Agenus (NASDAQ:AGEN) is a small cap pharmaceutical company with a potential drug pipeline that resembles that of much larger companies. Two recent developments have helped the stock price, but it is still far below where it should be, based on my view of pipeline data. This article will focus on the most recent developments, but will also summarize the state of the pipeline, including potential therapies previously licensed to Gilead (GILD), Incyte (INCY), and Merck (MRK). Technically Agenus is already a commercial stage company since its QS-21 Stimulon is a licensed component in GSK’s (GSK) Shingrix vaccine.
Agenus stock has been very volatile this past year, ranging from a low of $2.50 to a high of $5.95. At the Monday, May 24, 2021 close of $4.03 its market capitalization was $932 million. The next stock moving event I anticipate is the FDA’s acceptance (or not) of the application for balstilimab. After the establishment of a PDUFA date for approval (or not) of the drug for commercial use, investors should focus on the long line of data readouts and possible FDA approvals for the extensive pipeline.
Bristol Myers Squibb Deal
Over the last decade Agenus has built a remarkable platform for discovering and engineering therapeutic antibodies, which it calls Vison. Monoclonal antibodies are a big part of the pharmaceutical business and have only been in use since the 1990s. Each antibody has three major parts, two active arms and the main Fc body. Each arm is complex enough that for any given antibody target there can be multiple, differentiated antibodies that hit the target. More recently bispecific antibodies have been introduced that attach to two difference targets. In addition, the Fc region can be engineered to alter its properties. While there is much excitement today about newer technologies like mRNA, RNAi, DNA plasmids and genetic engineering, there is still a lot of room left for novel antibody development and commercialization.
Source: agenusbio.com
The Bristol Myers Squibb (BMY) deal is for AGEN1777, which is both a bispecific and Fc engineered. The main target is TIGIT; the secondary target remains undisclosed, as are the specifics about Fc engineering. TIGIT is a known inhibitor of T and NK cell anti-cancer activity, though to date making a working TIGIT therapy has proven difficult. The data for AGEN1777 is preclinical. It is good enough that Bristol is making an upfront payment of $200 million, plus potentially up to $1.36 million in milestone payments and tiered double-digit royalties if the drug is successfully commercialized. Note that other companies are working on TIGIT therapies.
The $200 million gives Agenus a cash runway that should get it through the FDA decision on balstilimab. The $1.36 billion sounds nice, but it is best to keep in mind that it is contingent on the drug being both safe and effective in real tumors in human patients. Cancers are highly variable, the immune system is complex, and failure is possible at each stage of the run through Phase 1, Phase 2, and Phase 3 clinical trials. Also, the timeline is usually long for cancer trials. Unless AGEN1777 gets accelerated approval after a Phase 2 trial, any commercial revenues are likely about 6 years away. Good data along the way would likely drive up the stock price. For me the main takeaway, other than the $200 million upfront payment, is another verification of the Agenus platform. Even if some of the Agenus antibodies fail in clinical trials, likely a percentage will prove out, making investing today a wise choice.
Balstilimab Updated Data and FDA Application
Biotechnology timelines can be difficult to predict and are highly dependent on FDA cooperation. 2020 was an especially difficult year given the FDA’s difficulties and prioritization of Covid vaccine work. Many companies also reported difficulty recruiting patients for trials. Sadly, patients delaying visits to doctors also has led to failure to discover cancers at earlier, more treatable stages. It the case of Agenus the development timelines have been quite long; I have seen considerable feedback about that from impatient investors. Agenus had guessed it would submit its BLA for balstilimab in 2021, then later announced a delay requested by the FDA so more mature data could be included. Sometimes when companies announce FDA related delays that means a real problem. Fortunately, we may now be seeing the light at the end of the test tube. On April 19, 2021 Agenus announced it had filed its BLA (biologics license application) for balstilimab to the FDA for patients with recurrent or metastatic cervical cancer. That resulted in a stock rebound.
But the data keeps getting better. That is important, because balstilimab is a PD1 antibody, which means it has to differentiate itself, by efficacy, safety, or price, from those already on the market, like Merck’s Keytruda. On May 20 Agenus announced there will be new data on balstilimab presented at ASCO in June. Likely this is the data included in the FDA application, showing a response rate of 20% in PD-L1 positive tumors and an overall response rate (including PD-L1 negative tumors) of 15% with a median duration of response of 15.4 months. This is strong data for patients in this recurrent or metastatic group and is differentiated from competitors because of its efficacy for PD-L1 negative tumors.
If balstilimab is shown to be effective in other types of PD-L1 negative tumors, it could gain significant market share as the label is expanded. However, keep in mind that label expansion requires further trials, which is time consuming.
