AGEN: Agenus Inc Analysis and Research Report
2018-05-21 - by Asif , Contributing Analyst - 445 views
Agenus is a clinical-stage immuno-oncology (“I-O”) company dedicated to becoming a leader in the discovery and development of innovative combination therapies and committed to bringing effective medicines to patients with cancer. The company's business is designed to drive success in I-O through speed, innovation, and effective combination therapies. Agenus has assembled fully integrated capabilities from novel target discovery, antibody generation, cell line development, and good manufacturing practice (“GMP”) manufacturing together with a comprehensive portfolio consisting of antibody-based therapeutics, adjuvants and cancer vaccine platforms. The company leverage its immune biology platforms to identify effective combination therapies for development and have developed productive partnerships to advance its innovation.
The company believe the next generation of cancer treatment will build on clinically validated antibodies targeting CTLA-4 and PD-1 combined with novel immuno-modulatory agents designed to address underlying tumor immune-escape mechanisms.
The company's pipeline of immuno-modulatory antibodies target important nodes of immune regulation, including its proprietary lead antibodies, anti-CTLA-4 and anti-PD-1. Agenus is aiming to develop, register, and launch these products with a first potential biologics license application (“BLA”) filing as early as the second-half of 2019. The company will then endeavor to expand on these agents with combinations of novel compounds designed to address tumor escape mechanisms, such as intratumoral Treg and tumor microenvironment conditioning.
In addition, for tumors not yet visible to the immune system, Agenus is leveraging its immune educating neoantigen vaccine platform, designed to target mutationally based and biochemically based (phosphorylated) neoantigens (AutoSynVax and PhosPhoSynVax) to prime the immune system to attack tumors. These vaccines may be applicable for patients where checkpoint modulating (“CPM”) antibodies alone are not sufficient to bring about tumor control.
Advances in its understanding of the interactions between cancers, the tumor microenvironment, and the immune system have led to powerful new approaches to treat cancer. The company recently formed a new subsidiary, AgenTus Therapeutics, to bring innovative living drugs to cancer patients. AgenTus is employing an integrated platform to discover and develop novel living drugs to treat a broad range of cancers.
To succeed in I-O, innovation and speed are paramount. Agenus is a vertically integrated biotechnology company equipped with a suite of technology platforms to advance from novel target identification (Retrocyte Display, SECANT, Agenus Immunogenic Platform (“AIM”), functional genomics and ligandomics) through manufacturing for clinical trials of antibodies and vaccines.
The company believe that harnessing innovation and speed with combinations of drugs are key to bringing effective treatments to patients with certain cancers. Agenus has assembled fully integrated capabilities in novel target discovery, antibody generation, cell line development, and GMP manufacturing, together with a comprehensive portfolio consisting of antibody-based therapeutics, adjuvants and cancer vaccines. The company believe that a balanced pipeline of product candidates should focus on both validated targets as well as novel targets designed to address tumor escape mechanisms. CTLA-4 and PD-1 antagonists are recognized as the first clinically validated immunotherapy combination. These, in combination with innovative immuno-modulatory antibodies or immune education vaccines, could be a focal point of the next generation of I-O combinations. Therefore, the company plan to develop, register, and launch, its proprietary PD-1 and CTLA-4 antibody programs aggressively through the clinic and expand with novel combination therapies designed to improve the clinical response and durability response of existing therapies.
The company's strategy is to combine its antibodies, vaccines, and adjuvants to develop effective combinations designed to yield best-in-class treatments for patients with cancer. Agenus is pursuing a tiered risk profile and targeting compressed timelines for regulatory filings. Agenus is executing on a clinical development plan with its anti-CTLA-4 (AGEN1884) and anti-PD-1 (AGEN2034) in definable patient populations. In addition, the company plan to pursue select indications to further expedite market entry.
