ImmunoGen, Inc.
Q1 2015 Earnings Call Transcript

Published: 24 Oct 2014

[Operator:]

Good day, and welcome, everyone, to this ImmunoGen First Quarter Fiscal Year 2015 Financial Results Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

[Carol Hausner:]

Thank you. Good morning. At 6

[Daniel M. Junius:]

Thank you, Carol. And good morning, everybody. ADCs continued to be an area of keen interest for drug development, with over 35 agents in development across more than 20 firms for a vast array of cancers. We are executing our business strategy of using our leadership in ADCs to develop novel therapies that can make a meaningful difference for individuals with cancer. There are already 11 high-potential ADCs in the clinic with our technology

[Charles Q. Morris:]

Thanks, Dan. And good morning, everyone. I will start with our most advanced wholly-owned compound, IMGN853, whose precision targets folate receptor alpha, an antigen highly expressed on many ovarian and endometrial cancers as well as on several other types of solid tumor. As you know, we are pursuing a two-pronged strategy, designed to enable us to expeditiously advance 853 deeper into clinical testing by gaining information on the activity of 853 in key cancers, at the same time that we're assessing further optimization of its dosing schedule. During dose finding, with a 173-week dosing schedule, we saw evidence of activity with 853 in both ovarian cancer and an endometrial cancer, the predominant cancers enrolled in that study. We have shared details on the activities seen with an advisory board of key opinion leaders, and they're impressed with a single-agent data, enthusiastic about further development of the product. We're now assessing 853, specifically, for the treatment to platinum-resistant ovarian cancer and relapsed refractory endometrial cancer. With its administered 173 weeks, it is recommended Phase II dose. Pleased with the dose established, comfortably above the dose, which we -- which activity was first seen, but below the level associated with dose-limiting side effects. Enrollment in both of these cohorts is progressing well. These patients are also being prescreened for target expression prior to enrollment in this part of the trial. As you recall, during the dose-finding phase in which patients weren't prescreened, 853 demonstrated activity in patients whose tumors highly expressed this target consistent with expectations based on the mechanism of action. The information gained about the activity of 853 in these 2 cancer types will help us refine its clinical programs, such as the cancers to be targeted and likely trial size necessary for appropriate statistical pairing for further studies. The second aspect of the testing under way is to ensure we take 853 forward with the best-dosing schedule. Recall our research conducted earlier this year indicated that dosing 853 more frequently to once every 3 weeks may provide patients with greater exposure to the therapy, while keeping post-dosing levels in the -- below the threshold associated with side effects. Our research suggested the best schedule for 853, may be, weekly dosing for 3 weeks, followed by a skip week before resuming weekly dosing. We've been assessing escalating doses of 853 using this modified weekly schedule. And we're pleased to report that our findings to-date are consistent with our expectations based on our modeling. We expect to establish the maximum tolerated dose to schedule in the next few months. We intend to report findings that we have in this assessments as a package in 2015, targeting ASCO. In the interim, we plan to provide program updates, including decisions made about dosing schedules. We'll turn now to our IMGN529 agent for B-cell malignancies. The CD37 targeting ADCs, currently in the dose finding portion of the Phase I trial, assessing it as a single agent in patients with non-Hodgkin lymphoma. The first date from this trial were presented to ASCO in June until we'd already seen evidence of activity with 529 at doses as low as 0.2 and 0.4 milligram per kilogram administered once every 3 weeks. Weekly part or all of the activities seen at those low doses could be from the antibody part of 529, which is highly active. The steps taken to address side effects seen at low doses will enable dose escalation to continue. And we're excited to be reporting updated findings at the ASH meeting in December. Once we've established its recommended Phase II dose, we intend to begin evaluating 529 in disease-specific patient populations. Dose finding also is ongoing with IMGN289, our EGFR-targeting ADC. We've been studying it to administer weekly, but don't want to rule out examining of the schedules as appropriate as we have for our other agents. Once we establish its recommended Phase II dose, we plan to assess 289, specifically for the treatment of cancers at the high expresses of EGFR, and which have limited treatment options today. Such cancers include squamous cell, head and neck cancers, squamous and non-squamous cell lung cancers and many breast, gastric and other GI tumors. We're targeting reporting initial findings for this compound at the medical conference in 2015. Lastly, our IMGN779 compound for acute myeloid leukemia remains on track for IND filing in the second half of 2015. It is the first ADC with one of our new DNA-acting payload agents, which we refer to as IGN and has an exciting profile preclinically. We'll be presenting additional preclinical data for 779 at ASH as well. With that, I will turn the call over to Dave to discuss the financials.

