Agenus Inc Q1 FY2022 Earnings Call

Welcome to Agenus First Quarter 2022 Financial Results Conference Call. My name is James and I'll be your operator for today's call. And I'd now like to turn the call over to Ethan Lovell, Chief External Affairs and Communications Officer. Mr. Lovell, you may begin.

Thank you, James, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will contain forward-looking statements, including statements regarding our clinical development, regulatory and commercial plans, and timelines, as well as timelines for data release and partnership opportunities. These statements are subject to risks and uncertainties, and we refer you to our SEC filings for more details on these risks. Joining me today on the call are Dr. Garo Armen, Chairman and Chief Executive Officer; Dr. Steven O'Day, Chief Medical Officer; Dr. Dhan Chand, Head of Drug Discovery; Christine Klaskin, Vice President of Finance and Dr. Jennifer Buell, Chief Executive Officer of MiNK Therapeutics. Now, I'd like to turn the call over to Garo to highlight our progress and speak to our outlook for the remainder of the year. Garo?

Thank you, Ethan, and thank you all for being with us today. As we have all witnessed, the biotech sentiment is the most negative we've seen in decades. Given the current climate, I'd like to begin today's call by indicating that we are aware of this reality and are putting on hold the old programs, which are not critical for near-term value generation. Wireless and importantly, we are marching ahead with programs which we believe have the prospects of generating significant near-term value. Overall, we expect these steps will result in significant cost reduction for the balance of this year. Ironically, despite recent trends, scientific and medical innovation is at an all-time peak. However, it appears that irrational exuberance, coupled with recent regulatory uncertainty—I'm mumbling my words here by even talking about regulatory uncertainty—but particularly this is happening in the West, of course, has made it more difficult for investors to differentiate between the good, the bad, and the ugly. Still, some companies will continue to innovate and achieve success; several like us have already started restructuring their operations and curtailing their ambitions to adjust to current realities. While this shifting environment has led to a discouraging financial requirement for biotech, we believe companies like Agenus with integrated capabilities and notably platforms, which can drive continuous innovation, will emerge in the forefront. If we are able to build significant value while advancing profoundly effective treatments and cures, we believe our strategy to continue to drive innovation will allow us to succeed in today's shifting environment. Now, I will outline our highest priority programs. Starting with botensilimab, our most advanced fully-owned program represents the highest potential in our portfolio. Our expectations of botensilimab as a potential blockbuster IO agent are supported with additional clinical data, which we expect to present at an upcoming Cancer Conference. Botensilimab is an activator of both innate and adaptive arms of the immune system. Data from our proprietary VISION platform continues to support its broad and unique activity, including responses in patients with so-called cold tumors, which typically do not respond to immunotherapy. We have expanded patient enrollment in our existing clinical trials in specific cohorts of patients, which will form the basis of our Phase 2 studies in colorectal cancer, melanoma, and pancreatic cancer. Our efforts to initiate these studies are currently in high gear. Our clinical development strategy for botensilimab is to demonstrate clear superiority to existing checkpoint immunotherapies and/or other standards of care. This is based on strong signals we have observed in our Phase 1 study in patients who were heavily pre-treated. These observations led to our prioritization of relapse refractory melanoma, MSS colorectal cancer, and pancreatic cancer as our target indications for potential approval. For context, colorectal cancer is the third leading cause of cancer-related death in the United States, with over 50,000 Americans dying each year. Immunotherapy treatments in colorectal cancer have been largely unsuccessful partly because most colorectal cancers are cold tumors. For those with metastatic disease, 5-year survival rates are in the low teens. Also for context, current standards of care for patients represented in our trials deliver approximately 2% response rates with significant side effects and minor improvement in survival. In contrast, botensilimab in combination with our anti-PD-1 balstilimab has delivered significantly higher response rates, which will be discussed soon. Botensilimab also holds significant potential in melanoma where, despite treatment advances, there remain few effective therapies for those who have failed frontline regimens, particularly with immunotherapies as well. In addition to these indications, we presented data at last year at SITC demonstrating that botensilimab benefits in several other cold tumors including endometrial, cervical, and pancreatic cancers. Over 50% of patients treated with botensilimab had received at least 3 prior lines of therapy. Botensilimab produced objective responses in these difficult-to-treat patients; hence, we're preliminarily exploring development strategies across these indications to bring therapy options to patients who have limited or no options today. The unique attributes of botensilimab have been the result of the deliberate efforts of our team who engineered this molecule based on their understanding of tumor biology and the immune system. These translated into a unique mechanism of action, which results in the activity of botensilimab