The company's combination clinical trial of AGEN1884 with Keytruda in patients with first line non-small cell lung cancer (“1L NSCLC”) with high PD-L1 expression is targeting a definable population indicated for Keytruda monotherapy where combination with its CTLA-4 could potentially expand the clinical benefit beyond Keytruda on its own. Second line cervical cancer is also an indication that is responsive to PD-1 blockade and where combination with CTLA-4 could potentially expand clinical benefit, present a differentiated development path, and potentially provide a niche opportunity in certain markets. Some of its additional programs may pose moderate regulatory risk and will entail: 1) pursuit of effective I-O antibody and vaccine combinations with CTLA-4 and/or PD-1 targeted antibodies as the backbone; and 2) advancement of its differentiated antibody programs such as its first-in-class bispecific programs, a next generation anti-CTLA-4, and a differentiated CD137 and TIGIT.
Part of its strategy is to develop and commercialize some of its product candidates by continuing its existing arrangements with collaborators and licensees and by entering into new collaborations.
The company's I-O assets include antibody-based therapeutics, cancer vaccine platforms, and adjuvants. The company's proprietary CTLA-4 and PD-1 antagonists are in clinical development; Agenus is one of the few companies to have a proprietary anti-CTLA-4 and anti-PD-1 in clinical combinations.
To complement its portfolio of foundational CPMs, Agenus has pre-clinical antibodies targeting novel immune-mechanisms. These include next-generation anti-CTLA-4, CD137 and anti-TIGIT antibodies, as well as undisclosed multi-specific antibodies.
Agenus has proprietary cancer vaccine platforms which are designed to be autologous (Prophage) and individualized (AutoSynVax (“ASV”); PhosphoSynVax (“PSV”)). The company's Prophage and synthetic ASV and PSV vaccine candidates are protein complexes that consist of heat shock proteins (“HSPs”) and peptides that are either tumor-derived or tailor-made based on the unique genomic fingerprint of a patient’s tumor, respectively. The company's vaccine programs are being developed for intended combinations with CPMs.
The company's QS-21 Stimulon adjuvant is partnered with GlaxoSmithKline plc. (“GSK”) and is a key component in multiple GSK vaccine programs. GSK's Shingrix vaccine, which contains its QS-21 Stimulon® adjuvant, is approved by the US Food and Drug Administration (“FDA”) and Health Canada and recently received the Committee for Medicinal Products for Human Use recommendation for approval.
The company's Antibody Discovery Platforms and CPM Programs
Checkpoint antibodies regulate immune response against pathogens that invade the body and are achieving positive outcomes in a number of cancers that were untreatable only a few years ago. Two classes of checkpoint targets include:
- inhibitory checkpoints that help suppress an immune response in order to prevent excessive immune reaction resulting in undesired inflammation and/or auto-immunity, and
- stimulatory checkpoints that can enhance or amplify an antigen-specific immune response.
The company possess a suite of antibody discovery platforms that are designed to drive the discovery of future CPM antibody candidates. Agenus is planning to employ a variety of techniques to identify and optimize mono-specific and multi-specific antibody candidates, internally.
Agenus has presented clinical data on its lead antibody, AGEN1884, at the American Society of Clinical Oncology (“ASCO”) in June 2017. Agenus has also presented pre-clinical and clinical data on its anti-CTLA-4 (AGEN1884), anti-PD-1 (AGEN2034), and ASV programs as well as its partnered programs GITR (INCAGN1876) and OX-40 (INCAGN1949) at the American Association for Cancer Research (“AACR”) April 2017, Society for Immunotherapy of Cancer (“SITC”) November 2017, the International Cancer Immunotherapy Conference (“CIMT”) May 2017, and CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference in September 2017. The presentations covered pre-clinical pharmacology for its antibodies and demonstrated that AGEN1884 binds to CTLA-4 expressed on T cells and potently blocks engagement of CD80 and CD86, leading to enhanced T cell responsiveness. The company also reported:
- data that AGEN1884 augmented vaccine response in primates;
- clinical data on safety and preliminary efficacy of AGEN1884, which supported its expectations of the safety profile;
- that the company observed a complete response in a compassionate use setting in a patient with advanced angiosarcoma, who was unresponsive to prior therapies;
- data demonstrating that AGEN2034, a novel human IgG4 anti-PD-1 antagonist antibody, inhibits PD-1 binding to PD-L1 and PD-L2, resulting in enhanced T cell responsiveness in vitro as well as in a non-human primate model;
- that AGEN2034 combined effectively with AGEN1884, a human IgG1 anti-CTLA-4 antibody, anti-TIGIT or anti-LAG-3 to further enhance T cell responsiveness;
- that AIM can predict immunogenic peptides containing neoantigens and tumor specific phosphopeptides to develop immunogenic vaccines; and
- clinical data demonstrating ASV can effectively deliver antigens and induce an anti-tumor immunogenic response and pre-clinical data revealing that these vaccinogenic responses are optimized with combination checkpoint modulating antibodies.
