Antigenics CEO Discusses Q4 2010 Results - Earnings Call Transcript

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Antigenics Inc. (NASDAQ:AGEN) Q4 2010 Earnings Conference Call February 17, 2011 11:00 AM ET


Garo Armen – Chairman & CEO


Ren Benjamin – Rodman

Shamma Freeman [ph]


Good morning. My name is Tracy, and I’ll be your conference operator today. At this time I would like to welcome everyone to the Fourth-Quarter and Year-Ended 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I would now like to introduce and turn the call over to Garo Armen, Chairman and CEO of Agenus. You may begin your conference.

Garo Armen

Thank you, and very good morning everyone. Welcome to Agenus conference call to discuss the financial results for the quarter and year ended December 31, 2010. With me today is Shalini Sharp, Vice President and CFO. Normally, Shalini does the financial part of the call, but she has partially lost her voice, so I will chip in today but she will be available for questions.

We hope that all of you have had a chance to review the press release that was issued this morning. During this call we will review our financial results as well as provide a corporate update. We will then open it up to question and answers.

Before we continue, I would like to remind you that this conference call will contain certain forward-looking statements including, without limitation, statements regarding the company’s cash position, timing of potential income streams and development and commercialization efforts, timelines, availability of data and potential efficacy with respect to product and product candidates of the company and/or its licensees and partners.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Reference to these risks and uncertainties is made in today’s press release and they are disclosed in more detail in our most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call, and Agenus undertakes no obligation to update or revise the statements.

All forward-looking statements are expressly qualified in their entirety by this cautionary statement. When evaluating Agenus business and securities, investors should give careful consideration to these risks and uncertainties.

For the purpose of this call, the phrase “net cash burn” means the cash used in operating activities plus capital expenditures, debt repayments, and dividend payments.

As a reminder, this call is being recorded for audio replay.

With that I’ll now review our financial results for the quarter and year ended December 31, 2010. For the quarter ended December 31, 2010 Agenus incurred a net loss attributable to common stockholders of $2.6 million or $0.03 per share. This compares with net income of $1.7 million or $0.02 per share for the same period in 2009.

For the year ended December 31, 2010, the company incurred a net loss of $22.7 million or $0.23 per share, compared with $31.1 million or $0.39 per share for the comparable period in 2009.

Agenus recognized revenues for the year ended December 31, 2010 of approximately $3.4 million, compared with approximately $3.3 million during the same period in 2009.

Research and development expenses for the year ended 2010were approximately $12.9 million, compared with approximately $17 million for the comparable period in 2009. General and administrative expenses for the full year 2010 were approximately $12.1 million compared with approximately $14.1 million for the full year 2009. These decreases reflect among other items our cost containment efforts.

Cash, cash equivalents and short-term investments were approximately $19.8 million as of December 31, 2010. The company’s net cash burn for the year-ended December 31, 2010 and 2009 were approximately $15.7 million and $25.2 million respectively.

The 2010 results primarily reflect the company’s continuing support of the Oncophage or the old Oncophage Series not Prophage Series, all cancer vaccines as well as its cost containment efforts. Net cash burn for 2011 is projected to be in the range of $16 million to $18 million.

I would like to highlight that we have retired all but the last 100,000 of our $50 million, 5.25% convertible subordinated note which was incurred in 2005. The last of this transaction was consummated during the fourth quarter of 2010 when we exchanged approximately 8.9 million shares of common stock and 6.4 million in cash for approximately 17.595 million of the notes outstanding.

Finally, I would like to mention that during the fourth quarter of 2010 we were awarded approximately $424,000 worth of grant under the IRS's Qualifying Therapeutic Discovery Project.

Under the program projects were selected by the Treasury Department and the Department of Health and Human Services and in order to qualify projects had to incur preclinical and clinical research course during 2009 and 2010, and be designed to result in one or more new therapies to treat or prevent a disease or condition representing in our medical needs.

In addition, reduced long-term healthcare cost in the U.S. and demonstrate the potential to enhance U.S. competitiveness and create high quality jobs in the U.S..

This concludes the financial portion of the call. And I will now provide a brief corporate update.

As you are aware, we are excited to announce the change of our company name this quarter from Antigenics to Agenus. The new name reflects broadening of our product portfolio and clinical candidate beyond autologous antigen based vaccine as well as our commitment to actively pursuing licensing opportunities to leverage our development capabilities and expand our product portfolio.