across a variety of tumors. At SITC, we presented botensilimab's activity in 9 different tumors. While botensilimab binds to CTLA-4, it has a much broader activity by targeting both the adaptive and innate immune arms of the system. We are working closely with scientific and regulatory experts to advance botensilimab in hard-to-treat cancers, which I mentioned include cancers characterized by cold tumor types. We're hopeful that the unique attributes of this molecule will lead to life-changing outcomes for underserved patients, including potential treatments for pediatric cancers. While advancing our portfolio with our high-priority programs, we're also pursuing our business development plans with potential collaborators. Additionally, we actively look at innovative financing mechanisms, which we have excelled at delivering previously. Adapting our business model in consideration of the current industry landscape is for us a critical extension of our innovation and strategic thinking. Agenus has had an impressive track record of ready transactions and innovative financings, raising more than $800 million in just the past 6 years and the potential to realize significant milestone and royalty payments from 6 different companies involving 8 product candidates currently in clinical development. As Agenus moves with speed and innovation to execute our scientific discovery in clinical research, we're committed to taking the steps that will ensure our medical advances will be widely available to patients all over the world. Investing in integrated discovery, development, and manufacturing capabilities and emphasizing international approaches to clinical development and commercialization are critical to achieving our objectives in this regard. We're putting these strategies into practice. For example, with bal/zal, we strive to make this combination available in ex-U.S. territories, and as we continue to prioritize industry partnerships, which also allow Agenus to retain elements of independence and control over the development of our molecules. It is also noteworthy to mention that Agenus science has already advanced 16 discoveries into clinical development. With a very exciting cell therapy company represented today by the CEO, Dr. Jennifer Buell of MiNK Therapeutics, created as a separate company, and another SaponiQx potentially in the making. Our ability to discover and innovate best-in-class molecules and treatments has been the basis for a significant number of productive industry partnerships. Our company values and the high worth we place on science have been instrumental in industry breakthrough therapies such as GSK's shingles vaccine, with current analyst estimates approaching $3 billion in annualized revenues this year. As I mentioned earlier, we're also sharpening our focus on expense management to extend our runway to continue with our discoveries uninterrupted. Every aspect of this process matters to us. We have initiated a comprehensive review to eliminate non-discretionary spending and implement highly efficient practices. While we believe Agenus is in a strong financial position with over $260 million in cash, our view is to exercise a conservative fiscal policy, particularly in times of uncertainty in financial markets and drug regulation. Our focus also includes our technology advancements, which drive efficiencies in product discovery and innovation. This is highlighted by our unique discovery platform VISION, which has led to, among others, our emerging work on myeloid checkpoint targets. At AACR in April, we presented data on our anti-ILT2 antibody AGEN1571, which represents our first fully owned clinical stage myeloid targeting agent. In preclinical studies, AGEN1571 has already demonstrated several important advantages. We expect to enroll patients in our Phase 1 studies of AGEN1571 shortly. Our plans are to evaluate this agent both as monotherapy and in combination, guided by readouts from our VISION platform. Last month, we also announced the receipt of a $5 million milestone payment from our partner, Gilead Sciences. While this is a small amount, it denotes the advancement of AGEN2373, our CD137 agonist, which has unique advantages over other molecules. CD137 is an important pathway for antitumor immunity due to its ability to enhance T-cell and NK cell proliferation, cytokine secretion, and cellular cytotoxicity. Importantly, AGEN2373 was designed to mitigate the liver toxicity that has limited the advancement of first-generation molecules. Gilead retains an exclusive option to license AGEN2373, while Agenus has the ability to obtain a 50:50 profit share and U.S. co-commercialization rights. Agenus stands to receive up to $570 million in future potential option fees and milestones from this product candidate alone. There will, of course, be additional royalty payments depending on the magnitude of a product like this upon successful launch. The development of AGEN1777, our FC-enhanced TIGIT bispecific antibody partnered with BMS, is also advancing in the clinic. We continue to believe 1777 represents a best-in-class antibody, with an increasing body of evidence suggesting that FC-enhancement is required to achieve optimal results with a TIGIT targeting approach. The programs I highlighted today signify Agenus' unique ability to advance our own pipeline with our own combinations, which is also enabled by information and knowledge we gather from our proprietary VISION platform. Among others, VISION informs upstream target prioritization and downstream biomarker identification as well as trial design. It is this ability to work rapidly with independence and integrity, driven by science, that positions Agenus to be a leader in biotech's currently shifting environment. Thank you very much, and I now turn it over to Christine, and I'll come back shortly after that.

