Oct 27, 2008
Executive
Carol Hausner - Executive Director, Investor Relations and Corporate Communications Mitch Sayare - Chairman and Chief Executive Officer Dan Junius - President, Chief Operating Officer, Acting Chief Financial Officer
Analyst
Joel Sendek - Lazard Capital Markets Shiv Kapoor - Morgan Joseph Brian Rye - Janney Montgomery Shin Shan - RBC Capital Markets Pamela Bassett - Cantor Fitzgerald
Operator
Good day and welcome everyone, to this ImmunoGen's First Quarter Fiscal Year 2009 Conference Call. Today's call is being recorded.
At this time, for opening remarks and introductions, I'd like to turn the call over to the Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.
Carol Hausner – Executive Director, Investor Relations and Corporate Communications
Thank you. At 4 p.m.
this afternoon, we issued a press release that summarizes our financial results for our first quarter ending September 30, 2008, which is the first quarter of our 2009 fiscal year. I hope you've all had a chance to review it.
If not, it's available on our website at ImmunoGen.com. During today's call, we will make forward-looking statements.
Our actual results may differ materially from the projections made. Descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which are also can be accessed through our website.
With me today are Mitch Sayare, our Chairman and Chief Executive Officer, and Dan Junius, our President, and Chief Operating Officer and also currently our acting Chief Financial Officer. Mitch and Dan will provide an update on ImmunoGen, and Dan will also discuss our financial results.
We'll then open the call to questions. I'll now turn the call over to Mitch.
Mitch Sayare - Chairman and Chief Executive Officer
Thanks, Carol. So we begin by saying that I am delighted that earlier this month our collaborator Genentech announced that they've made a Phase III go decision for trastuzumab-DM1 where T-DM1 as its called.
This is a real turning point for ImmunoGen, our first partnered product in Phase-III testing. It's taken a long time for ImmunoGen to get to this stage, but we are very happy to be here.
The Phase III trial that the Genentech has outlined is impressive, its scheduled to start in the first half of 2009 and we'll evaluate trastuzumab-DM1 head-to-head against Tykerb+Xeloda improved to second line treatment for HER2-positive breast cancer in the US and in some international markets. The primary endpoint to this study is progression-free survival.
This will be the first large trial to assess progression-free survival with T-DM1 used in second line therapy and that's we don’t know what the study outcome will be. What we do know is that in Phase I testing at second line treatment with the same dosing schedule.
T-DM1 achieved to medium progression-free survival of 9.8 months. According to the FDA approved labeling for Tykerb the combination of Tykerb+Xeloda achieved medium time to progression of 24 or 27 weeks depending on whether you use the investigator assessment or the assessment by an independent third party.
So it's roughly six months. As you can tell we are excited to see T-DM1 being compared head-to-head with these agents.
Additionally the start of Phase-III testing at T-DM1 triggers a milestone payment to ImmunoGen and we are looking forward to that too. It is also a second potential route to market for T-DM1 and that's as a third line treatment for HER2-positive metastatic breast cancer.
That is as a treatment for patients whose cancer progressed on treatment with herceptin plus chemotherapy and then on Tykerb+Xeloda. Currently there is no approved third line therapy for metastatic breast cancer.
Genentech has initiated a Phase II study evaluating T-DM1 in just such a patient population and they have noted that to discuss with FDA an accelerated approval pathway if the study results merit it. This potentially pivotal trial is a 100 patient's single arm study with objective response as the primary end point.
We know that at least 40 medical centers are participating in the study and the dosing began in August of this year. Patient enrollment is expected to take a year, which will be about the same amount of time as for the first Phase II trial conducted with T-DM1 the 100 patient second line plus study.
In the past three months, the first findings from that second line plus trial we'll report it. The data presented at the ASCO Breast Cancer Symposium in September were from a planned interim analysis of the findings in the first 30 evaluated patients enrolled in the trial.
Like we are doing with our IMGN242 Phase II study, this T-DM1 Phase II study has efficacy threshold that had to be met to trigger expansion of the trial to the full group of patients planned. That efficacy threshold was met and Genentech reported in July that they had completed enrollment of the full 100 patients planned by June 2008.