Agenus is developing its anti-CTLA-4 antibody in combination with Keytruda in a definable cohort of patients in 1L NSCLC with high PD-L1 (>50%) expression, where Keytruda is approved for use as a monotherapy with <50% response rates. The company also plan to develop its proprietary anti-CTLA-4 antibody in combination with its proprietary anti-PD-1 antibody in second line cervical cancer. Chemoradiation therapy is the current standard of care for earlier lines of treatment. In distant metastatic patients, platinum-based chemotherapy, with or without bevacizumab, is the current standard of care. However, there are no established therapies for second line cervical cancer and the five-year survival rate of recurrent/metastatic cervical cancer is 16.8%. Cervical cancer is a malignancy that is driven by the persistent infection by certain types of human papilloma virus (“HPV”). Anti PD-1/PD-L1 have shown to be active in virally induced disease and, specifically, HPV induced squamous cell cancer of the head and neck. In these tumors, anti PD-1 blockade might induce objective responses as well as prolongation of survival.
In addition to pursuing validated targets, its discovery pipeline includes next generation molecules to known targets (such as TIGIT and CD137) as well as potential first-in-class bispecific antibodies designed to go beyond T cell targeting to address tumor escape mechanisms within the tumor micro-environment. The most advanced of its discovery pipeline is its next generation CTLA-4, an IgG1 anti-CTLA-4 antagonist. This molecule is advancing through Investigational New Drug (“IND”) enablement.
Partnered CPM Programs
In January 2015, the company entered into a broad, global alliance with Incyte Corporation (“Incyte”) to discover, develop and commercialize novel immuno-therapeutics using its antibody platforms. The collaboration was initially focused on four CPM programs targeting GITR, OX40, TIM-3 and LAG-3, and in November 2015, the company expanded the alliance by adding three novel undisclosed CPM targets. Pursuant to the terms of the original agreement, Incyte made non-creditable, non-refundable upfront payments to it totaling $25.0 million. Targets under the collaboration were designated as either profit-share programs, where the parties shared all costs and profits equally, or royalty-bearing programs, where Incyte funded all costs, and the company were eligible to receive milestones and royalties. Under the original collaboration agreement, programs targeting GITR, OX40 and two of the undisclosed targets were designated as profit-share programs, while the other targets were royalty-bearing programs. For each profit-share product, the company were eligible to receive up to $20.0 million in future contingent development milestones. For each royalty-bearing product, the company were eligible to receive (i) up to $155.0 million in future contingent development, regulatory, and commercialization milestones and (ii) tiered royalties on global net sales at rates generally ranging from 6%-12%. Concurrent with the execution of the original collaboration agreement, the company and Incyte also entered into a stock purchase agreement pursuant to which Incyte purchased approximately 7.76 million shares of its common stock for an aggregate purchase price of $35.0 million, or approximately $4.51 per share. In February 2017, the company and Incyte amended the terms of the original collaboration agreement to, among other things, convert the GITR and OX40 programs from profit-share to royalty-bearing programs with royalties on global net sales at a flat 15% rate for each. In addition, the profit-share programs relating to two undisclosed targets were removed from the collaboration, with one reverting to Incyte and one to Agenus (the latter being its TIGIT antibody program), each with royalties on global net sales at a flat 15% rate. The remaining three royalty-bearing programs in the collaboration targeting TIM-3, LAG-3 and one undisclosed target remain unchanged, and there are no more profit-share programs under the collaboration. Pursuant to the amended agreement, the company received accelerated milestone payments of $20.0 million from Incyte related to the clinical development of INCAGN1876 (anti-GITR agonist) and INCAGN1949 (anti-OX40 agonist). Across all programs in the collaboration, Agenus is now eligible to receive up to a total of $510.0 million in future potential development, regulatory and commercial milestones. Concurrent with the execution of the amendment agreement, the company and Incyte entered into a separate stock purchase agreement whereby Incyte purchased an additional 10 million shares of Agenus common stock at $6.00 per share. Immediately following the transaction, Incyte owned approximately 18.1% of its outstanding common stock.
