Earnings Call Transcript - AGEN Q2 2022

Ethan Lovell, Chief External Affairs and Communications Officer

Thank you. Good morning, everyone, and welcome to our second quarter earnings results conference call. I’m Ethan Lovell, Agenus' Chief External Affairs and Communications Officer, and I have with me today on the call, Agenus', Chairman and CEO, Garo Armen; and the company's Vice President of Finance, Christine Klaskin. Also joining us today is the Genesis' Chief Medical Officer, Dr. Steven O'Day, who will be available during the Q&A portion of this call. Before I turn the call over to Garo for his prepared remarks, I would like to read our forward-looking statement disclosure. This call will include forward-looking statements, including statements regarding our clinical development, regulatory and commercial plans and timelines including timelines for data release and partnership opportunities. Such statements are subject to risks and uncertainties and speak only as of the date they are made. Agenus is under no obligation to update any of these forward-looking statements and we refer you to our SEC filings for more details on these risks. With that, I'd like to turn the call over to Garo Armen. Garo?

Garo Armen, Chairman and CEO

Thank you very much, Ethan, and thank you for joining us today. We will focus on our priority clinical programs, which have shown very promising activity. We will also provide updates on our earlier stage programs, which we expect to have successful outcomes based on the robust research and preclinical data generated so far. Agenus had a successful second quarter highlighted by a groundbreaking presentation at the World Congress on Gastrointestinal Cancer in Barcelona. Our late-breaking submission was featured prominently at the conference’s opening session, where Dr. Anthony El-Khoueiry presented on heavily pretreated MSS colorectal patients treated with our novel adaptive innate immune activator, Balstilimab, in combination with our anti-PD-1 antibody. This combination achieved a 24% overall response rate and a 73% disease control rate, with many patients showing responses at data care. Importantly, no grade 4 or 5 events were reported, and the combination was generally well-tolerated. What’s particularly noteworthy is that these responses came from patients with cold tumors, which are historically unresponsive to immunotherapy. Additionally, these patients had PD-L1 negative tumors with low tumor mutational burdens, and included those who had already failed prior immunotherapy treatments. All of these factors made the patients in our trial highly unlikely to respond to immunotherapy or conventional treatments. Although this trial was not randomized, experts in the field were satisfied with our patient selection criteria, which targeted heavily pretreated patients without confounding factors that might bias the outcomes. We observed a 24% objective response rate compared to 1% to 2% responses seen with current standards of care in similar patients, clearly demonstrating a potentially groundbreaking therapy according to experts in the field. For those unable to attend the conference, we will provide a video link to the full presentation on our website. We are also happy with the enthusiastic feedback from ESMO GI leadership and from our subsequent meetings with leaders in immuno-oncology, who see the outcomes as potentially paradigm changing. This data has generated significant interest in our upcoming clinical trials with Botensilimab, and we have received many unsolicited inquiries from leaders in the field who want to participate in our CRC, melanoma, and pancreatic cancer trials. The unique characteristics of Botensilimab and the unprecedented response it achieved in patients with cold tumors has sparked considerable interest in future trials for other cold tumor cancers, including gynecological cancers, gliomas, breast cancer, and pediatric cancers. We are currently collaborating with the FDA and other global regulatory agencies to initiate randomized Phase II clinical trials, which we hope will begin soon. Our strategy is to pursue the rapid development and approval of our promising pipeline in as many markets as possible. This includes Botensilimab both as a standalone treatment and in combination with Balstilimab and other therapies in clinical development. All of our pipeline products have been designed to work uniquely as combinations or monotherapies, aiming to overcome the limitations of current immunotherapy treatments to deliver improved and differentiated patient benefits. We do not take a one-size-fits-all approach in our development strategies. With Botensilimab, we are encouraged by the design performance of this molecule, which clinicians describe as yielding unprecedented