The findings in the interim analysis were impressive. In this Phase II study all patients had to have HER2-positive metastatic breast cancer that had progressed on treatment with herceptin plus chemo as in the Phase I trial.
However, patients also could have gone on to treatment with Tykerb+Xeloda and in fact close to half of the 29 patients included in the interim analysis had been treated with those agents in addition to herceptin plus chemo prior to entering the study. Among the 29 patients 23 benefited from treatment with T-DM1 having either an objective response over stable disease.
13 of these patients had an objective response including one patient who had had a complete response that had been ongoing for 30 weeks at the time of data cutoff for the presentation. These results are consistent with the excellent activity and tolerability reported in Phase I and the tolerability of T-DM1 was also comparable to the Phase I findings.
These interim data suggested prior treatment with Tykerb+Xeloda had little, if any impact on the tolerability or activity of T-DM1. Early data to be sure and we learn more as the full study results become available.
The T-DM1 Phase II second line plus study has been accepted for all our presentation at the San Antonio Breast Cancer Symposium in December, so more data will be reported at the time. We understand from Genentech that these won't be the complete study results, but we had expected to include more of the 100 plus patients treated.
Genentech also reported earlier this month that patient dosing is underway in their Phase I study that evaluates T-DM1 as a first line treatment for HER2 metastatic breast cancer. They also disclosed that they've added another study to the program of Phase 1b study evaluating T-DM1 in combination with pertuzumab.
I won’t spend anytime on these studies in this call as we have a lot of other achievements to cover. After market closed today, we announced that another partnered compound AVE1642 has advanced into Phase II testing.
This is the non-conjugated or naked antibody that we developed using our cancer biology and antibody expertise, and then license to Sanofi-Aventis as part of our broader collaboration. AVE1642 binds to and blocks IGF-1 receptor.
Patients dosing is now underway in a Phase II trial evaluating AVE1642 in women with hormone sensitive breast cancer when given in combination with estrogen receptor antagonist progestin. We earned a $4 million milestone payment with the start of patient dosing in this study.
And on that note, I will turn the call over to Dan.
Dan Junius - President, Chief Operating Officer, Acting Chief Financial Officer
Thank you Mitch and good afternoon everyone. Last week we announced fair healthcare license exclusive rights to use our TAP technology for an undisclosed target found on solid tumors.
The terms of this license includes a $4 million upfront payment, 170.5 million potential milestone payments per compound, royalties and commercial sales and payment for any materials produced on their behalf of product development research done on their behalf. Of note, these richer terms reflect increased validation of our TAP Technology, and that puts us in a position of now having six active partnerships, Genentech, Sanofi-Aventis, Biogen Idec, Biotest, Amgen and Bayer.
The first four of which all have TAP compounds in clinical testing. Mitch has covered Genentech's Phase III go decision and that AVE1642 has advanced into Phase II testing and their associated milestone.
Biotest advanced their BT-062 TAP compound into clinical testing this summer for the treatment of multiple myeloma. Biogen Idec's BIIB015 compound advanced into the clinic earlier this summer for the treatment of solid tumors.
Sanofi-Aventis continues to make excellent progress with their TAP compound SAR3419 for the treatment of non-hodgkins lymphoma. The preclinical on SAR3419 was reported a EORTC.
They had hoped to have the first clinical data at ASH, however they are now shooting for ASCO 2009 and we look forward to these data being reported. For our compounds we presented clinical data at EORTC on IMGN242 on the rationale for the dose adjustment in the Phase II gastric study.
Recall if we have an objective response in the first 23 patients we'll announce that event when it's been confirmed, since it triggers expansion of the study. Similarly or conversely I guess I should say if we treat 22 patients without an objective response we'll announce that, too, as we will then discontinue that trial.
IMGN901 is pursuing the lead indication of multiple myeloma and we have a two pronged approach in the development of this compound. First, we want to complete the Phase I trial assessing IMGN901 uses a single agent for the treatment of multiple myeloma that failed to respond to improve therapy.