At the April 2016 AACR conference, the company presented data for two antibody candidates under the Incyte collaboration: INCAGN1949 (anti-OX40 agonist) and INCAGN1876 (anti-GITR agonist). The presentations covered pre-clinical pharmacology for each antibody, including optimized features. At AACR 2017, the company presented additional pre-clinical data for both INCAGN1949 and INCAGN1876 which further characterized these antibody candidates. In June 2016, the company announced that the first patient was dosed in a Phase 1/2 clinical trial of INCAGN1876. The Phase 1/2 trial is exploring the safety, tolerability, and efficacy of INCAGN1876 combined with immune therapies, ipilimumab and nivolumab, in advanced or metastatic malignancies such as advanced or metastatic endometrial cancer, gastric cancer (including stomach, esophageal, and gastroesophageal junction), and squamous cell carcinoma of the head and neck. In addition, in November 2016 the company announced the commencement of a Phase 1/2 clinical trial of INCAGN1949. The Phase 1/2 trial is exploring the safety, tolerability, and efficacy of INCAGN1949 combined with immune therapies, ipilimumab and nivolumab, in advanced or metastatic malignancies such as advanced or metastatic urothelial carcinoma or RCC.
In addition, in April 2014, the company entered into a collaboration and license agreement with Merck to discover and optimize fully-human antibodies against two undisclosed CPM targets. Merck selected a lead product candidate against one of the undisclosed Merck targets to advance into preclinical studies, leading to a $2.0 million milestone payment that the company received in May 2016. In November 2017, the company announced the company had received a $4.0 million payment for the advancement of the undisclosed antibody under its license and research collaboration agreement with Merck. Under the terms of the agreement, Merck is responsible for all future product development expenses for the selected antibody candidate. Agenus is eligible to receive up to an additional $99.0 million in milestone payments, in addition to royalties on any worldwide product sales.
In 2017, the company also formalized a research collaboration with UCB Biopharma SPRL (“UCB”). The collaboration leverages the antibody engineering capabilities of UCB and Agenus in novel bispecific antibody discovery. In addition, Agenus has a collaboration agreement with Recepta Biopharma SA on the development of its antibodies targeting CTLA-4 and PD-1, which gives Recepta certain rights to South American countries. The company expect to continue exploring additional future collaborations.
The company's current vaccine platforms for the treatment of cancer, and potentially other indications, include its HSP based Prophage vaccine candidates, and its fully synthetic, neoantigen vaccine candidates, ASV and PSV.
HSPs are a group of proteins present at high levels in most mammalian cells. Their expression is increased when cells are exposed to elevated temperatures or other stresses. A potential role for HSPs in regulating immune responses was revealed when it was first discovered that HSP complexes purified from cancer cells produced immunity to cancer, whereas HSP complexes purified from normal tissue did not. This discovery led to the understanding that HSPs bind to and carry a broad sampling of the protein environment within cells, including mutant proteins that might arise from genetic mutations within cancer cells. It was further shown that immunization with HSP complexes purified from tumors generate both CD4 and CD8 positive T-cell immune responses. These activated T-cells target the cancer cells of the tumor, from which the HSP complexes were derived, for destruction. Thus, HSP complexes isolated from cancer cells may be particularly helpful in mediating successful immunization. Since HSPs are expressed in all tumor cells, the approach of immunizing with the HSP complexes isolated from a particular tumor may be broadly applicable to a variety of cancer types. The company believe that the company pioneered the use of gp96, an HSP, purified from a patient’s own tumor tissue, as a way to make I-O vaccine candidates.
