens with that same association. So, it’s that specificity that impresses us.

But we were not satisfied in looking at these data, just to find antibodies that associate with survival and some that don’t. When we found the antibodies that associate with survival, we found that that association was independent of how long the patient has been treated or other characteristics of that patient.

As we go forward in this work, we fully expect to identify antibodies in addition to the two that we reported. And we moreover further expect that different groups of patients will have associations with different antibodies.

We may, but we haven’t proven this yet, but when we get to use this information and do the similar studies in Phase 3 to be able to identify a panel of antibodies that are associated with clinical outcome in most, if not all of the treated patients, and develop assays that would be useful to clinicians in guiding treatment decisions in the future.

I don’t know, if I have covered in my comments, Joe, the kinds of things you were wondering about, or if you have a specific follow-on question, but that’s the context that I would like to place all of these data in. And I want to make sure that people listening in don’t think that this is a retrospective subset analysis that’s being used to prove clinical efficacy. That’s not the case at all; this is about mechanism of action and developing the tools to do a prospective analysis with a large randomized Phase 3 trial.

Operator

And our next question comes from the line of Ren Benjamin - Rodman & Renshaw.

Ren Benjamin - Rodman & Renshaw

Going back to the immune response data, I think, there is a lot of interesting results that came out, but this is more of a basic question. In cancer vaccine development, I know that at one point we were talking about humoral response, and then it seems to me that the drug thinking changed to how cellular responses was more important.

Can you give us an idea as to how this data, does it help resolve that issue? Is GVAX one that can tap both the humoral and cellular component, and compared to other vaccines which can only tap or generate response from one arm versus the other? How would you comment on that?

Stephen A Sherwin

Ren, there is no question that you need both. Both the T cell or cellular response, generation of cytotoxic lymphocytes in particular that can directly attack the tumor, as well as the humoral response, the generation of anti-tumor antibodies. Which can work independently or even in conjunction with the cellular immune response through well-defined processes, that include things like ADCC, for example, antibody-dependent cellular cytotoxicity.

So you need both a T cell and a B cell response. And one of the strengths of GVAX is that we have without question demonstrated in both preclinical and clinical studies that it can activate both the T and the B cell limbs of the immune system.

And that makes perfect sense, because the activation of the immune system with GVAX starts by activating dendritic cells, which present antigen to early T cells that get activated, and in turn activate other more mature killer T cells, and also ultimately the B cells that make the antibody.

So we are turning on the immune response with GVAX at an early enough step in the process to result in activation of both T and B cell immunity. So that’s how GVAX works. And we know that T and B cell activation is occurring in these patients, both limbs of the immune system.

So that’s important. Now there are other immune therapies in development, where that is not the case. It is not unique to GVAX. There are other immune therapies that probably produce both T and B cell responses. But there are definitely some that are heavily weighted towards one side of the immune system or the other. I won’t comment on those, but just to emphasize that GVAX is broad and activates both sides of the immune response.

Now if that’s true, why are we so focused on measuring antibodies? Well, there is a good answer for that. The kinds of assays that we can do to characterize the immune response across a wide array of antigens by measuring B cell responses in the form of antibodies are high throughput assays, using that term broadly, meaning we can do lots of assays on lots of patients with lots of different antigen induced immune responses.

While you can do that to some extent with the T cell response, I am sure the immunologists on the phone know exactly what I am talking about, it’s logistically complex and cumbersome, and depends on having access to patient specimens that are often not as easy to get or not as easy to store or both.

And without getting into technical details, basically what this comes down to is our choosing the B cell response because we could do these so-called high throughput assays, and focus not on just documenting whether the response was there, but on characterizing it across a wide array of antigens.

Ren Benjamin - Rodman & Renshaw

There was a recent article where, I think, GVAX was combined with ipilimumab, and they looked at some patients with melanoma and ovarian cancer. And I just wanted to get a sense, this is a platform technology and can be applied obviously to a lot of different cancers, and this seems it was more of an investigator-sponsored study.

Correct me if I am wrong, but what are the other tumor types that you have looked at and you think have promise. I know that you are focused on prostate right now with all your resources, but if you had sort of unlimited resources where would you be?

Stephen A Sherwin

This is a recent publication from the proceedings of the National Academy that comes from Glenn Dranoff and his group at the Dana-Farber Cancer Institute at Harvard. And what they reported is that patients who got either GVAX melanoma or GVAX ovarian products, and then later on received the CTLA-4 antibodies had in some cases histologic evidence of tumor destruction, and rather impressive long-term survival.

So it’s another encouraging data point that suggests that the addition of this antibody could be a benefit in patients who have had GVAX. And by the way those effects have not been seen in their experience with single antigen immunotherapy. So that’s another important data point for us.