[David B. Johnston:]

Thanks, Charlie. As Carol noted, we issued a press release this morning with our fiscal -- with our first quarter of the fiscal year 2015 financial results. I'll discuss the highlights and then, I will review our guidance for fiscal year 2015. For the quarter ended September 30, 2014, we reported a net loss of $22.3 million, or $0.26 per share, compared to a net loss of $11.2 million, or $0.13 per share, for the same quarter of last year. Revenues in our first quarter of fiscal year 2015 were $13.2 million as compared to $17.2 million for the same quarter of last year, reflecting that our noncash revenue from amortization of upfront license fees was lower in the current period than in the prior year period, $1.8 million versus $7.8 million, respectively. As we said previously, such revenue tends to be lumpy. For example, we reported earlier this month that Novartis took the remaining 3 licenses under the agreement with them, which will trigger recognizing $22.7 million of amortization revenue in the second quarter of fiscal year 2015. Our cash revenues were greater in aggregate for the first quarter of this year compared with last year, and include $4.2 million in royalties earned on the sales of Kadcyla compared to $2.1 million in the same period last year. As a reminder, we received and recognized royalties on Kadcyla sales one quarter in arrears. Operating expenses for our first quarter of fiscal 2015 were $35.1 million compared with $28.6 million in the first quarter of last year. These consisted of $28 million of R&D expense in the first quarter this year compared to $22 million in the same period last year, and $7.1 million in G&A expense this year compared to $6.5 million in the same quarter last year. We ended the quarter with $121.8 million of cash and marketable securities compared with $142.3 million as of June 30, 2014, and we continued to have no debt. Cash used in operations was $18.9 million in the first three months of fiscal 2015, down from $23.6 million in the same period last year. Capital expenditures were $1.7 million in the first quarter, compared with $600,000 in the same period of last year. Our fiscal year 2015 guidance remains unchanged from what we issued on August 2, 2014. Specifically, revenues are expected to be between $100 million and $105 million; operating expenses to be between $160 million and $165 million; net loss to be between $60 million and $65 million; cash used on operations between $55 million and $60 million; and capital expenditures to total between $7 million and $9 million. Lastly, we expect to end the fiscal year with between $75 million and $85 million in cash. We believe our current financial resources, combined with expected cash inflows from partners, are enough to fund us with establishment of proof of concept for our lead programs. And that a development of our own portfolio of important new therapies will result in the greatest creation of value for our shareholders. With that, let me turn the call back over to Dan.

[Daniel M. Junius:]