Prophage Vaccine Candidates
The company's Prophage cancer vaccine candidate, HSPPC-96, is an autologous cancer vaccine therapy derived from cancer tissues that are surgically removed from an individual patient. As a result, a Prophage vaccine contains a broad sampling of potentially antigenic mutant proteins from each patient’s own tumor. Prophage vaccines are designed to program the body’s immune system to target only the specific cells that express those mutant antigens, thereby reducing the risk that the body’s immune response against the tumor after vaccination will also affect healthy tissue. Enhancing immune response using personalized vaccines, particularly in combination with CPMs, could be useful in cancers where a low number of mutant proteins leads to weakened immunogenicity.
To date, more than 1,000 patients have been treated with Prophage vaccines in clinical trials internationally, covering a broad range of cancer types, and no serious immune-mediated side effects have been observed. The results of these trials have been published and/or presented at scientific conferences. These results indicate observable clinical and/or immunological activity across many types of cancer.
In January 2017, the company announced a clinical trial collaboration with the National Cancer Institute (“NCI”). The double-blind, randomized controlled Phase 2 trial is evaluating the effect of Prophage in combination with pembrolizumab (Keytruda®) in patients with ndGBM. The trial is being conducted by the Brain Tumor Trials Collaborative (“BTTC”), a consortium of top academic centers led by Dr. Mark Gilbert, Chief of the Neuro-Oncology Branch at the NCI Center for Cancer Research. The trial consists of two-arms with one arm receiving pembrolizumab as a monotherapy and a second arm receiving both Prophage and pembrolizumab in combination. Forty-five patients are being randomly assigned to each arm. Under this collaboration, Agenus is supplying Prophage, Merck is supplying pembrolizumab (Keytruda®) and NCI and BTTC member sites are recruiting patients and conducting the trial.
Neoantigen Vaccine Platforms
Mutation-based neo-epitopes, which will form the basis for the immunogens used in ASV, appear to be almost always particular to a given patient. Therefore, ASV is a largely individualized vaccine product candidate. With a small amount of a patient’s tumor as a sample, its ASV program is designed to utilize next generation sequencing technologies coupled with complex bioinformatics algorithms to identify mutations in a tumor’s DNA and RNA. Once these mutations have been identified, the company plan to manufacture synthetic peptides encoding these neoepitopes, load these peptides on to its recombinant HSP70 and deliver a fully synthetic polyvalent vaccine to the patient. This program is based on the hypothesis that the HSP70 platform would shuttle the mutated peptides to sites where they could be recognized by the immune system and elicit a cytotoxic and helper T cell response in patients with cancer.
Biochemically based neoantigens, such as those arising from dysregulated phosphorylation of various proteins in malignant cells, can serve as a tumor fingerprint across a broad histology of tumors. Through the acquisition of PhosImmune, Agenus has a portfolio of proprietary phosphorylated antigenic targets that can be used for therapeutic development. PSV is a vaccine candidate designed to induce immunity against this novel class of tumor specific neoepitopes. PSV is intended to induce cellular immunity to abnormal phosphopeptide neoepitopes that are characteristic of these various forms of cancer. Phosphopeptides (or phosphopeptide analogues) can be synthesized and complexed with HSP70, using an approach analogous to that used in the generation of its previous HerpV vaccine candidate. HerpV demonstrated good cellular and humoral responses to synthetic peptide immunogens complexed with HSP70 in a placebo-controlled Phase 2 study. The company believe that similar responses could be obtained to phosphopeptide or phosphopeptide analogues bound to HSP70 when used as vaccines. Phosphorylation-based neoepitopes can apparently be found on specific types of cancer in many patients. Studies to optimize the immunogens to be used in PSV are ongoing.
QS-21 Stimulon Adjuvant
QS-21 Stimulon is an adjuvant, which is a substance added to a vaccine or other immunotherapy that is intended to enhance an immune response to the target antigens. QS-21 Stimulon is a natural product, a triterpene glycoside, or saponin, purified from the bark of the Chilean soapbark tree, Quillaja saponaria. QS-21 Stimulon has the ability to stimulate an antibody-mediated immune response and has also been shown to activate cellular immunity. It has become a key component in the development of investigational preventive vaccine formulations across a wide variety of diseases. These studies have been carried out by academic institutions and pharmaceutical companies in the United States and internationally. A number of these studies have shown QS-21 Stimulon to be significantly more effective in stimulating immune responses than aluminum hydroxide or aluminum phosphate, the adjuvants most commonly used in approved vaccines in the United States today.