Now, with respect to the potential of GVAX and different tumors, we have tested GVAX and we or collaborators in the following list of cancers today, not only prostate, of course, lung cancer, as you just heard, melanoma and ovarian cancer, as I commented on pancreatic cancer and leukemia, early on kidney cancer, and breast cancer as well, is being studied at Johns Hopkins.

So it’s a long list, and we have a lot of conviction about this being a multi product platform. But there is, well, as you can see a lot of this work is being done in academic centers at a time when it means an awful lot to the company with respect to resource conservation. So to state the obvious, the work at the Dana-Farber at Harvard, the work at Hopkins is funded largely through grants and other academic sources of funding.

What would we do at the company? Well, we have kind of spoken to that in terms of where we would really like to put future emphasis, and that is by way of our efforts for GVAX lung. And we are driven here by not only our past experience, which was quite encouraging, albeit with the patient specific form of the product.

But what is now as most people appreciate the most common form of cancer death in both men and women, a major unmet medical need, and one that would provide great opportunity for new therapies. We haven’t anointed our next candidate for Phase 3, and we need more clinical data before we do that. But those are some thoughts.

Ren Benjamin - Rodman & Renshaw

Just can you give us a more detailed status of the pancreatic and leukemia studies? You mentioned the number of patients, but how far along are they in these studies? And you mentioned that there should be data in 2008. But when exactly might we see that, second half, first half, anymore clarity you can give us that would be great?

Stephen A Sherwin

Well, just to try to calibrate, both of those two ongoing studies are both enrolling, and I believe, those are second half, not first half with respect to the pancreatic.

Operator

Our next question comes from the line of Richard Smith - JP Morgan.

Richard Smith - JP Morgan

Just a quick question on the finances with respect to the Kingsbridge facility how much is left on that?

Sharon E. Tetlow

About 4.5 million shares.

Richard Smith - JP Morgan

And so just wondering, given your cash burn, you are getting towards the end of the year. Am I right in thinking, when do you start getting concerned with respect to either refinancing or signing a deal?

Sharon E. Tetlow

Well, I think, what we have consistently said is that we want to maintain a strong cash balance. And that we prefer to use the diversified assets of the company and potential corporate collaborations first in the list of potential sources of funding, and then resort to equity sales to fill in between.

And that’s pretty much all we have been saying, except that we do intend to maintain a strong, a relatively strong cash balance. And I think we did that, as you could see, by the ending cash balance in 2007.

Richard Smith - JP Morgan

What other assets do you think you have that you could monetize?

Sharon E. Tetlow

If we were to have other intellectual property assets, we probably would try to be thoughtful about building any expectations, and really only talk about them after we sign a transaction, such as we did with the Lenti asset sale, which was a sale of variety of technologies in already existing license agreements intellectual property with respect to the Lenti technology.

So we would certainly do that again, but as a matter of course, we discuss them after we have something that we can concretely talk about.

Richard Smith - JP Morgan

And you might have mentioned this before, but with the combination with MDX-010, I think, there is data you mentioned coming mid-year, is there a chance it could be at ASCO, and what are the next steps there?

Stephen A Sherwin

Well, Richard, our practice is not to promise a meeting until an abstract is accepted, if you follow me. But it’s a reasonable time of year and time of meeting to think about that. There are alternatives, and the important point I would make is the completion of enrollment of the expansion phase occurred last year in a timeframe that gives us some confidence that we will have enough follow-up on these patients to make meaningful report at that time.

Operator

And our next question comes from the line of Mark Monane - Needham.

Mark Monane - Needham

Let’s start with the idea of cancer patients being immunosuppressed. Clearly this is something that’s thought of in the literature, and it’s hold into question, the whole idea of using that active immunotherapy cancer vaccine in these patients. Do you think the data that we saw at ASCO GU address that issue in some way, what are your thoughts here?

Stephen A Sherwin

Mark, there is a prevailing view as you point out that once patients get cancer, their immune system stop working, so why bother trying to make them work again. And I think, yes, the data that we presented at GU ASCO shows that men with advanced prostate cancer, even at the metastatic stage are obviously capable of having specific immune responses to things on prostate cancer cell, that’s what the data shows.

So their immunosuppression may be there at some level, but it is certainly not deeper, broad enough to prevent a meaningful immune response. And so, I think what you have to do in thinking about the immune system in cancer patients is look at each clinical situation on a case-by-case basis.

If you had patients with advanced cancer that have been heavily pre-treated with chemotherapy or radiation such that their immune systems had been damaged by those treatments, the ability to stimulate the immune response would be obviously much more challenging. But just because a person has advanced cancer unless they have received that kind of heavy prior therapy, it doesn’t mean they couldn’t respond.