Zalifrelimab and AGEN1181
Zalifrelimab and AGEN1181 will receive only brief mention here, as I have covered them extensively in past articles. They are both CTLA-4 targeting antibodies, in the same class approved drugs like Bristol’s Yervoy. My impression is zalifrelimab is comparable to Yervoy, so its main advantage is as a combination agent to balstilimab, or for companies that are looking for an alternative to Yervoy combinations. The truly huge upward inflection point would be an approval of AGEN1181. So far we only have early data, so we should not assume it is guaranteed superior to Yervoy. But if it does generate results significantly better than Yervoy, we are looking, eventually, at something like Yervoy’s 2020 revenue of $1.62 billion.
Licensed Drugs with Gilead, Incyte, and Merck
In November 2020 Agenus announced that MK-4830 entered a Phase 2 trial, combined with Keytruda, in patients with PD-L1 positive NSCLC (non-small cell lung cancer), earning a $10 million milestone payment from Merck. MK-4830 is an ILT4 antibody designed to target immune-suppressive myeloid cells in the tumor microenvironment for the treatment of advanced solid tumors. Data from the positive Phase 1 trial of the agent combined with Keytruda in patients with PD-L1 positive advanced solid tumors was presented at ESMO 2020. Agenus is eligible to receive up to $85 million in additional potential milestone payments, as well as royalties on worldwide product sales. Under its Royalty Purchase Agreement with XOMA LLC, Agenus retains 90% of all milestones from Merck and 67% of future royalties.
Gilead has licensed AGEN2373, a CD137 antagonist, and AGEN1223, a bispecific for depletion of regulatory T cells. Both are in Phase 1 trials.
Incyte has licensed 5 potential therapies. The most advanced, in a Phase 2 trial, in INCAGN1876, which targets GITR. In Phase 1 there are INCAGN1949, INCAGN2390, and INCAGN2385, targeting OX40, TIM-3, and LAG-3, respectively. There is also an undisclosed antibody in preclinical development. All the targets are well-known, and all the therapies would likely be used in combinations rather than as monotherapies.
Rest of Pipeline
If you are not impressed yet, take a look at the Agenus pipeline page. In addition to the antibodies already mentioned, there are more antibodies in preclinical development, including ones targeting cytokines and tumor micro-environment conditioning. Then there is the AgenTus division with trials underway of iNKT cell therapies. Still hanging in there are the older therapy types, from before Agenus added antibody engineering capabilities: vaccines and QS-21 Stimulon adjuvant for vaccines.
Cash Runway
As said above, Agenus will be receiving $200 million from Bristol, probably in this quarter. At the end of Q1 2021 Agenus reported a cash and equivalents balance of $119 million. My guess at Q2 cash spend is $50 million. I expect, unless the milestone payment is delayed, Agenus will end Q2 with about $270 million in cash. That is not bad, but more cash is likely to be needed in 2022, unless some major milestones are generated from partners during the rest of 2021. I would not expect a particularly quick ramp of balstilimab if it does get FDA approval, and the rule is the marketing expense rises just to prepare in case there is an approval. My hope is that an approval, or anticipation of it, would run the share price up to the low double digits, which would mean significant cash could be raised by issuing stock, without much share dilution.
Conclusion
I am surprised that one of the companies licensing Agenus therapies has not simply made a hostile takeover bid to capture its Vision platform and pipeline. Agenus’s market cap was just $932 million, end of day May 25, 2021, at a closing price of $4.01 per share. Why license the milk when you can own the cow?
Aside from that scenario, I see Agenus as a rewarding waiting game. The stock price could go down from today’s low levels if there are regulatory delays, rejections, or trial failures. There is no guarantee that the FDA will approve balstilimab. If approved, a sales and marketing expense ramp will be required to differentiate it from competitors in the minds of prescribing physicians. But approval is likely, and so sales will ramp over time. The data for zalifrelimab also looks good, but again it will be going up against well-funded, well-established competition. Most of the antibodies licensed by major pharmaceutical companies are in early clinical trials, so it could be years before we know for certain if they will ever be commercialized. Any strong Phase 2 results reported would likely raise the stock price.
I would call Agenus a Strong Buy, for the patient. The most likely scenario is we will periodically get both good and bad data and other events. Gradually the number of commercially approved drugs will increase, and for many of them they will gain label expansions over time. If Agenus continues to turn in outstanding clinical trial results, and gets FDA and EMA approval, AGEN1181 could turn Agenus into a large cap pharmaceutical company, worth over $10 billion. Some of the less-understood, more novel antibodies in the pipeline could have similar or even greater value. With the confirmation from the BLA and Bristol deal, I think Agenus is already a Strong Buy at $4.00 per share, given its potential for positive events in 2021 or 1H 2022.