Partnered QS-21 Stimulon Programs
In July 2006, the company entered into a license agreement and a supply agreement with GSK for the use of QS-21 Stimulon (the “GSK License Agreement” and the “GSK Supply Agreement,” respectively). In January 2009, the company entered into an Amended and Restated Manufacturing Technology Transfer and Supply Agreement (the “Amended GSK Supply Agreement”) under which GSK has the right to manufacture all of its requirements of commercial grade QS-21 Stimulon. GSK is obligated to supply it, or its affiliates, licensees, or customers, certain quantities of commercial grade QS-21 Stimulon for a stated period of time. In March 2012, the company entered into a First Right to Negotiate and Amendment Agreement amending the GSK License Agreement and the Amended GSK Supply Agreement to clarify and include additional rights for the use of QS-21 Stimulon (the “GSK First Right to Negotiate Agreement”). In addition, the company granted GSK the first right to negotiate for the purchase of Agenus or certain of its assets, which expired in March 2017. As consideration for entering into the GSK First Right to Negotiate Agreement, GSK paid it an upfront, non-refundable payment of $9.0 million, $2.5 million of which is creditable toward future royalty payments. The company refer to the GSK License Agreement, the Amended GSK Supply Agreement and the GSK First Right to Negotiate Agreement collectively as the GSK Agreements. In 2017, the company received a final milestone payment of $1.0 million from GSK and are no longer entitled to any additional milestone payments under the GSK Agreements. Under the terms of the Agreement, Agenus is generally entitled to receive 2% royalties on net sales of prophylactic vaccines for a period of 10 years after the first commercial sale of a resulting GSK product, with some exceptions; however, Agenus has already sold this potential royalty stream in its entirety as discussed in more detail below. The GSK License and Amended GSK Supply Agreements may be terminated by either party upon a material breach if the breach is not cured within the time specified in the respective agreement. The termination or expiration of the GSK License Agreement does not relieve either party from any obligation which accrued prior to the termination or expiration. Among other provisions, the license rights granted to GSK survive expiration of the GSK License Agreement. The license rights and payment obligations of GSK under the Amended GSK Supply Agreement survive termination or expiration, except that GSK's license rights and future royalty obligations do not survive if the company terminate due to GSK's material breach unless the company elect otherwise.
QS-21 Stimulon is a key component included in certain of GSK's proprietary adjuvant systems, and the company believe that a number of GSK's vaccine candidates currently in development are formulated using adjuvant systems containing QS-21 Stimulon, including its shingles vaccine that was approved by the FDA and Health Canada in 2017. The company do not incur clinical development costs for products partnered with GSK.
In September 2015, the company monetized a portion of the royalties associated with the GSK License Agreement to an investor group led by Oberland Capital Management for up to $115.0 million in the form of a non-dilutive royalty transaction. Under the terms of a Note Purchase Agreement with the investor group (the “Note Purchase Agreement”) the company received $100.0 million at closing for which the investors had the right to receive 100% of its worldwide royalties under the GSK License Agreement on sales of GSK’s shingles (HZ/su) and malaria (RTS,S) prophylactic vaccine products that contain its QS-21 Stimulon adjuvant to pay down principle and interest. In November 2017 and pursuant to the Note Purchase Agreement, the company received an additional $15.0 million in cash from the investors based on the approval of HZ/su by the FDA. Pursuant to the terms of this transaction, the company retained the right to receive all royalties from GSK after all principal, interest and other obligations were satisfied under the Note Purchase Agreement. The Note Purchase Agreement also allowed it to buy back the loan and extinguish the notes early under pre-specified terms.