We will present findings updating this information, updating the study as ASH in December of this year. We have also implemented Phase I/II trial that assesses IMGN901 used in combination with approved therapy reflected of both preclinical findings and investigator interest in combination therapy.
We plan to start this study in the first half of 2009 and it will have a very short dose escalation range. We think this will be a relatively quick study to work our way through.
In terms of IMGN901, CD56 expressing solid tumors we presented additional data at EORTC on Friday from that study. The data was consistent with our findings previously reported, a compound is well tolerated, evidence of activity has been reported and the maximum tolerated dose has not yet been established.
I should also note that we ceased enrollment in our Study 001 which assess IMGN901 for the treatment of relapsed small-cell lung cancer. This study was started years ago by our former partner British Biotech and was evaluating IMGN901 at relatively low dose.
Consistent with our plans to focus on multiple myeloma at this point we have no further solid tumor studies planned. For IMGN388, we advance this compound for the treatment of solid tumors into the clinic this summer and we presented preclinical data on the compound at EORTC.
Our goal here is to present the first clinical data in 2009 hopefully at ASCO. With that I want to move to the financials, but let me summarize, we have 8 compounds in clinical testing, five of them from partnerships.
The lead compound in Phase III testing for the end of our fiscal year on June 30, 2009, -- we will have as a lead compound in Phase III testing with two other compounds in Phase II testing, IMGN242 and AVE1642. On that note, let me go through our Q1 FY '09 financial highlights.
For the three-month period ended September 30, 2008, we reported a net loss of $9.4million, or $0.19 a share, compared to a net loss of $1 million, or $0.02 a share, for the same period last year. In the first quarter of our 2009 fiscal year our revenue was $6.1 million, compared to $11.4 million for the same quarter last year.
This difference was spread across our three revenue categories. Research and support fees in this quarter were $3.2 million compared to $5.4 million in the same period last year.
As expected, the research funding from sanofi-aventis was less this quarter than in the prior year as the funded research portion of our collaboration is coming to a close. Our license and milestone fees in this quarter were $2.2 million, compared to the $4.2 million in the same quarter last year.
The big driver of this difference is that the prior quarter numbers included a $3 million milestone payment from Genentech earned with the start of T-DM1 Phase II testing. During the quarter ended September 30, 2008 we secured agreement from both Boehringer Ingelheim and Millennium Pharmaceuticals to terminate their TAP technology licenses that were no longer being used to develop products.
This released their target back to our target goal. As a result of the termination fee licenses we recognized $0.5 million and $0.4 million, respectively from these companies in the current period, which is the balance of their upfront payment that had not been recognized previously.
Clinical material reimbursement in this quarter was $0.7 million, compared to $2.8 million for the same quarter last year. This difference is principally due to two factors.
First the timing and differences in the timing of acceptance for batches made for partners and as the prior year improvement about $800,000 in revenue from supplying a collaborator with one of our cytotoxic agents. In the first quarter of our 2009 fiscal year our operating expenses were $15.5 million, which compares to $13.3 million in the same period last year.
This reflects some increase in our research and development cost between these two first quarters from $10.8 million in fiscal year 2008 to $11.9 million in the current fiscal year. This increase was from further commercial development work on our cytotoxic agents and also due to increased clinical trail cost and compensation cost compared with the same period last year.
G&A expenses were also higher in the current period, $3.7 million compared with $2.4 million in the prior year period. Much of this difference is because the current expense includes about $700,000 of non-cash expense related to the modification of exercise related terms of options previously granted to Mitch.
A modification reflected in the CEO succession plan we announced in September. The charge results from putting all of Mitch's options on the same terms as those in the current equity incentive plan that was approved by shareholders in November of 2006.
This current plan allows an individual to retain his or her options as long as that person is an employee or a director of the company. The earlier plan under which Mitch has most of his options would have forced the exercise of those options when he was no longer an employee of the company.
Looking at the balance sheet, we had $44.6 million in cash and marketable securities as of September 30, 2008, which compares with $47.9 million as of June 30, 2008. And we had no debt, no warrants, and no converts outstanding in either period.