Thank you, Garo. We ended our first quarter 2022 with a cash and short-term investment balance of $263 million, as compared to $307 million on December 31, 2021. We recognized revenue of $26 million for the quarter ended March 31, 2022, which represents an increase of $14 million from the $12 million reported for the same quarter in 2021. Both amounts include revenue related to non-cash royalties earned, revenue recognized under our collaboration agreements, and 2022 milestones received. The loss for the quarter ended March 31, 2022, was $51 million, which includes non-cash expenses of $21 million, compared to a net loss for the same period of 2021 of $54 million, which includes non-cash expenses of $20 million. Per share losses were $0.19 per share in the first quarter of 2022, as compared to per share losses of $0.27 in the first quarter of 2021. Cash used in operations for the 3 months ended March 31, 2022, was $52 million, up from the $43 million for the quarter ended March 31, 2021. As Garo mentioned, the company has initiated cost containment measures with expected reductions in operating expenses in the coming quarters. I now turn the call back to Garo.

Thank you very much, Christine. To summarize, despite the stressful external landscape, we continue to make important advances in a field which is in need. We have a number of important developments, including near-term data disclosures and the initiation of Phase 2 botensilimab programs. We're delivering on our promise of building a company with a diverse pipeline and moving swiftly to address areas of high unmet patient need. By the end of 2022, we expect to have initiated several new clinical studies, including the 3 Phase 2 studies for botensilimab that we spoke about, a Phase 1 monotherapy study for AGEN1571. We also expect to complete enrollment in the relapsed/refractory melanoma cohort of our combination study involving botensilimab and AGEN2373. In addition, there's of course a potential for corporate collaborations and additional cash infusions from them during the course of this year. Thank you again for your attention, and we will now open the call for questions.

Our first question comes from Mayank Mamtani from B. Riley Securities.

And helpful biotech sector-specific commentary there, Garo. So maybe just to kick start things with your recent prioritization of ILT2 as an important target and myeloid checkpoint inhibitor. I was just curious what was the rationale for that and sort of your history in that space? And also, if you could talk to how might Sanofi's development—and I think some data coming at ASCO—inform your development and sort of the basket of initial solid tumors you might prioritize? And then I have a follow-up.

Let me first turn it to Dr. Dhan Chand to address at least a part of this question.

As you are aware, Agenus is well familiar with the ILT space. In fact, we built Merck ILT4 antibody MK-4830, which is progressing in the clinic, showing activity in patients that are refractory to PD-1 therapies as designed by Agenus. With that knowledge and experience that we built in the space, we've also retained ILT2 and progressed ILT2 to the clinic, where we have demonstrated, as you can see at AACR, the potential for ILT2 activity and not only complementary to PD-1 but also extending activity to colder tumors where PD-1 is not active. We have also demonstrated broad activity of AGEN1571, which includes activity that goes beyond just myeloid activation, which includes T cell, NK, and NKT activation. You also notice from our poster at AACR that we demonstrated best-in-class activity compared to other ILT2 targeting agents, including the most advanced clinical asset.

And great—then the second part of the question is what tumors will we study? I think maybe Dhan could start and Dr. O'Day could finish that.

Sure. And I'll turn it over to Dr. O'Day shortly. As you saw from our poster, we demonstrated that HLAG, which is the milligan file T2, are expressed in tumor types that are independent of PD-L1 expression. So we see this as complementary. Of course, we will be exploring this retrospectively in the clinic. We've also identified as part of our preclinical development potential biomarker of response to AGEN1571, which will also be applied to our trial.

Obviously, you can see our excitement around the ILT2/ILT4 field. The myeloid space has been a challenge, but we really feel this is an important space. The ILT2 that we put forward with AACR, as Dhan said, has both myeloid as well as lymphoid activation features, which may bring it best-in-class. Obviously, the ILT4 molecule that Merck is advancing is showing some early promise. In terms of tumor types, I think we are going to do the Phase 1 broadly and look because obviously, ovarian cancer and other tumors, even liver metastasis may be very much myeloid dependent, pancreas and others. So what's really great about our pipeline right now is botensilimab obviously looks like the next-generation CTLA-4, broader than CTLA-4 in terms of its innate and adaptive sort of synapse in the FC-enhanced region, really, we think bringing broader T cell repertoire recognition of weak neoantigens. That innate adaptive space that botensilimab brings and then bringing the myeloid active drug that has lymphoid coverage also may be very exciting. We couldn't be more excited about the areas of the pipeline that we're going to bring forward and then have combinational potential.