Thanks, Dave. We expect quite a bit of activity with both our wholly-owned programs as well as our partnered programs over the coming quarters. [indiscernible] updates on them. Let me review what we expect to see happening across both of those categories. And I'll start with the wholly-owned compounds. IMGN529 investigators will be reporting updated clinical data on this novel ADC for B-cell malignancies at ASH in December, which should provide insight into our excitement about this compound. There also will be new preclinical data reported on 529 at ASH. We expect the recommended Phase II dose to be established for 529 in the coming months and for it to begin disease-specific testing in 2015. For IMGN853, our folate receptor alpha targeting ADC, we expect to establish the recommended Phase II dose to modify the weekly schedule over the next few months. Lastly, we have findings from evaluating IMGN853 every 3 weeks, specifically for the treatment of platinum-resistant ovarian cancer and relapsed refractory endometrial cancer. We plan to select the best dose among those -- between those 2 and schedule to take forward -- take that forward into more advanced testing and potentially could have this information by ASCO. Our plan is to report the findings we have from these evaluations at a medical conference in 2015, and right now, we're targeting ASCO. For IMGN289, our novel EGFR-targeting ADC, we expect dose finding to continue with the possible exploration of alternative schedules and to report findings in 2015, either at ASCO or at a medical conference later in the year. Once we establish its recommended Phase II dose, we plan to move 289 into disease-specific testing and we would expect this to start during 2015. For IMGN779, our CD33 targeting ADC for acute myeloid leukemia, we'll report additional preclinical data for this novel compound at ASH. And we're on track to submit its IND in the second half of next year. Let me make a couple of more comments around our partnered compounds. First of all, we would expect to see several presentations on partner compounds in December at ASH. For Kadcyla, Roche continues to project reporting the readout from MARIANNE before year-end, the full data set to presented -- to be presented at a later date. With positive data, Roche is projecting filing for marketing approval of Kadcyla for first-line treatment of HER2-positive metastatic breast cancer in 2015 off of the MARIANNE results. Our understanding is this could be Kadcyla alone, Kadcyla plus PERJETA, or both, depending on the study findings. Roche is also projecting filing for marketing approval of Kadcyla for second-line treatment of advanced HER2-positive gastric cancer in 2015 using the GATSBY results, again, assuming positive data. We would expect presentation of both MARIANNE and the GATSBY data in 2015, although that's our estimate, it's not something that's been confirmed by Roche. Roche has projected having the first data from its KRISTINE, neoadjuvant trial, in late 2015. As noted earlier, we expect multiple compounds to advance into the clinic to our partnerships over the course of 2015 as well as our own IMGN779 ADC. And we expect several partnered compounds to advance further in clinical testing as well as multiple data presentations on partnered compounds. So all in all, we expect the coming quarters to be very active for ImmunoGen. With that, let me turn it back to Carol, and we'll be opening the call for the question-and-answers.

[Carol Hausner:]

Thanks, Dan. We're about to open the call to questions. We'd like to ask each person to limit their questions to 1 or 2 per person until everyone has had a chance to ask their question, so you can then get back into the queue. Operator, we're now ready to open the line for questions.

[Operator:]

[Operator Instructions] We'll go first to Adnan Butt of RBC Capital Markets.

[Adnan S. Butt:]

Two questions. First for Dave, perhaps. Dave, reaching 2015 guidance for [indiscernible]. But do you have more visibility into certain partnerships versus others generating revenue? And can you share that with us? And then a second question on 529, specifically. If this data at ASH focused more on safety, or is it both activity and safety data? And maybe could you repeat where it's been dosed at this time? And if the population -- if the expansion cohorts aren't being selected at this time in -- sometime in 2015? Is it because your seeing good tolerability?

[David B. Johnston:]

I actually missed the first part of your question. I'm assuming that you're asking about the revenues part of our guidance? Is that correct?

[Adnan S. Butt:]

Correct.

[David B. Johnston:]

Yes, so what we do when we're establishing guidance is, we go through the expected activity of all of our partners. And we do have some insight into what the expectations are. And we, obviously, handicap that some, but what we haven't done, and I think what we're going to do today is, walk through partner by partner the activities that we expect to have. But it's a fairly well-thought-out process. And if -- as of this point, we're confident that it reflects what we should expect in terms of 2015 revenues.

[Daniel M. Junius:]

Maybe just to provide a little bit more color, Adnan, I mean, note that within the -- in Dave's comments, he pointed to, for example, Novartis, where in the December quarter, we would recognize the revenue -- the deferred revenue associated with the licenses that they took in early October. So there are discrete events like that, that have revenue -- have characteristics where it's going to be somewhat lumpy and it's coming from multiple sources, in some cases, deferred revenue. Certainly, we expect, as you noted in my comment about more partnered compounds coming into the clinic, moving further into the clinic, all of those would be milestone-related events. And again, we have some degree of visibility into that, and that's what underlies the revenue forecast.