We are extremely proud of the pioneering work that we have done in the field of antigen-based personalized cancer vaccines over the past 16 years and our commitment to this technology continues to be an integral part of our company.

In conjunction with this our personalized cancer vaccines have been named the Prophage Series of cancer vaccines. The name Oncophage will be retained in the Adjuvant Renal Cell Carcinoma indication as part of the Prophage Series. Our herb-based therapeutic vaccine name also has been changed from AG-707 to HerpV to properly and more accurately reflect the indication and the fact that it is a vaccine.

Beginning with the Prophage Series of vaccines, firstly, the enrollment is ongoing in two phase, two clinical trials testing the Prophage Series vaccine G-100 in newly diagnosed gliomas and G-200 in recurrent glioma. The trials are being led by Dr. Andrew Parsa of the University of California, San Francisco (UCSF) and are supported with funding from the American Brain Tumor Association, the Accelerate Brain Cancer Cure, the National Brain Tumor Society and the National Cancer Institute.

Data from the first 32 patients in the G-200 recurrent glioma trial showed median survival of 44 weeks compared with a historical median of 26 weeks. And very objectively in this trial, all patients tested exhibited a significant generalized innate immune response, and 92% of the patients showed an adaptive tumor antigen specific immune response, demonstrated by a significant increase in both CD4 and CD8+ T cell counts. Updated data from this trial is expected to be reported by midyear this year.

A second glioma trial in newly diagnosed patients involve administration of G-100 in combination with radiation and Temodar which is the standard of care. Based on encouraging early results this trial has been expanded to include up to 10 leading brain tumor research centers in the U.S.

In addition, Agenus in conjunction with UCSF plans to initiate a Phase 1 trial in the Prophage Series vaccine NP-150 in pediatric neurological tumors. There are very few of available treatment options for this disease and the area of glioma in other brain cancers represent a tough priority for our company.

We continue to explore development and commercial partnerships for our Oncophage vaccine for RCC, Renal Cell Carcinoma and Prophage Series for glioma on both a global and regional basis.

A partnership in glioma could help accelerate and fund pivotal trials in the syndication which would be among the next step for us. A distribution partnership in Russia could help broaden commercial penetration of Oncophage as well as assist in seeking government reimbursement at minimal cost of the company. A partnership in Europe is expected to minimize cost of advancing development, potential resubmission and registration in that territory.

As previously mentioned, we are pursuing collaborations to test Prophage Series of vaccine candidate in combination with other investigational and/or commercially available therapies in an attempt to enhance the efficacy of our vaccines in late-stage cancers.

I am pleased to report that during the first quarter of 2011 we entered into a research agreement with Memorial Sloan-Kettering Cancer Institute. The collaboration will test Prophage Series of vaccines in combination with therapeutics that prevent down regulation of the immune system such as antibodies to CTLA-4 and PD-1.

This group of antibodies represent a new class of immunotherapeutic agents that represent complementary mechanisms of action for use with cancer vaccines. Pursued all these various types of potential partnerships remains a very high priority for our company.

Now moving on to QS-21. GlaxoSmithKline is currently testing more than a dozen vaccine candidates containing our QS-21 stimulant adjuvant. I would like to highlight that four of these programs are in Phase 3 clinical development. The Phase 3 programs include vaccines for shingles, malaria, melanoma and non-small cell lung cancer.

This February will be a major milestone for the melanoma trial. This trial enrolled approximately 16,000 subjects and the last subject is expected to be dosed during this month. The malaria study has been featured in several publications over the last few months. They include The Lancet Infectious Diseases, Scientific American and Reuters Special Report on Malaria. This vaccine candidate has the potential to be the first vaccine against human parasite. And has the potential to be a product given alongside standard infant vaccines in a substantial part of the world.

Pending favorable data, the first vaccine products containing QS-21 are expected to be launched in the 2013 to 2014 timeframe. Phase 3 data should become available during 2012. Agenus is entitled to receive milestone payments as these programs advance as well as royalties for at least ten years after commercial launch. In addition, JANSSEN AI, a division of J&J has a vaccine candidate in Phase 2 trial to treat Alzheimer’s disease.