clinical benefits in heavily pretreated cold tumor cancers, in addition to the next three cancers we have identified for our upcoming Phase 2 clinical protocols. Botensilimab was designed to deliver multiple functions in a single antibody, including T cell priming, activation, suppression of regulatory T cells, and avoidance of complement-related toxicities, among others. Balstilimab has shown consistent activity across nine solid tumors, including gynecological cancers and sarcomas that have not responded to available immunotherapy treatments. We have several other pipeline candidates that we are excited to discuss, developed with a similar approach. Leveraging our advanced discovery, antibody engineering, and vision platforms, we designed our CD137 agonist AGEN2373 to retain or enhance the efficacy of first-generation CD137 agonists while avoiding liver toxicity that has hindered the development of other similar molecules. So far, we’ve observed early activity signals without liver toxicity in the clinic and are completing enrollment in a combination study of AGEN2373 and Botensilimab in relapsed refractory melanoma to start. We also recently announced the initiation of patient dosing in our Phase 1 study of our novel anti-ILT2 antibody, AGEN1571. AGEN1571 is a powerful inhibitor of ILT2, a broadly expressed receptor that suppresses myeloid and lymphoid responses and is believed to contribute to resistance against PD-1 and CTLA-4 therapies. We are very optimistic about AGEN1571, especially given our competitive positioning and the encouraging results from a similar antibody we discovered and licensed to Merck. The Merck antibody, codename MK-4830, targets members of the LILRB family, including ILT4. Merck has published data indicating strong activity in heavily pretreated patients with solid tumors when combined with anti-PD-1 therapy, reporting a 45% response rate in patients who had progressed on prior PD-1 therapies. Naturally, the question of whether we have ample resources to advance these programs has arisen in both internal planning and discussions. Throughout our history, we have balanced our ambitions with our capacity to secure resources. Our tactics have included prioritizing key near-term value drivers and building internal capabilities to decrease reliance on outside vendors, including commercially producing our products and managing clinical trials through our own CROs. We have balanced the necessity of properly resourcing our priorities with prudent efficiency measures and cost-cutting. This is reflected in our spending trends between the first and second quarters of this year, and we expect these trends to persist. We have also been resourceful with our cash management. Our largest cash influxes over the past six years have come from corporate transactions, totaling over $800 million. We have also selectively utilized at-the-market sales to minimize dilution. We anticipate that corporate transactions will remain our primary source of cash until we achieve sustainable cash flow from our products to finance our operations going forward. In regards to our partnered antibodies in active development, alongside the aforementioned MERC-licensed antibody MK-4830, we are also advancing our anti-TIGIT bispecific AGEN1777 licensed to Bristol-Myers, along with four immunotherapies licensed to Incyte. As these programs advance, they have the potential to generate milestone payments to Agenus of nearly $3 billion, plus sales-based royalties for those molecules that achieve commercial launch. Over the past six years, Agenus has demonstrated exceptional productivity by advancing 15 antibodies and cell therapies. Biopharmaceutical discovery and development are high-risk, high-reward activities, and we believe we have formidable capabilities in selecting targets, combinations, and design elements for immuno-oncology innovations. All molecules in our pipeline were chosen for their potential advantages in clinical settings, with their designs carefully tailored to create differentiated best or first-in-class molecules and therapies. We are confident that our current and future partnerships will help fund a significant portion of our development activities in the coming years, and that our discovery, antibody engineering, and vision platforms will continue to drive innovation and growth in our pipeline. We are excited to enter the third quarter from a position of strength and innovation, evidenced by the remarkable results achieved with the Botensilimab and Balstilimab combination in MSS CRC patients, with more to come. The future is bright for immunotherapy, and Agenus looks forward to significantly contributing to these life-changing advancements. With that, I will turn the call over to Christine to discuss our financials.