In January 2018, the company sold 100% of all royalties the company were entitled to receive from GSK to Healthcare Royalty Partners III, L.P. and certain of its affiliates (collectively, “HCR”) and used the proceeds to extinguish the debt under the Note Purchase Agreement. HCR paid approximately $190.0 million at closing for the royalty rights, of which approximately $161.9 was used to extinguish the prior notes, yielding it approximately $28.0 million in net proceeds. Agenus is also entitled to receive up to $40.35 million in milestone payments from HCR based on sales of GSK’s vaccines as follows: (i) $15.1 million upon reaching $2.0 billion last-twelve-months net sales any time prior to 2024 and (ii) $25.25 million upon reaching $2.75 billion last-twelve-months net sales any time prior to 2026. The company would owe a reverse milestone payment of approximately $25.9 million to HCR in 2021 if neither of the following sales milestones are achieved: (i) 2019 sales of the GSK vaccines exceed $1.0 billion or (ii) 2020 sales of the GSK vaccines exceed $1.75 billion (the “Rebate Payment”). As part of the transaction, the company provided a guaranty for the potential Rebate Payment and secured the obligation with substantially all of its assets pursuant to a security agreement, subject to certain customary exceptions and excluding all assets necessary for AgenTus Therapeutics, Inc.
Manufacturing CPM Antibodies
In December 2015, Agenus acquired an antibody manufacturing pilot plant in Berkeley, CA from XOMA Corporation (“XOMA”), which the company refer to as “Agenus West.” A team of former XOMA employees with valuable chemistry, manufacturing and controls experience joined it and continue to operate the facility. In addition, in February 2017, the company amended its collaboration with Incyte, transferring manufacturing responsibilities for all antibodies under the collaboration to them. This includes antibodies targeting GITR, OX40, TIM-3, LAG-3 and one undisclosed target. Agenus has transferred the manufacturing know how to Incyte to support these endeavors and allow Agenus to focus on the manufacture of antibodies for some of its own CPM programs and those of existing and potential third-party collaborators. Since the acquisition of Agenus West, Agenus has made significant improvements in the plant, and added additional headcount increasing both scale and capacity. The plant is currently providing antibody production for its lead programs. The company aim to utilize its Agenus West pilot plant capabilities to accelerate antibody delivery, improve quality and increase product yield while providing it with greater manufacturing flexibility, all at reduced costs.
Manufacturing Cancer Vaccines
The company manufacture its cancer vaccine candidates in its Lexington, MA facility.
Each Prophage vaccine is manufactured using a patient’s own tumor. After the patient undergoes surgery to remove cancerous tumor tissue, the tumor is shipped frozen in a specially designed kit provided by it to its Lexington, Massachusetts facility. Each Prophage vaccine is produced to a specific standard, in a process taking approximately ten hours, after which it undergoes extensive quality testing for approximately two weeks. The turnaround time from the date of surgery to delivery of vaccine is approximately three to four weeks, which generally fits well with the patient’s recovery time from surgery. Once the company release the vaccine, it is shipped frozen overnight to the hospital pharmacy or clinician. Prophage vaccines are given as a simple intradermal injection.
ASV and PSV vaccine candidates are manufactured using HSP70 loaded with synthetic peptide synthesized by approved manufacturers. The sequence of the peptides is determined by sequencing and analysis of patient and tumor DNA and RNA and run through complex algorithms by its bioinformatics group who have specialized knowledge of the attributes required to elicit immune responsiveness. This process takes several weeks, after which the manufactured vaccine undergoes extensive quality testing, including sterility testing, which takes a further two weeks.
Agenus has established, within a single facility, well-defined, cost efficient vaccine manufacturing under GMPs, including bioanalytical, quality control and quality assurance, logistics, distribution and supply chain management. After manufacturing, Prophage and ASV vaccine candidates are tested and released by its analytical and quality systems staff. The quality control organization performs a series of release assays designed to ensure that the product meets all applicable specifications. The company's quality assurance staff also reviews manufacturing and quality control records prior to batch release in an effort to assure conformance with current GMP (“cGMP”) as mandated by the FDA and foreign regulatory agencies.
The company's manufacturing staff is trained and routinely evaluated for conformance to rigorous manufacturing procedures and quality standards. This oversight is intended to ensure compliance with FDA and foreign regulations and to provide consistent vaccine output. The company's quality control and quality assurance staff is similarly trained and evaluated as part of its effort to ensure consistency in the testing and release of the product, as well as consistency in materials, equipment and facilities.