The cost of developing and marketing all these vaccines is assumed by our licensees. QS-21 represents a very broad and diversified pipeline of programs with minimal risk and no real investment on the part of Agenus. This pipeline is rapidly approaching maturity, and we look forward to the potential commercialization of an important next-generation of vaccines.

Finally, I will discuss our program in the treatment of Agenus HerpV, formally AG-707. This product candidate is based on the heat shock protein platform which is the engine of our Prophage Series of vaccine candidates. But this one is not patient-specific because it does not need to be.

It is comprised of heat shock protein-70 complexed with 32 different immunogenic peptides derived from the HSV-2 genome. HSV-2 is a virus that causes genital herpes. This high degree of multivalent potentially means that HerpV will have broader applicability to more patients, and may have a more durable impact on the disease.

Phase 1 data for this product show that 100% of the valuable patients receiving HerpV with QS-21 demonstrated a statistically significant CD4+ T-cell response to HSV-2 antigens. In addition, a majority of these patients, 63%, demonstrated also a CD8+ T-cell response. Eliciting both of these types of immune responses is a first of a kind achievement in herpes therapy.

A report of these findings will be submitted for publication in a peer review journal by the middle of this year. HerpV represents our first proof of concept study for the application of HSV platform in the infectious disease field. Based on the potential of our platform, almost any pathogen could be addressed with similar vaccine constructs. We’re currently seeking partners for the further development of HerpV and/or this platform technology.

I hope that you have found this update to be helpful, and I will now conclude my remarks. And I believe we are ready for a Q&A session.

Question-and-Answer session


(Operator instructions). Your first question comes from the line of Ren Benjamin from Rodman. Your line is open.

Ren Benjamin – Rodman

Hi, good morning, Garo, and congrats on the progress. I have several questions, maybe just starting off with Oncophage. Can you talk and give us an update as to what is happening in the Russian front as far as securing a local distribution partner, is there interest, is there talks going on or are you spearheading yourself at the government level?

Garo Armen

Certainly, Ren. Let me just give you a little bit of background of what is happening in Russia, in general and then I will put it in the context of what is happening with us. In the Russian marketplace, over the last two years specifically, there have been some remarkable reforms in the business environment of Russia. As you know, many of the multinationals have really stepped up their efforts, particularly, in the pharmaceutical business to expand their operations in Russia.

So in that regard, over the last two years, Russia has become a dramatically better business environment. Fortunately or unfortunately, our approval was a little over two years ago. So, at the time we got approval, we were still struggling with some of the requirements or reform and some of the import/exportation issues and so on and so forth. Now, all these logistical issues are basically behind us now.

And the proper permitting has been done, some test runs have been run and while we’re in the process of doing is, we’ve talked about in the previous calls, finalizing the arrangements with at least one partner but in the meantime, Oncophage has gotten attention from several other local parties in Russia.

Russia has a number of hi-tech initiatives and a few of these initiatives are in the biotechnology field and a substantial amount of money has been devoted to upgrade systems in Russia to really lead in a few areas. An outfit called Scofcova [ph] as well as Rusnano [ph] are among the government established institutions who have started pioneering in this effort. And we have unsolicitedly have gotten several inquiries by established pharmaceutical distributors and players in Russia.

And just a past month alone by inquiring about the fact that some of these government initiatives are very early stage programs and we represent an already approved product which represents a high technology and we will be considering partnering with local players, entirely Russian-owned players in order to bring this product to the market. So, I hate to put it this way but bear with us, a little bit longer and I believe that we have a reasonably good chance of finalizing a deal and exploring the commercial marketplace in Russia in a way that will not tax our own financial resources and be completely undertaken by a third-party.

Ren Benjamin – Rodman

Okay. And then just switching gears, still staying with Oncophage, but to the EU market, you may have mentioned this in your prepared remarks, but maybe I missed that. Just what’s the status there, if there is anything moving forward in the EU market?

Garo Armen

Certainly. As you know after we withdrew the application we had several meetings with specific country regulatory agencies within the EMA, who are much more advanced in the field of immunology and in their consideration for cancer vaccines. And we were encouraged, in no uncertain terms, encouraged to basically fill in some of the empty boxes and consider coming back for a reconsideration of our application.