[Charles Q. Morris:]

So in terms of 529, what we will present at ASH will be updates on the information that we currently have from dose escalation. We are still in that dose-escalation phase. But based on available information and what we know about the rest of our outline, we believe that we will likely be in a position to move into the sort of expansion efficacy testing during 2015. So I think what you should expect is an update on the safety, efficacy, pharmacokinetics, all available information from the dose-escalation phase.

[Operator:]

We'll go next to Matthew Harrison of Morgan Stanley.

[Matthew Kelsey Harrison:]

So first one on 529. I just want to confirm in your remarks and the answer to the last question. Does that specifically mean you haven't reached the MTD yet with 529? And then, separately, on 853, in terms of where you are with the dosing schedules, so you started on the weekly schedule and exactly when do you expect to have completed data that you'll be able to share with us when you choose which schedule and which dose you're going to go forward with it?

[Charles Q. Morris:]

For 529, I think it's safe to say that we have not yet established the maximum tolerated dose; though that's, obviously, in dose escalation, is a moving target -- rapidly moving target on occasion. So -- but for 853, what we would anticipate is that we were pleased with the progress that we've made in escalation with the weekly schedule. We believe that we're doing the right thing here, which is continuing to add patients into the expansion efficacy cohorts 3 weekly. We imagine that the -- around about the middle of 2015, we would anticipate having information both from those cohorts 3 weekly as well as having enough information from the dose escalation of the weekly that we would be in a position to, at the very least, get some further information on that weekly and hopefully able to make the decision between which of those would be going to the next stage. But I think, what the basic message is that, we're pleased with progress on all fronts here. We're pleased with the 3 weekly, but we're seeing what we -- the weekly has been an interesting step as well and we're learning more from it. And I think, overall, we're putting ourselves in a good position to being able to make the best decision during 2015.

[Operator:]

We'll go next to Andrew Peters of UBS.

[Andrew R. Peters:]

A couple. First on 779. As you kind of look ahead to filing the IND, I was just curious, when you look at the history of CD33-targeting agent in AML, what have you learned in terms of maybe a potential benefit in certain patient populations? As well as, kind of your own experience what the previous Sanofi-Aventis CD33 in terms of kind of targeting that area? So just a broad question there. And secondly, on 529. As you start the disease-specific patient populations later next year, to what extent does the competitive landscape play a role and kind of defining which population you plan to target? Or is that going to be purely data-driven?

[Carol Hausner:]

Charlie?

[Charles Q. Morris:]

So CD33, I think one of the interesting things as we go out and talk to the opinion leaders is that, clearly, Mylotarg had a complex history. But I think a lot of the investigators we find now feel that they finally understood how to use the product around about what time that it was taken away from them. So there is actually quite an interest in this as a target. Obviously, we try to learn, we try to understand what some of the pitfalls were, particularly, around the toxicity issues. We believe that the design of the payload will have some advantages in terms of the potential for lower risk of some of the long-term effects. I think we also -- what we know from the prior experience with the maytansinoid-based targeting of this one. First of all, we have a good sense of the pharmacokinetics of the antibody, which gets off to a good start. And perhaps, one of the other learnings, of course, was that we did some degree of activity in there. But the activity that we saw was in patients with particularly high levels of CD33 expression. But I think now, using a more potent payload, the level of expression is likely to be key, so a bit more potent payload, the -- we should be able to have benefit in patients with lower-target expression. I think we're using a different mechanism of action than the use of maytansinoid, so now targeting DNA rather than targeting the microtubules. And I think -- and we all know that the expression of CD33 on normal tissue is relatively low. So I think there's a real opportunity here. I think there's a good opportunity, first of all, to learn a lot about our IGN platform. But I think there's reasons to be positively optimistic that this is actually a good target, with a well-defined population in acute myeloid leukemia. From 529, I think we have to be impacted by the competitive landscape, but we also have to be impacted by the data that we see as we emerge. We'll update on what activity we're seeing at ASH, and I think that may influence some of our thinking. And I'll remind you that -- of the interesting single-agent data, for example, SAR3419 with Sanofi, in the diffuse large B-cell lymphoma, this would suggest that our platform may have a role in DLBC, an aggressive lymphoma, which despite all of the new agents coming in, remains an area, I would argue, of high-unmet need. So I think we will be impacted by our data, but we're not going to just sort of -- we've got to be aware of idelalisib and ibrutinib and where these are working and trying to understand what the new opportunities are, which are created by those new agents coming in.

