AGEN - NASDAQ

Good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Agenus Second Quarter 2022 Financial Results 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. Mr. Ethan Lovell, Chief of External Affairs and Communications Officer. You may begin your conference.

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 time lines 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?

Thank you very much, Ethan, and thank you for joining us today. We will concentrate to start on our priority clinical programs, which have demonstrated highly exciting activity. We will also provide updates on our earlier stage programs, which we expect to deliver successful outcomes interconnect based on the robust research and preclinical data that's been generated so far. Agenus has had a successful second quarter capped by a groundbreaking presentation at the World Congress on Gastrointestinal Cancer in Barcelona. Our late-breaking submission was offered prime of place at the conference's opening session, and Dr. Anthony El-Khoueiry presented on heavily pretreated MSS colorectal patients who are treated with our novel adaptive innate immune activator called balstilimab in combination with our anti-PD-1 antibody balstilimab. We will call these buck bang for sure, but this combination delivered 24% overall response rates and 73% disease control rate with a substantial number of these patients showing responses at data care. No grade 4 or 5 events were reported, and the combination was generally well-tolerated. What makes these responses unique is the fact that these patients had cold tumors and cold tumors are historically not responsive to immunotherapy. In addition, these patients had tumors, which were PD-L1 negative with low tumor mutational burden responsive patients included those who had failed prior I-O therapies. All of these make the patients treated in our trial, highly unlikely to respond to immunotherapy or conventional immunotherapy and certainly, not other treatments either. While this trial was not randomized, experts in the field were satisfied with our criteria for selecting patients who are heavily pretreated and that we're not confounding factors, which would subjectively favor outcomes achieved in the study. We observe 24% objective response rates when compared to 1% to 2% responses in similar patients are achieved with current standards of care. This is a clear demonstration of a potentially groundbreaking therapy by the account of the experts in the field. For those of you who were unable to attend the conference, we would provide a video link to the full presentation on our website. We're also pleased with the enthusiastic response of the ESMO GI leadership. And in our subsequent meetings, with I-O leaders in the field, who regard the outcomes as potentially paradigm changing. This data has translated into significant interest in our upcoming clinical trials with botensilimab and we have received a substantial number of unsolicited inquiries from leaders in the field to participate in our upcoming CRC melanoma, and pancreatic cancer trials. The unique attributes of botensilimab and the unprecedented response that they achieved in patients with cold tumors, has also generated significant interest in future trials of other cold tumor cancers, such as gynecological cancers, gliomas, breast cancer and pediatric cancers. We're currently working with the FDA and other global regulatory agencies to start randomized Phase II clinical trials, which we hope will begin very shortly. Our strategy is to pursue the expeditious development of approval of our promising pipeline in as many markets geographically as practical. This includes botensilimab, as a monotherapy and in combination with balstilimab. Botensilimab in combination with balstilimab and others in clinical development. All of our pipeline products have been designed, and this is a very important point to note, to perform in unique ways as combination or monotherapies and all of our programs are designed to address the limitations of current I-O treatment to deliver improved and differentiated patient benefit. We do not take a like approach in any of our development strategies. With Botensilimab, we're very encouraged to see the design performance of this molecule play out in what clinicians described to be the unprecedented clinical benefit in heavily pretreated cold tumor cancers. And this, of course, is beyond the next three cancers that we have defined as our Phase 2 clinical protocols to commence shortly. Botensilimab was designed to deliver multiple functions in a single antibody. T cell priming, T cell activation, suppression of regulatory T cell and avoidance of complement-related toxicities among others. Among the attributes of balstilimab, is consistent activity we're seeing across nine solid tumors, including as we've talked about earlier, gynecological cancers, sarcomas, which have not responded to available isle of treatments. We have several other pipeline candidates that I'd like to enter now, for which we employed a similar approach. Powered by our sophisticated discovery, antibody engineering and vision platforms we’ve design, for example, our CD137 agonist AGEN2373, a to retain or enhance the efficacy of first generation of CD137 agonists, while avoiding liver toxicity that derail the development of other such molecules. Thus far, we've seen early signals of activity with no liver toxicity in the clinic and are moving to complete our enrollment in a combination study of AGEN2373 and Botensilimab in relapsed refractory melanoma to start. We also recently announced that we've begun dosing patients in our Phase 1 study of novel -- our own novel anti-ILT2 antibody. This is AGEN1571. AGEN1571 is a potent inhibitor of ILT2, a broadly expressed receptor that suppresses myeloid and lymphoid responses and which is believed to contribute to PD-1 and CTLA-4 resistance. That is suppression all myeloid and lymphoid responses, we believe are responsible partly for PD-1 and CTLA-4 resistance. We're very optimistic about AGEN1571, given our competitive positioning is and the encouraging activity of a similar antibody, we discovered and licensed to Merck. The Merck antibody codename MK-4830 targets among members of the LILRB family shown as ILT4. Merck has published data demonstrating strong activity in heavily pretreated patients, with solid tumors, when combined with anti-PD-1 therapy, including a 45% response rate in patients who have progressed on prior PD-1 therapy alone. Naturally, the question of access to ample resources, to make these programs, to take these programs to the finish line has come up from time-to-time in both internal and strategic planning and external discussions. Throughout our company history, we have managed and balanced our ambitions and our ability to tap resources. Tactics we've used included prioritization of key near-term value drivers, building internal capabilities to reduce dependence on outside vendors, including suit-to-nut commercial manufacturing of our products, clinical trial management and execution through our own CROs and of course, our own internal discovery engine and development. We have balanced the need to properly resource our priorities with prudent efficiency measures and cost cutting. You have seen this in our spending trends from the first quarter of this year to the second quarter of this year. We expect these trends to continue. We have also been resourceful with inputs of cash resources. Our largest cash resources over the past half a dozen years have been corporate transactions, which have netted us over $800 million. We've also selectively utilized ATM sales, designed to keep dilution to a minimum. We expect corporate transactions to continue to be the dominant source of our cash until we have a sustainable cash flow from our products and our revenues from products to finance our operations going forward sustainably. Regarding our partnered antibodies in active development, in addition to the earlier mentioned MERC-licensed antibody, MK-4830, the list includes our anti-TIGIT bispecific AGEN1777 licensed to Bristol-Myers along with our four immunotherapies licensed to Incyte. These are all advancing in the clinic and as these programs successfully progress, they have the potential to trigger milestone payments to Agenus totaling close to $3 billion in addition to sales-based royalties for those molecules that reach commercial launch. In the half -- past half a dozen years, Agenus has delivered exceptional productivity by advancing 15 antibodies and cell therapies. Biopharmaceutical discovery and development is a high-risk, high-reward endeavor and we believe we have a powerful set of capabilities when it comes to choosing targets, combinations, and design elements for IO innovation and success. All the molecules in our pipeline were chosen based on their potential for unique advantages in clinical setting. And elements of their design have been carefully tailored with the intention of creating differentiated best or first-in-class molecules and cell therapies. We are confident that our current and future partnerships will position the company to fund a substantial portion of our development activities over the coming years and that our discovery antibody engineering and vision platforms will fuel continued innovation and growth of our pipeline. We're excited to enter the third quarter from a place of strength and innovation as we have seen with the remarkable results that have been achieved with botensilimab and balstilimab combination in MSS CRC patients and more to come on that. The future holds great things for the field of immunotherapy and Agenus looks forward to contributing to the investment of these life-changing medical developments. With all of that, I'll turn the call over to Christine to cover our financials. Christine?