Understood. And then on botensilimab, how might you be thinking of the second half or all medical conferences for incremental data disclosures? If you are able to comment relative to what you have said before; obviously, the melanoma landscape is very different than pancreatic and with colorectal cancer you do have a specific trial design in place, a competitive study, but any incremental thoughts on melanoma and pancreatic for development and registration would be helpful?

Let me just tell you regarding the conference. We have not disclosed the conference that we're going to be presenting at yet. But it is an important medical cancer conference, so stay tuned and that disclosure will be made shortly. But now let me turn it to Dr. O'Day about the trial design. One of the reasons our Phase 2 trials have taken a little bit of time to comment is related to the fact that the regulatory environment has gotten to be somewhat all over the place. We've had to make sure that we consult with the appropriate parties to design the kinds of trials that are going to be meaningful for the next steps in product registration. Now with that, it's important to note, and Dr. O'Day will elaborate on this, that all of the trials in the Phase 2 setting, particularly given the regulatory environment that we're in right now, will be randomized in one way or another, okay? Randomized to either standard of care or randomized within the drug that we're studying. So Dr. O'Day, please take it from here.

What I would say is, as Garo has said, we are laser-focused on our botensilimab program because the Phase 1, which is now an extended Phase 1 program, is showing really remarkable activity in a number of solid tumors, and the data continues to be encouraging. Because of this, we see it as a potential foundational partner. The development plan, which has taken some time to really be very strategic, is really going to ask 3 fundamental questions. One, as a single agent, is it differentiated and powerful? Obviously, melanoma is the disease to test that with a clear benchmark for ipilimumab, which we think we can beat. The second is colorectal, where combination therapy with our PD-1 is showing significant activity. This will be an area where we can see how botensilimab combines with PD-1. Finally, a very cold tumor like pancreas given our preclinical data showing a very powerful combination potential of botensilimab with chemotherapy in a mouse model and some early signals in the clinic with response to pancreas with botensilimab. We think this is an excellent experiment to look at botensilimab in combination with chemotherapy. So the 3 registrational pathways—melanoma, colorectal, and pancreas—are really asking 3 fundamental scientific questions: single-agent activity, combination with chemo, and combination with PD-1. We look forward to following that data and seeing if it can become a real new asset to the IO community in terms of target and most importantly, clinical performance in unmet needs.

Great. And my final question was on the OpEx savings that you guys are working on, obviously very astute and makes a lot of sense in this environment to prioritize as much as you can. Could you quantify any of that, or is that sort of work in progress? And maybe also comment on since a majority of the work will be on botensilimab development and potential combination regimens in the tumor types we talked about and beyond? How might you be thinking of — some of that P&L burden that's to come starting next year?

Okay. We haven't quantified the savings yet. But let me tell you that it's got to be 5% or 10%. We are talking about significant savings associated with the measures that we're taking. But as I said earlier, all these savings are taking place without compromising the delivery of our highest priority programs, which include botensilimab. There's no way we're going to compromise the advancements of botensilimab because it is the most advanced, the most promising, potentially blockbuster compound in our portfolio. That doesn't mean we're not excited about the rest of the compounds in our portfolio. It's just the fact that this is the most advanced that makes it much more compelling to support near-term value generation. As I talked about, some of the other compounds are also advancing. For example, the expenses associated with AGEN1571 through Phase 1 clinical trials are relatively modest, and compounds such as our CD137 are also advancing rapidly with the potential of the option holder exercising the option, which will—when it happens—bring in significant additional cash resources into the company. AGEN1777, on the other hand, is being advanced entirely with Bristol-Myers' support. Many of these compounds, other than botensilimab, are either representing minor expenditures going forward or are underwritten by our collaborators.

Great.

Our next question comes from an analyst at Jefferies.