[Operator:]

We'll take our next question from Jason Kantor of Credit Suisse.

[Jason Kantor:]

I'm just wondering a couple of things. I'm just looking at your forecast year-end cash. It looks like you'll be needing to get more cash, if you're going to move these things forward. So I'm just wondering with your stock where it is, if your thoughts around partnering, your proprietary drugs, where you're headed on that? And whether or not that's something we might also look forward to in the coming year? And then if you could give us any kind of update on your thinking around ocular toxicity whether or not that's something that you got -- gained a better understanding of, in the terms of, managing it and the causes of it, et cetera?

[Carol Hausner:]

Dave, you want to take the cash one?

[David B. Johnston:]

Sure. Yes, so, we're in a pretty good cash position, and we anticipate ending the year in a pretty strong position. But you're right, the more success we have with our products -- with our own proprietary products clinically, the more demand that there's going to be to advance them. And as you understand it, that's an expensive business. So you're also right with our current stock price, we would not be eager to be issuing new equity at these prices. But we do have several other options available, including one that you mentioned, which is potentially doing a partnership, probably on a geographic basis at some point in the future on some of our internal products. But there's other options as well that are open to us. So in terms of having cash available, what I would tell the guys here is, you guys advance the products and will find the cash.

[Charles Q. Morris:]

And from, clearly, the agent where we experienced some of the ocular adverse effects that's been seen both with our own end of the platforms with 853, I think we are -- I know we're pleased with the progress that we've made. Particularly, I think that dose-adjustment works made a big difference here. As you know, we changed the dosing calculation to base it on adjusted ideal body weight. We've been doing the work on the weekly schedule, and we're pleased with the progress. And obviously, as we get towards ASCO, we'll be able to give a full update on that as we go through. But I think those have been the key activities. We continued to try to understand whether there are other interventions that may help, but I don't think we're in a position to make any sort of concrete statements about success of -- or otherwise there. But I think the dosing work has clearly made an important difference there and has enabled us to be, I think, very optimistic about where we are with 853 right now.

[Jason Kantor:]

And in terms of the dosing, you're looking at this weekly dose versus the average weekly dose. Would you -- you're going to have the dose escalation around the same time you have the cohort -- expansion cohort data for the every 2 weeks. Would you have enough information to move directly to an advance study with weekly? Is that the way you wanted to go? Or would you have to run an expansion cohort part for the weekly dosing?

[Charles Q. Morris:]

This is slightly unhelpful answer, I guess, that is

[Operator:]

We'll go next to Brian Klein of Stifel.

[Brian Klein:]

First, on 529. Just wondering if now might be the right time to start thinking about combination studies with some of the approved agents, and maybe other immuno-oncology agents that are being investigated? And then my second question is on 853. If you could just comment beyond the occular toxicity, if you're seeing any other major toxicities arising in the 3 weekly dose versus the weekly dose?

[Charles Q. Morris:]

So 529 combinations are -- yes, it is the time to start thinking about that. We are doing an extensive panel of preclinical work to really try to get the best insights into what would be the right combinations there, and I think that would be an important part of future development. In terms of immuno-oncology, I think broadly speaking, whether it's 529, 853, 289 or anything else, that certainly is something that we are keeping a very close eye on. I think as we get closer to understanding our own profile -- and our own safety profile, our own efficacy profile, that would be another possibility, if not probability for seeking opportunities for combination work. For 853, I'm completely blanking on what...

[Daniel M. Junius:]

The question, are we seeing any other toxicity?

[Charles Q. Morris:]

All right. I mean, obviously, we'll disclose full information at -- when we next present data. But at this point, would -- I wouldn't-- I don't have any new concern at this particular time.