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 of 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?

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

[Operator Instructions] Your first question comes from Mayank Mamtani with B. Riley Securities. Your line is now open.

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.

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

Yes, the first part of the question.

Okay. So I'm going to ask Dr. O'Day and perhaps even Dhan Chand, who has joined us today for why we have query this in preclinical models and the research rationale and perhaps Dr. O’Day can elaborate on that more.

Thank you, Garo, thank you, Mayank, for the question. So there are a couple of evidence that support the combination of AGEN1571 with botensilimab and balstilimab. But first is that you will recall from our – our AACR poster actually earlier this year, demonstrating the high expression of ILT2 and ILT2 positive myeloid cells in patients that did not respond to checkpoint therapy. And the checkpoints are on referring to PD-1 or PD-1 anti-CTLA-4 combination. The second is that we've demonstrated in preclinical disease relevant models that the combination of PD-1 and AGEN1571 enhances T cell activation, NK cell activation and NKT activation and the combination of botensilimab and AGe1571 potentiates immune activation. One of the reasons for this is that ILT2 is known to inhibit Fc Gamma R signaling, which is critical for therapies like botensilimab and AGEN1571 release that. And then lastly, when you look at patient sample, particularly tumor-infiltrating lymphocytes and tumor cells, as shown in our AACR poster, you'll notice that PD-L1 and HLA-G, the ligand for ILT2 are expressed on different subsets of tumor cells and in cells. Same goes for ILT2 and PD-1. This suggests that a combination of balstilimab, botensilimab with AGEN1571, where we leverage different arms of immune system with potential anti-human unity. I'll turn it over to Stephen to add a bit more color on our clinical rationale.

Yes. Thank you, Mayank. And yes, we're very excited about this ILT2 program as potentially best first-in-class based on Dan said, the preclinical data suggests that we have both a myeloid and lymphoid checkpoint that could be quite synergistic and really build into some of the mechanism of resistance of PD-1 and CTLA-4. And obviously, the ILT4 program that we -- our antibody that Merck is – is using is obviously advancing in the clinic with objective responses. So there's improvement concept in this myeloid class. But we think we have a more broad myeloid lymphoid checkpoint that may answer some of the resistance issues to first-generation checkpoints. So -- and as you know, we dosed the first human patient with our ILT2 several weeks ago. And what's exciting about this program is we will be looking for monotherapy, single-agent activity but obviously, the program is designed to fold in both tau ILT2 combinations and Botensilimab combination. So we have the flexibility to move forward quickly with combinations, as well as monotherapy. So more to come, but a very exciting program that's now in the clinic after some tremendous preclinical work and drug design.

Thank you.

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?

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.

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?

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.

Thank you, Garo, for that helpful overview.

And your next question comes from the line of Matt Phipps with William Blair. Your line is now open.

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?

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.

Interesting. Okay -- and I guess as far as the expansion cohorts coming up later this year, is there any details you can give on maybe how many patients you expect total in advanced cohorts that are going out of date?

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

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

Thank you very much, Matt.

[Operator Instructions] Your next question -- my apologies, the questioner has jumped out of queue. Okay, here we go. Kelly Shi with Jefferies. Your line is now open.

Thank you for taking our question. This is Dev on for Kelly. And my question is -- could you talk about potential impact of Relatlimab plus Nivo approval in melanoma on your Phase 2 trial design in melanoma?

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

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

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

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.

All right. Great. Thank you.

And there are no further questions at this time. Mr. Armen, I will turn the call back over to you.