And this isn’t exactly what you asked, but I am going to use the opportunity to make a point that may be helpful to some of the people listening in. Why is it that we believe that we can make active immunotherapy a meaningful treatment for patients with cancer. We use products of the immune system today oncologists do to treat cancer.

And in fact the most important new products in the last decade have all been antibodies, products of the immune system that are being used now in a number of advanced cancers. So if we can use antibodies made exogenously to treat cancer why can’t we learn how to successfully induce antibodies and other aspects of the immune system to treat cancer.

And the analogy, I think, a good and fair analogy is the diabetes, where we treat the disease today both by administering exogenous insulin, and using pharmacologic agents to induce production, at least in Type II diabetes, where patients still have insulin reserves. So I know, you didn’t ask me about the latter point. But you set the stage and allowed me to say that.

Mark Monane - Needham

A couple more questions on the data, could you help us understand, are we able to tease out from the data, the correlation versus causation of the effect? Is it possible that we are able to separate, how much of the survival might be due to the vaccine, which led to immune response, and that immune response was responsible for survival, versus the opinion that maybe it was just immunocompetent patients are healthier, and therefore do better in prostate cancer. Can we look at that question in this data set?

Stephen A Sherwin

Well, I think, the answer is yes in a limited way, remembering that these are just the first two antibodies, and that the numbers of patients are relatively small compared to what we will have the opportunity to look at in the Phase 3 setting. But even with those limitations, we showed statistically significant associations between two antibodies, and as we reported another two where that association was not present in the same group of patients.

So that’s one data point. In a sense, the lack of an association with two antibodies, it serves as a negative control, if you will.

Secondly, we did the multivariate analyses to rule out an association with, for example, duration of treatment, which could create a false impression of an association. Patients who are destined to do better, live longer, get more treatment, and therefore make more antibodies, but we could find no statistical association to explain the results away in that manner.

And again the patient numbers are small. We did disease characteristic analysis to show the association was independent of that using the Halabi nomogram that’s widely used in advanced prostrate cancer to look at disease characteristics.

So all of those things, we felt the need to do ourselves internally before we came forth with these data to address the question that you raised. So even with the limitations of a small trial, we don’t believe there is a serendipitous explanation of the sort you mentioned.

Of course, going back to these kinds of questions with even broader panel of antibodies in a prospective randomized Phase 3 trial with several hundred patients in each treatment arm, where we can look at both the treated and control patients will provide even, I would expect, even more convincing data to the skeptics, which may be there still being skeptical.

But I said something, a while ago, that maybe bears repeating. We did not put forth these data as part of a retrospective analysis in a Phase 3 trial to try to prove that a product is working that has missed its endpoints in Phase 3. That’s not what this is about.

And we have every hope and conviction that we could, that we will have positive clinical data in our Phase 3 trials based on predefined endpoints, and if we are right in that conviction and we have such data then to be able to go back and show these associations will provide important mechanism of action data that confirms the finding, number one.

And number two, as I mentioned a while ago, could provide access to a panel of antibody assays that could be used to guide future treatment decisions. So those are some thoughts that I think get at the question that you were asking.

Mark Monane - Needham

In the VITAL-1 trial, when patients were assigned to the two different groups, patients who got GVAX prostate cancer immunotherapy were they allowed during the course of the trial to receive Taxotere. If they progressed on therapy were they allowed to get Taxotere, and if they were, how were they dealt within the analysis, and do you have any information from the Phase 2 data that you have presented on several occasions of what happens in patients with GVAX who later get Taxotere?

Even in the protocol for VITAL-1, are patients who are assigned GVAX prostrate cancer vaccine in active immunotherapy, are they allowed after they progress to get Taxotere or are any of these patients getting Taxotere, as part of their treatment course?

Stephen A Sherwin

So, let me answer your question, both with respect to what’s been published around Phase 2, number one, and number two, what can happen in the context of the Phase 3 trial.

So, first of all, with respect to the Phase 2 and one of the trial results are published already, and the other will be forthcoming. After patients receive GVAX, they could be treated by their physicians with whatever available therapy the physician deem to be appropriate, and this is very typical when you are following patients for survival, of course.

And it turns out in the first study where I can comment specifically about a third of the patients went on to chemotherapy, not in all cases, Taxotere. And these are very small patient numbers, so I wouldn’t make too much out of them. But those patients, who went on to receive Taxotere or other chemotherapy after GVAX, had longer median survivals. But the cautionary note there is that the patient numbers are small.

Now turning to the Phase 3 circumstances, pertains of course only to VITAL-1, and the answer to your question is, after patients received GVAX, they are being followed obviously for survival and they can be managed by their physicians in whatever ways deemed appropriate. So the expectation is that some patients, but probably by no means all, will go on to receive Taxotere after GVAX, if that’s what their physician thinks is in their best interest.