Our guidance for our fiscal year ending June 30, 2009 is unchanged from the guidance we gave in our August 2008 call. We expect our net loss to be between 37 and $40 million.
We expect our cash used in operations to be between 20 and $23 million and our capital expenditures to be between 1 to $3 million. Finally, we expect to end this fiscal year with at least $23 million on our balance sheet.
I should note that our projections are currently putting us at the low end of our net loss and our cash usage projections, which makes me very comfortable with this guidance. Our balance for the year through 06/30/2009 are the key events that includes presentation of preliminary data from the Phase II second-line plus trial for T-DM1 at the San Antonio Breast Cancer Symposium in December 2008.
We would also see Genentech’s initiation of a Phase III trial assessing T-DM1 as a second-line treatment for HER2-positive metastatic breast cancer in the first half of 2009, and receive a milestone associated with the initiation of this Phase III testing. For IMGN901, we should expect presentation at ASH in December of new clinical data on the safety and activity of IMGN901 when used as a single agent to treat multiple myeloma that failed to respond to approved therapies.
We also expect initiation of a Phase I/II trial assessing IMGN901 when used in combination with an approved therapy. We would expect to announce confirmation of an objective response toward the end of the study for IMGN242 ideally by 06/30/09.
For IMGN388, we hoped to see presentation of the first clinical findings, the goal is ASCO in June of next year, June of 2009. SAR3419, we also got certain presentations of the first clinical findings, we target for that now at ASCO.
Our other collaboration compounds i.e. AVE1642, BIIB015, and BT-062, we may have events in this time period, it’s difficult to say definitively at this point.
I should note that we are also seeing a marked increase of interest in the licensing arena, both from some of our current partners and what would be new partners to us. We announced a new partnership with BioNext last week and we would hope to have additional announcements in this area over the coming year.
Before I turn over the mic back over to Mitch, I want to remind our shareholders that our annual meeting is coming up on November 12. It will be held at our new company headquarters in Waltham, Massachusetts and start at 11 AM.
Mitch?
Mitch Sayare - Chairman and Chief Executive Officer
Thanks Dan. This will be final conference call as the CEO of ImmunoGen.
With all the positive developments with T-DM1, and after doing this for well over 20 years, I thought it was a good time to turn the company over to a new CEO. The company is at a great stage and it’s time for me to move on to other things.
Dan is the right person to be taking over the helm at ImmunoGen and I am confident his leadership will bring even greater success. Carol?
Carol Hausner – Executive Director, IR & Corporate Communications
Thank you, Mitch. We are about to open the call for questions.
Before we do so, I would like to ask that our question askers limit themselves to one to two questions until all of the analysts have had an opportunity to ask questions. We would certainly allow you to come back and ask additional questions if there is time at the end of the call.
Operator, we are now ready to open the line for questions.
Operator
Thank you. [Operator instructions].
And we will go to Joel Sendek with Lazard Capital Markets.
Joel Sendek
Hi, thanks. So I have a few questions.
First, one on just the AVE1642 study. Is that a single agent study or is that controlled study?
Mitch Sayare
Okay. John, that’s a single agent study.
John Lambert
It is a single agent.
Joel Sendek
Okay. And any more details on years?
Mitch Sayare
No, not at this time.
Joel Sendek
Okay. And then the next question as well, so by my calculations you have I guess maybe a year-and-a-half to two years or one to two years of cash and given the circumstances that the whole market is in right now, is there anyway to make that potentially last longer than the downturn that we are in continue specifically, do you have to pay for anything from the partner compounds and the internal compounds, you are prepared to dial that back in order to make the cash last longer?
Daniel Junius
I guess I would respond to old standard. I agree with the window, it’s certainly 18 months, it might be 24 assuming steady state and I think that I would view that to be conservative because I think there are a number of things that will potentially have an impact on extending that run rate.
Some of them very positive, some of them being actions on our part to assure that we extend that run rate. The positive events could have something to do with – if the results warranted some out-licensed activity around our propriety compounds.