And one of the drivers of this is our immunology trial which has started and continues to enroll patients and we are in the process of exploring a local player in Europe, we are in very advanced discussions with the local player in Europe who will undertake the significant amount of the cost of this completing the immunology trial in renal cell carcinoma and undertake also additional cost that would be required for the regulatory work in the EU and potential resubmission of our application. So that too is in very advanced stages of discussion and I hope that we will have something during the course of this quarter.

Ren Benjamin – Rodman

Okay. So now switching gears to, I’ll probably make a mistake on the Nomenclature here so just correct me if I am wrong, but the Prophage G-200 which is the vaccine for the recurrence brain tumor. We are expecting updated survival data from that trial in the middle of this year potentially at ASCO?

Garo Armen

The answer is, yes. Potentially at ASCO.

Ren Benjamin – Rodman

Okay. Can you just give us a trial update as to just a longer-term follow up and the trial is done, and it is a longer-term follow up or has there been any sort of additional dosing, can you just give us a status update?

Garo Armen

Sure, in the recurrent glioma setting, 34 patients have been enrolled. And as we have previously mentioned we are now working towards closing enrollment at UCSF, even though there has been additional demand for enrolling more patients, we need to put a closure to this trial so that we can contemplate what the next test will be.

So at UCSF, we are working on closing the enrollment and enrollment has been closed at all the other centers, which include Columbia and Case Western. And the data that I provided to you in terms of survival and recurrence in the setting versus the historical controls is from this trial and the immunology data that we talked about also is from this trial.

In the newly diagnosed setting, we have now enrolled 17 patients and are actively working to initiate the other centers that we talked about to include the rest of the patients. As you may remember, we had only eight patients enrolled in this trial and because of the encouraging trends, we decided to add more centers and also have as many as 50 patients enrolled in the trial. So since the last update was gone from 8 to 17 patients at just one center, and we expect that as the other centers come onboard, the enrolment will be significantly improved by the next quarter and certainly, by the fall of this year.

Ren Benjamin – Rodman

And so, is it fair to say that we may be obtain some preliminary results from this trial in the second half of 2011 or may be earlier?

Garo Armen

I think preliminary results, yes.

Ren Benjamin – Rodman

In the second half?

Garo Armen

In the second half to be conservative.

Ren Benjamin – Rodman

Okay. And so that I guess the Nomenclature Right that the newly diagnosed is Prophage G-100?

Garo Armen

That’s correct. So the way we have worked the Nomenclature, the old Oncophage, which encompass everything has now been named as the Prophage Series and the name Oncophage has been retained for the RCC adjuvant setting only. So Oncophage now is part of the Prophage Series but only refers to our product and the RCC setting in the adjuvant RCC setting.

The best of them are the nomenclature is somewhat self-descriptive. We try to make itself descriptive. So G refers to Glioma and Prophage G-100 is the newly diagnosed patients, whereas Prophage G-200 would be the recurrent patient population. The next one I wanted to talk about in terms of update is Prophage NP-150 and that’s because just to get used to the algorithm, NP will refer to Neurological Pediatric tumors and 150 is because there maybe some recurrent and some newly diagnosed in that mix.

Ren Benjamin – Rodman

Okay and what is the status of that? We have it is something to initially this year.

Garo Armen

We have been working with UCSF investigators to finalize the protocol and that we are basically targeting to initiate this trial in the second quarter of 2011.

Ren Benjamin – Rodman

Right. And then you mentioned the combination studies in your prepared remarks or at least preclinical combination studies can you give us some sort of thoughts as to when do you think the combination studies may enter the clinical stage?

Garo Armen

Okay, so, the combination studies are really in two or maybe even three categories. One are the kinds of combinations that we are looking at Memorial Sloan Kettering Research Center which includes CTLA-4 antibody and as soon as (inaudible) becomes, for example, a commercial available product or even perhaps before that, in some circumstances, we will be looking at potential combinations of a Prophage Series product with (inaudible).

In addition, there are other products in the pipeline that we are in the process of exploring. One of them is the PD1 antibody. It is perhaps best described as the next-generation (inaudible) and the moment we have that product available to us because it’s not commercially available, so it will require us finalizing a potential arrangement with a provider of that product, then we will contemplate what to do with that next.