I'm asking questions on behalf of an unidentified party. I have two quick questions; first, regarding the Phase 2 trials for botensilimab. Could you clarify if the trials are set to launch in Q2 or Q3? Second, you previously mentioned that in colorectal cancer or cervical cancer, the response rate is very low. Could you provide a rough estimate of what the response rate would need to be to clear the regulatory hurdle? For my second question, I would like to follow up on the operating cash expenses. Apart from cost containment, are there any other strategies you are considering that could potentially increase cash flow? Alternatively, what milestone payments do you anticipate receiving in the next few quarters?

Okay. So let me start out with the trials' timing. All 3 trials that we spoke about—Phase 2 trials—are expected to commence starting in the third quarter of this year. As I mentioned, one of the reasons it's taken so long is for us to be able to confirm with the appropriate advisers, authorities, and so forth to ensure that we have considered everything. That's one of the reasons for each trial having multiple arms, including randomization in some cases to the standard of care. All of this means that trial design has been finalized, so the only hurdle between now and the initiation of these trials is simple operations. We are clear on the kinds of trials that are going to be the subject of our Phase 2 undertakings. Now, regarding expenses, I think your question, if I understand it correctly, is how—did you have a question on the expenses?

Yes. I just want to understand, besides the cost containment, is there any other plans to raise cash?

Oh, I see, right. And you also wanted to know if there are any additional milestones that we will receive this year. The answer is yes, we expect additional milestones to be received for the balance of this year. We haven't disclosed what they are, but stay tuned. And with regard to additional cash resources, as you know, we've been very, very resourceful in doing collaborations with companies and other creative transactions. We haven't tapped the — I mean this is the horrible time to do that. We have no plans for any marketed stock issuance, if that is the question you are asking; it's a horrible environment to do that in any way. But we've been very creative in transactions, and I don't want to elaborate on what we have in active consideration right now. Everything you do has some element of dilution, including partnerships because you're giving up part of the upside of your compounds. What we plan on doing is to be as creative as possible, including potential royalty transactions that will support our needs in the coming years.

Our next question comes from Matt Phipps of William Blair.

Dr. O'Day, I was curious about your Phase 2 melanoma trial and relapsed refractory melanoma. The first-line market is evolving with the recent approval of PD-1 and LAG-3. Will you be enrolling patients who have just failed PD-1, those who have failed PD-1 plus LAG-3, or even patients who have had other failures?

Yes, Matt, yes. Obviously, the frontline setting in melanoma now involves 3 options: single-agent PD-1 combinations with CTLA-4 ipi/nivo, and obviously, the new LAG-3 PD-1 combination. So we will be looking at all of those groups. Obviously, the space is sort of divided between ipi/nivo frontline and PD-1 monotherapy. We expect some patients will be failing. We know that we'll be failing the LAG-3 combination too; we will be looking at all 3 of those. We think we have not just a CTLA-4 drug, but potentially a broader drug with botensilimab, and we certainly want to understand whether it can rescue any of those scenarios.

Okay, great. And then just to help clarify what to expect in the third quarter. Is this just a combination? Is there also additional monotherapy update that you guys showed at SITC? Is this all tumor types or was it focusing on some of these ones that you're going into Phase 2 for additional patients beyond what we saw at SITC?

Sorry, Matt. I guess I don't understand the question.

You said some botensilimab updates coming in Q3 and some additional clinical data you guys now show data at SITC. Is this just— is it the patients across both monotherapy and the combination? Is it just a combination?

Yes, as Garo said, we are continuing to expand the Phase 1 trial in a number of different areas, particularly around the diseases like melanoma, colorectal, and pancreas, that we plan to open Phase 2 trials. We will be bringing data forward at important medical conferences later this year, and we haven't announced where. But the additional data around those diseases will be updated at conferences later this year.

So, Matt, to be clear on that note, as you remarked, we had done a Phase 1 study with over 100 patients enrolled. Then we were getting set up to start our Phase 2 studies late last year. For a while, these Phase 1 enrollments have slowed down. Because of the longer timelines required for our initiation of Phase 2 studies, we made a deliberate effort and executed on it in enrolling patients in specific cohorts that would be the subject of our Phase 2 studies. Since that decision was made earlier this year, enrollment in those cohorts that will be the subject of Phase 2 studies has actually exploded. We now have considerably more patients in those cohorts that have generated data, which will be the subject of our upcoming presentation with additional data disclosures. Does that answer your question?

Yes, no, that's great for the additional clarity on that. I look forward to it.

And we have no more questions.

Thank you very much, everybody, and thank you for your attention during these very busy times. We look forward to fielding your questions, and don't hesitate to contact us as required.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.