I referenced the fact that we are seeing increased interest from partners. We have not factored that in in any meaningful way into the one what that we are looking at or what goes into the thinking to say that we have got 18 to 24 months of liquidity available to us.
On the other side, I think that we will and are doing things now to try to selectively reduce our spending to give ourselves financial flexibility. But if we feel that we are not seeing the developments that will provide us sort of top line cash coming in, we will take further steps to reduce the cash outflow, but we are very mindful of the external environment and we want to do everything we can to avoid having to raise money a) at all but certainly not at any time and any sooner than we have to.
Joel Sendek
Okay.
Mitchel Sayare
Before you go, you asked a question regarding the 1642 Phase II study. I wasn’t sure did you say – did you asked whether it was a single agent study?
Joel Sendek
Well, I am sorry, I didn’t mean single agent. I mean single arm.
Mitchel Sayare
Obviously, it is a single arm study.
Joel Sendek
Sorry about that.
Mitchel Sayare
No problem.
Operator
And we will go next to Shiv Kapoor, Morgan Joseph.
Shiv Kapoor
Hi. Thanks for taking my question, I have got a couple and then I will probably jump back, one involving your partnership announcement with Bayer.
I had a question on due specifics. Does this involve one target and multiple compounds of that same target?
And my another question is, do this target – do the antibody come from ImmunoGen or Bayer?
Mitchel Sayare
The Bayer deal is the same as virtually all the other deals that we do in which we license the right to use our technology platform with a specific antibody target and that's what we've done here in this deal and it's conceivable that Bayer could go ahead and make three or four different antibodies against that same target or use the same antibody with different payloads from ImmunoGen using different linkers from ImmunoGen. They would have the right to do that.
It would probably be a pretty inefficient process to go much beyond preclinical studies. So we think of this as they're definitely single target deals and likely to be single product deals as well.
So I hope that answers that.
Shiv Kapoor
But just in case if they choose to take two compounds into clinical, would the milestone then be doubled or will they be the same?
Mitchel Sayare
I see what you're asking. Indeed we would get multiple copies of the same milestones for every antibody product that they take into the clinic, but -- or through the process, but all of those antibodies need to be against the same target.
Shiv Kapoor
Okay. Second question.
It was good to see is Amgen as one of the active collaborators in the same press release that you put the Bayer announcement on. The deal with Amgen or should I say maybe was signed a long time again, seems like maybe seven, eight years.
Can you share with us what gives you the cause that Amgen is still active in the usage or evaluation of their technology?
Mitchel Sayare
As you may recall, we rarely - I don't think we've ever just outlicensed a technology platform without also being involved with our partner in providing support. That support can range from R&D through manufacturing and so forth.
So we have a -- we can make the assessment as to whether or not a partner is active by how engaged they are with us in the collaboration and we're confident in being able to say that Amgen is active, actively engaged in developing products making use of our technology platform.
Shiv Kapoor
Great. I will jump back.
Operator
And we'll go next to Brian Rye, Janney Montgomery.
Brian Rye
Good afternoon guys and thanks for taking my question. I guess just two as well.
On the Sanofi-Aventis collaboration I seem to recall earlier this calendar year there was a mention of a couple of new antibody conjugates that were in late preclinical testing and I was wondering if those were still active and still advancing towards the clinic? And then secondly on AVE1642 as you noted, the Sanofi-Aventis is planning a few different Phase II trials, it sounds like and wondering just technically if or financially do you all get milestone payments with each Phase II initiation or is the initial initiation a Phase II testing what triggers a single $4 million milestone payment and the next would comment either Phase III or beyond?
Daniel Junius
Right. It's Dan.
With respect to the first question, the answer is yes. Those compounds that we've referenced earlier continue to be moving through the process at Sanofi.
So we'll hear more about them at a point in time where we reach a stage or where we'd have further disclosure around that. As it relates, to you know, are we going to get multiple bites at the Apple as they do different verses of a Phase II, the answer to that would be no.
Brian Rye
Great. Thanks, Dan and congratulation on your appointment.
Daniel Junius
Thank you, Brian.
Operator
We'll take our next question from Jason Kantor, RBC Capital Markets.