[Daniel M. Junius:]

And Brian, it's Dan. I would point to the data that we disclosed as we're talking about 853 on the every 3 weeks that the DLT was ocular, which caused us to look back. And so there wasn't any -- there were no other major issues that we were seeing from a toxicity standpoint. The reason we adjust the dosing was to deal with the DLT. So I think I'd leave it at that for now.

[Operator:]

We'll take our next question from John Newman of Canaccord.

[John L. Newman:]

I have a couple. So the -- because the $29 million you mentioned from Novartis in terms of amortization revenue, I just wanted to confirm if that would all be recognized in the fourth quarter? And then, I'm wondered if you could give us a sense as to whether or not there's going to be a milestone payment associated with submission of the SBLA for Roche, assuming MARIANNE successful? And then, finally, just wondered if you have any thoughts on Roche's comments on their recent quarterly call regarding their expectations for the MARIANNE study?

[David B. Johnston:]

Hi, John, this is Dave. I'll start with the Novartis question on terms of the amortization of the revenue. I think what we said is, it will trigger by $22.7 million of amortization. And yes, and that would all hit in what would be our second fiscal quarter 2015, which would be the calendar year fourth quarter. And then the other question was on -- is there a milestone associated.

[Daniel M. Junius:]

You should not -- we've disclosed incremental milestones. The filing of an SBLA for first-line metastatic would not trigger a milestone. And your question around the Roche comments from MARIANNE. I think the major caveat, I think, we ought to pay attention to is that Roche, any comments they made, were qualified by what -- it all depends on what the data says. But I think that they continued to emphasize an important role for Kadcyla in their HER2 franchise, looking at it as an avenue to pursue for first-line metastatic as well as earlier HER2-positive breast cancer. But -- yes, they covered a pretty wide range as they made those comments. But I think that what they're trying to do -- what I heard them trying to do is to make sure investors waited until the data was available to be able to provide a more detailed discussion around where Kadcyla will be -- will fit in the treatment paradigm.

[Operator:]

We'll take our next question from Chris Marai of Oppenheimer.

[Christopher N. Marai:]

First question, really, regarding 853. I'm wondering in the early data, if you see any differential activity in patients who are higher expressors of that preceptor? And then secondarily, with respect to any Phase II trials, will you be stratifying by receptor expression?

[Charles Q. Morris:]

Certainly, obviously, in dose escalation, you got relatively small numbers, so it's hard to be -- difficult to be absolute about this. But as we presented previously, the activity that we are seeing, whether -- both in terms of objective responses, CA-125 responses and long-term stable diseases, this certainly seemed to be most of the patients having that type of higher expression of the receptor. And As we go forward, we certainly anticipate selecting patients according to their folate receptor expression. I think it's an important part of patients selection. I think if you're going to call it a precision agent, you need to be precise about who you're going to treat. And I think all of the science and the logic would say that we should be selecting higher expression and that is the plan. Even in the expansion cohorts that we're now conducting, we are selecting the patients according to their folate receptor expression, both for ovarian and for endometrial carcinomas.

[Operator:]

We'll take our next question from [indiscernible] of Guggenheim Securities.

[Unknown Analyst:]

Just to follow-up on Brian's question earlier for the combo studies with 529. Can you provide any more clarity on that as to what type of regimen?

[Charles Q. Morris:]

Probably not. There's a whole bunch of new agents out there that we need to be thinking and the whole bunch of older agents that we needed to be thinking about testing. We have a significant screen ongoing. I think, we have -- clearly, we have to be aware of a broad class of agents, BTK inhibitors, PI3-kinase inhibitor of the B-cell receptor signaling mechanisms as well as what now seems like the old-school treatments with monoclonal antibodies against CD20. So all of these things need to be under consideration. All of these things would imply and we will -- with so many choices, we need to get preclinical data to -- so, which helps us prioritize, which would be the right way to go and that's what we're working on doing right now.

[Operator:]

With no further questions, I'd like to turn the conference back over for any additional or closing remarks.

[Carol Hausner:]

Thank you. I'd like to thank, everyone, for your interest in ImmunoGen. And if you have any subsequent questions, please do not hesitate to call. Have a great day.

[Operator:]

That does conclude today's conference. Thank you for your participation.