So all of these things are in active exploratory stage. In addition to that there are other products that we are looking at. And one of the reasons these are being explored actively is because we want to generate both some preclinical data so that going into the clinic in combinations, we have a better justification in terms of the synergistic outcomes that we can expect with Prophage Series plus one of these compounds.

In the last 12 months, there has been a considerable amount of progress made in looking at the immunological effects of some existing products, such as Sutent and even Temozolomide, which is the combination we are using in our glioma newly diagnosed patients. And as we understand what they do to the immunology system we will be able to design and act under protocols much more deliberately, and presumably, with lesser risk of outcome. So those are being explored and we hope to undertake some of these activities during the course of the next month to this year.

Ren Benjamin – Rodman

Okay. Switching gears to HerpV, in my previous notes, we have that there is the potential to publish the Phase 1 data. Is that manuscript been accepted anywhere, has there been written and then also can you just comment on how discussions with potential partners have been going or is it something that will be initiated this year?

Garo Armen

Okay. So as far as the manuscript is concerned, the manuscript is essentially final. It’s been finalized by the respective authors. There will two manuscripts actually. And the authors includes some of the leading investigators from the leading centers of the world. And it’s just making its rounds now for a final review and will be submitted hopefully very shortly.

Ren Benjamin – Rodman


Garo Armen

As far as partnership discussions on this, we have thought that once the manuscripts have been submitted, we have a better basis for having intelligent discussions with partners, and so I am hoping that those discussions will be underway also during the course of next months to this year.

Ren Benjamin – Rodman

Okay, and then just one final question regarding QS-21. Should we be expecting any milestone payments this year in 2011, is there any milestone payments attached for both a completion of enrollment or is it all regulatory filings in the sales market?

Garo Armen

It depends on the product run, for example, with certain products upon entry into Phase 3, we get a milestone payment. With other companies and other products we get a milestone payment upon regulatory filing.

Ren Benjamin – Rodman

And I guess is one cash question. I believe if you can just reiterate for me please the net cash burn expected for this year? And then I just want to make sure that all the debt that you have has now been officially retired?

Garo Armen

Okay, so we had two series of debts. One has been the public debt, that’s the $50 million convert. It has essentially all been retired. The reason I say essentially all is because the last $100,000 worth of it we haven’t found the owner and so there is no claim for it so far, but it’s immaterial basically. For all intensive purposes that $50 million public debt is done.

And just to give you an idea of what we have done with it, we have retired $50 million for approximately less than $10 million of cash consideration and approximately, $15 million of stock consideration. So between cash and stock it has been retired at current stock levels for slightly less than $0.50 and $1. And that was because we made some early direct market purchases and some negotiated purchases with the holders, so it’s been done except the last $100,000 for which we cannot find a claimant.

The second piece of the debt was a transaction consummated with one party, that’s spreaded in different instruments within their company. And that was $25 million convertible debt that comes due the end of this August, and we have not yet done anything with it, but we expect actually very, very, very shortly to restructure that debt.

Ren Benjamin – Rodman

Excellent, thank you very much and congratulations on the progress.

Garo Armen

Thank you.


(Operator instructions). And your next question comes from the line of Shamma Freeman [ph] this is an individual investor. Your line is open

Shamma Freeman

Thank you. Two questions; one, based upon what you said this morning, I assume you have enough funding to last you through at least 2011?

Garo Armen


Shamma Freeman

Okay. And also based upon the fact that you listed on NASDAQ, is there any thought or consideration at the present time of any reverse stock splits?

Garo Armen

As you may know we have had that option in place, but we haven’t acted on it, and we probably don’t want unless there is a compelling reason to do so.

Shamma Freeman

Thank you very much.

Garo Armen

But we had the option in place.

Shamma Freeman

Okay, thank you very much.


At this time there are no further questions in the queue. Turn the call back over to the presenter.

Garo Armen

Thank you very much and I would like to remind listeners that a replay of this call will be available approximately two hours from now through midnight Eastern Time on August 17, 2011. Please dial 800 642-1687 from the US or use the international number which is 706-645-9291. The access code is 42-65-9717. The replay will also be available on our company Web site in approximately two hours. If you have any additional questions after today’s call, you may call us at 1800-962 AGEN extension 2436. I hope you all have a very good day.


This now concludes today’s conference call. You may now disconnect.

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