Shin Shan
Hi. This is actually Shin Shan for Jason.
Just a couple of housekeeping questions and for the 4 million milestone from Bayer and are you guys going to amortize the amount or it's going to book as a one time item?
Daniel Junius
No. That's a development milestone that would be recognized all at one point.
That would be recognized in our quarter ending December.
Shin Shan
Okay.
Mitchel Sayare
I'm sorry. Did you ask Bayer or -- I beg your pardon.
I was listening. I was thinking about Sanofi.
Bayer would be amortized as an up front. I was thinking you were asking about the $4 million.
To me $4 million flying around. I thought you were asking about Sanofi.
Shin Shan
So its going to amortized over how many years?
Mitchel Sayare
I am trying to think whether we had disclosed you around that. Maybe it’s multiple years.
I think our current estimate is that is from entering into a licensed through our period of significant involvement, it's about six and a half years.
Shin Shan
Okay.
Mitchel Sayare
That gets refined as we see more data from a partner that allows us to use a better estimate, but that's sort of our generic estimate.
Shin Shan
Okay. But for the four million milestones for the AVE1642, that's booked as a one time item in second quarter, fiscal second quarter?
Mitchel Sayare
That was my original answer, yes.
Shin Shan
Okay, great. And for the Genentech milestone, do you guys -- have you guys provided any guidance on how big the milestone will be of something like that?
Mitchel Sayare
No, we haven't. You know, the Phase II milestone was $5 million, but we haven't provided any dimension as to the Phase III milestone.
Shin Shan
So that will be booked as a one time item, too right?
Mitchel Sayare
That's right. That would be a development milestone and booked as a one time item.
Shin Shan
Great. Thanks a lot.
Mitchel Sayare
Yeah.
Operator
(Operator Instructions) and we'll go next to Pamela Bassett, Cantor Fitzgerald.
Pamela Bassett
Hi, everybody. Thanks for taking my call.
What can you tell us about the timing around Genentech's decision regarding the third line T-DM1 indication?
Mitch Sayare
This is Mitch. They've indicated that it's going to take about a year to accrue those patients.
So they started -- we are pretty certain they started the study in July and so next summer sometime they should have data. And based on how the data came in from other studies that they've conducted -- I don't know on what basis they would make the decision to go pivotal and seek registration, but in order to evaluate and assess that data and determine whether or not they want to go to FDA, I would imagine that it would be well after the completion of the accrual of patients.
Pamela Bassett
And would this require -- would there be a way to extend and expand the existing trial or have to be -- or that would be it?
Mitch Sayare
Well, the existing trial is designed as we understand it…..
Daniel Junius
Which existing trail you are referring?
Pamela Bassett
The third line?
Daniel Junius
The third line…
Pamela Bassett
Yeah.
Mitch Sayare
Yeah. So the third line study of 100 patients is designed to provide a pathway toward approval based on what Genentech has said and as we understand it, it would not be subject to expansion.
The 100 patients for this third line, which is obviously an unmet medical need might were the data good enough qualify for a subpart-H filing.
Pamela Bassett
So it might take about another year before we see data, final data?
Mitchel Sayare
No. We are just not in a position to answer that.
We don’t know what the answer is. That would be upto Genentech.
Daniel Junius
And I need final piece of final data. I think about the current Phase II where they're disclosing data right now.
We've seen interim data. We don't think we'll see final data at SABC.
So I don't know if that's a model because it's a similar size trial. It said about 18 months and you don't have the final data.
Now, I don't know that it's written anywhere that they need final data depending on the quality of the data they're getting, but that's entirely in their hands. We're just sort of sharing with you the various components that guide our thinking, but we don’t know.
Pamela Bassett
Okay, great. That's helpful.
Thank you.
Daniel Junius
Sure.
Carol Hausner
We did our last question in the queue. And so I would like to thank you again for your interest and inviting to call me if any additional questions you might have at 781-895-0600.
And again just as reminder, we do have our annual meeting coming up in about two weeks here at Waltham. Take care.
Operator
And this does conclude today's conference call. We thank you for your participation.
Have a great day.