Christine Klaskin, Vice President of Finance

Thank you, Garo. We ended our second quarter 2022 with a cash and short-term investment balance of $238 million. This compares to $253 million at the end of the first quarter and $307 million at year-end. We recognized revenue of $21 million for the second quarter ended June 2022, which represents an increase of $10 million from the $11 million reported for the same period in 2021. Revenue for the six months ended June 2022 was $47 million, an increase of $25 million from the same period in 2021. Amounts include revenue under our collaboration agreement in 2022 milestones earned and revenue related to non-cash royalties earned. For the second quarter ended June 2022, our cash used in operations was $43 million, compared to $56 million for the same period in 2021. Our net loss for the quarter ended June 2022 was $49 million or $0.17 per share, compared to a net loss of $84 million or $0.37 per share for the quarter ended June 2021. Non-cash operating expenses for the second quarter ended June 2022 were $19 million, compared to $30 million for the second quarter ended 2021. Our cash used in operations for the six months ended June 2022 was $96 million with a net loss of $100 million or $0.35 per share, compared to cash used in operations of $98 million and a net loss for the same period in 2021 of $138 million or $0.65 per share. I'll now turn the call back to Garo to handle our Q&A.

Garo Armen, Chairman and CEO

Thank you very much, Christine, and I think we're ready for any questions that you may have from the field.

Mayank Mamtani, Analyst

Good morning team. Thanks for taking our question. So maybe first on the ILT2 program that just ended clinic. Could you just review with us the rationale for combining with both PD-1 as well as your next-gen CTLA-4. And also would love to hear what we already know and should look out for the – in the field with these ID drugs in the clinic and how those might be evolving going forward for validation of use in a combination setting.

Garo Armen, Chairman and CEO

Sure, Mayank. I think if your question is the rationale for combining ILT2 with Balstilimab and Botensilimab. Is that the question?

Dhan Chand, Research Executive

Thank you, Garo, and Mayank, for the question. There are a couple of pieces of evidence supporting the combination of AGEN1571 with Botensilimab and Balstilimab. First, you may recall our AACR poster from earlier this year, which demonstrated the high expression of ILT2 and ILT2 positive myeloid cells in patients who did not respond to checkpoint therapy, namely PD-1 or the PD-1 and anti-CTLA-4 combination. Second, we've shown in preclinical disease-relevant models that the combination of PD-1 and AGEN1571 enhances T cell activation, NK cell activation, and NKT activation. Additionally, the combination of Botensilimab and AGEN1571 boosts immune activation. One reason for this is that ILT2 is known to inhibit Fc Gamma R signaling, which is crucial for therapies like Botensilimab and AGEN1571. Lastly, when examining patient samples, particularly tumor-infiltrating lymphocytes and tumor cells shown in our AACR poster, we see that PD-L1 and HLA-G, the ligand for ILT2, are expressed on different subsets of tumor cells and in cells. The same applies to ILT2 and PD-1. This suggests that the combination of Balstilimab, Botensilimab, and AGEN1571 leverages different arms of the immune system for potential anti-human unity.

Steven O'Day, Chief Medical Officer

Thank you, Mayank. We're very excited about the ILT2 program, which has the potential to be a first-in-class treatment. The preclinical data indicates that we have both myeloid and lymphoid checkpoints that could work synergistically, addressing some of the resistance mechanisms associated with PD-1 and CTLA-4. Additionally, the ILT4 program, which is the antibody being developed by Merck, is progressing well in clinical trials with observed objective responses. There’s a promising concept in the myeloid class, but we believe our broader myeloid and lymphoid checkpoint approach may help tackle some of the resistance problems linked to first-generation checkpoints. Recently, we dosed the first human patient with our ILT2, which is exciting. Our program will focus on single-agent activity, but we also plan to explore combinations with tau ILT2 and Botensilimab. This gives us the flexibility to advance both combination therapies and monotherapy quickly. There’s a lot to look forward to as we move into the clinical phase after significant preclinical development and drug design.

Ethan Lovell, Chief External Affairs and Communications Officer

Thank you.

Mayank Mamtani, Analyst

Thank you so much for that comprehensive overview. And then just maybe a follow-up, more focus on Botensilimab, could you just give us an update on how far along you are with the melanoma cohort? And how might your progress to date is informing your thinking for future development plan, which is looking like you are working towards some sort of a Phase 2 trial starting later this year or next year?

Garo Armen, Chairman and CEO

So the question is to be answered at an upcoming major conference that's going to release data, not just for the additional patients that have been enrolled and studied in the CRC cohort, but some of the major cohorts as well. So, unfortunately, we cannot publicly disclose the specifics, but it will be during the course of this year.