Built into the analysis plan for this protocol is an analysis of the outcome for patients who go on to receive Taxotere versus those who don’t, and there is a lot of literature now and views being put forth that immunotherapy prior to chemotherapy in a setting like this can make the chemotherapy work better.

So we are going to be in a position because of the design of our Phase 3 trials and the size of the trials to get an answer to that question. And it is also is an analysis plan that’s designed to eliminate any complications in demonstrating the benefit of GVAX by itself in the study population.

Operator

And our next question comes from the line of Pamela Bassett - Cantor Fitzgerald.

Pamela Bassett - Cantor Fitzgerald

I think you mentioned that certain antibodies were present, and this was independent of how long the patient had been treated with GVAX; can you talk a little bit about what the implications of that may be on [inaudible]?

Stephen A Sherwin

What is independent of duration of treatment is the association between the two antibody responses that we identified in survival. So the independence of those durations has to do with the association with survival. However, that’s not saying that you don’t get more antibody responses across the whole array of antigens, if you treat patients at higher doses or longer.

Now, let me stop and make sure that that’s clear. So it’s the association between the response and survival that can not be explained away by dose or duration, but in fact if you treat patients longer or at higher dosage you get more antibodies being formed, so there is every reason to use GVAX at the dose that we selected for Phase 3, and to treat patients for as long as it’s deemed medically appropriate by their doctors even with maintenance.

Operator

Our next question comes from the line of Jeff Englander - Standard & Poor’s.

Jeff Englander - Standard & Poor’s

I am going to make the assumption that there is some combination of an upfront and a royalty that would get you to a partnering deal that you would accept, and obviously you haven’t gotten that yet. Can you give us some sense of maybe what some of the gating factors are, obviously those two things, but in fact does time become one as you get closer to the Phase 3 results, and as previously mentioned your cash position?

And can you give us some sense of is there a waiting difference between maybe a domestic agreement and international agreement?

Stephen A Sherwin

I am not going to comment in any quantitative way on upfront versus royalty. We have, as I said again today, felt that at this point considering the fact that the company and its shareholders have borne the brunt of the cost and risk of this program that it makes a lot more sense for us to put our focus on royalty, on sharing in the downstream success, as I have put it earlier.

So, that’s what we are focusing on, and obviously, we want to get the best possible arrangement with respect to the sharing mechanism, royalties or however it may be structured.

With respect to geography we have, I think it’s fair to say in these discussions, been ecumenical. There could be a regional deal that would be sufficiently valuable that it would be more attractive to us than a global deal.

Timing, you also asked about and let me try to address that. We have, of course, never promised a deal by a certain point of time, and we have been very deliberate about that, because we wanted to give ourselves as much time as we could to find the best possible deal.

I have said previously that if there is going to be a deal prior to Phase 3, it’s obviously going to occur this year. We do not feel that we have a gun to our head, and have to sign a deal at any cost, that I want to be clear about as well.

Jeff Englander - Standard & Poor’s

The question was asked earlier in terms of other IP assets that you may have to enhance your liquidity, is it safe to say, without identifying them specifically, you feel comfortable in addition to the Ceregene assets, that there are other assets like the Lenti asset that you could go to if you need to?

Stephen A Sherwin

The answer is absolutely, yes. I won’t name specifically which assets, because again we want to have maximum flexibility, as Sharon mentioned, on the timing of any transactions. But we have a broad array of technologies here, some of which are results of acquisitions, some from our own work.

And our practice is either to use them ourselves or if they are not relevant to our core business to either license them, sell them, or spin them out. And without being more specific, I can’t say, it’s in our business plan this year. That’s absolutely the case.

Operator

Dr. Sherwin, please go ahead with any closing remarks, sir.

Stephen A. Sherwin

I hope that both in terms of the comments from Sharon, and myself as well as the Q&A session that you are going to leave this call with a sense of our energy and enthusiasm about what’s been happening, and what’s in front of us. And you will have plenty of opportunities to hear us again on a lot of these topics at the upcoming conferences, that Susan mentioned, as well as our next quarterly call. So I thank you for your time today, and look forward to keeping you posted.

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Comments

[Greg Pinelli:]

I've followed CEGE thru its ups and downs..certainly more of the latter to this ppoint...and it could be very close to becoming a major force in cancer therapy. Aside from the investment aspect I wish them the best..tens of thousands of lives could be changed for the better.
Taking account of the investment side, however, the next few months..probably May-June ...will be telling for CEGE and its future profitability. At 2.40 and change it's a low risk..and incredibly high reward play. The suffering has already been done by those who've held this long shot for years!

2008 Mar 26 07:37 PM