Mayank Mamtani, Analyst

Got it. And my final question on financials. Could you just remind us what outstanding non-dilutive milestones remain for the remainder of the year? Can you just comment on that, or even into early next year?

Garo Armen, Chairman and CEO

Yes. So, once again, given the sensitivity of this very subject, we will not comment on any specific deal structures or, I should say, the numerical relevance of anything, such as that. Now, as far as any particular milestones, as we've said publicly and I think we've alluded to this during the course of our press release that we expect this year to receive a total of approximately $25 million from the payment that's due to us as part of the transaction that we consummated with HCR for QS-21. So that will happen during the course of this year, and that's, of course, a non-dilutive component, but additional partnership discussions and consummation of these discussions to take them to conclusion, we'll wait for more specific deal announcements for that.

Mayank Mamtani, Analyst

Thank you, Garo, for that helpful overview.

Matt Phipps, Analyst

Good morning. Thanks for taking the question. Just curious, when we might get some more details on the design of these impending Phase 2 studies for Balstilimab? Can you comment on the MSS-CRC arm will require a monotherapy trial or arm? And maybe any thoughts on comparators for that trial?

Garo Armen, Chairman and CEO

So, I think, in terms of the specific design of the trials, I mean, as you know, Matt, we have said specifically that we expect to start three randomized Phase 2 trials, those will commence soon. I think the first cohort of details will be disclosed during the week of ESMO coming up.

Matt Phipps, Analyst

Interesting. As for the expansion cohorts later this year, can you provide details on the total number of patients you expect in the advanced cohorts that are nearing completion?

Garo Armen, Chairman and CEO

So, the plan is for us to present a number of cohorts of this study at another major conference coming up, which we have not announced yet.

Matt Phipps, Analyst

Okay. All right. Great. Well, look forward to update. Thanks guys.

Garo Armen, Chairman and CEO

Thank you very much, Matt.

Unidentified Analyst, Analyst

Thank you for taking our question. This is Dev on for Kelly. My question is could you discuss the potential impact of Relatlimab plus Nivo approval in melanoma on your Phase 2 trial design in this area?

Garo Armen, Chairman and CEO

So, I think Dr. O'Day will tackle that question. Steven?

Steven O'Day, Chief Medical Officer

Sorry, the question is what is the impact of Nivo LAG-3 in the melanoma space with our trial design. Is that the question?

Unidentified Analyst, Analyst

Yes. So, the approval of Relatlimab and Nivo, how does it impact your design for melanoma?

Steven O'Day, Chief Medical Officer

Yes. Well, I think that the exhaustion checkpoints like LAG-3 and TIM-3 and obviously PD-1 are obviously very different targets than CTLA-4. So obviously, with first-line melanoma, now there's three frontline options, CTLA-4 with PD-1, PD-1 monotherapy and then PD-1 LAG-3. So, we'll be addressing all those cohorts with our design of our Botensilimab, which we think is obviously, a very unique different checkpoint than the exhaustion checkpoints. But we will address it and look forward to getting data around all those subgroups.

Unidentified Analyst, Analyst

All right. Great. Thank you.

Garo Armen, Chairman and CEO

Thank you very much for your attention and interest in our company. In closing, I'd like to just reiterate the point that with the data disclosure of Botensilimab plus Balstilimab, we have received many accolades about the robustness of the responses that we've seen, in fact, many of the long-term experts in the field, including certainly CRC experts have commented on the fact that they have not seen such responses with conventional immunotherapy. So, clearly, this is a very exciting period for the next steps of immunotherapy. And we're delighted to have Botensilimab lead that effort for the future of these patients and there will be. So with that, stay tuned for additional information that we will be disclosing between now and the end of the year. And that will set the stage for us to be able to do our next set of trials, randomized trials with the hope that we will get to the finish line with the collaboration of many of the experts in the field, as well as regulatory agencies throughout the world. So, I'll end my comments and if you have any additional questions and queries, please don't hesitate to get in touch with us. Thank you very much.

Operator, Operator

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