Except in the case of GSK, Agenus has retained worldwide manufacturing rights for QS-21 Stimulon, and Agenus has the right to subcontract manufacturing for QS-21 Stimulon. In addition, under the terms of its agreement with GSK, upon request by it, GSK is committed to supply certain quantities of commercial grade QS-21 Stimulon to it and its licensees for a fixed period of time.
Intellectual Property Portfolio
The company seek to protect its technologies through a combination of patents, trade secrets and know-how, and the company currently own, co-own or have exclusive rights to approximately 35 issued United States patents and approximately 120 issued foreign patents. The company also own, co-own or have exclusive rights to approximately 30 pending United States patent applications and approximately 125 pending foreign patent applications. The company may not have rights in all territories where the company may pursue regulatory approval for its product candidates.
Through various acquisitions, the company own, co-own, or have exclusive rights to a number of patents and patent applications directed to various methods and compositions, including methods for identifying therapeutic antibodies and product candidates arising out of such entities’ technology platforms. In particular, the company own patents and patent applications relating to its Retrocyte Display technology platform, a high throughput antibody expression platform for the identification of fully-human and humanized monoclonal antibodies. This patent family is projected to expire between 2029 and 2031. The company own, co-own, or have exclusive rights to patents and patent applications directed to various methods and compositions, including a patent directed to methods for identifying phosphorylated proteins using mass spectrometry. This patent is projected to expire in 2023. The company also own patents and patent applications relating to the SECANT® platform, a platform used for the generation of novel monoclonal antibodies. This patent family is projected to expire between 2028 and 2029. In addition, as the company advance its research and development efforts with its institutional and corporate collaborators, Agenus is seeking patent protection for certain newly identified therapeutic antibodies and product candidates. The company can provide no assurance that any of its patents, including the patents that the company acquired or in-licensed, will have commercial value, or that any of its existing or future patent applications, including the patent applications that were acquired or in-licensed, will result in the issuance of valid and enforceable patents. The company's issued patents covering Prophage vaccine and methods of use thereof, alone or in combination with other agents, expired or will expire at various dates between 2015 and 2024. In particular, its issued U.S. patents covering Prophage composition of matter expired in 2015. In addition, its issued patents covering QS-21 Stimulon composition of matter expired in 2008. The company continue to explore means of extending the life cycle of its patent portfolio.
Various patents and patent applications have been exclusively licensed to it by the following entities:
University of Virginia
In connection with its acquisition of PhosImmune in December 2015, the company obtained exclusive rights to a portfolio of patent applications and one issued patent relating to PTTs under a patent license agreement with the University of Virginia (“UVA”). The UVA license gives it exclusive rights to develop and commercialize the PTT technology and an exclusive option to license any further PTT technology arising from ongoing research at UVA until December 2018. Under the license agreement, the company will pay low to mid-single digit running royalties on net sales of PTT products, and a modest flat percentage of sublicensing income. In addition, the company may be obligated to make milestone payments of up to $2.7 million for each indication of a licensed PTT product to complete clinical trials and achieve certain sales thresholds. The term of the UVA license agreement ends when the last of the licensed patents expires or becomes no longer valid. The UVA license agreement may be terminated as follows: (i) by UVA in connection with its bankruptcy or cessation of business relating to the licensed technology, (ii) by UVA if the company commit a material, uncured breach or (iii) by it for its convenience on 180 days written notice.
Ludwig Institute for Cancer Research
On December 5, 2014, its wholly-owned subsidiary, Agenus Switzerland Inc. (formerly known as 4-Antibody AG)(“4-AB”), entered into a license agreement with the Ludwig Institute for Cancer Research Ltd. (“Ludwig”), which replaced and superseded a prior agreement entered into between the parties in May 2011. Pursuant to the terms of the license agreement, Ludwig granted 4-AB an exclusive, worldwide license under certain intellectual property rights of Ludwig and Memorial Sloan Kettering Cancer Center arising from the prior agreement to further develop and commercialize GITR, OX40 and TIM-3 antibodies. On January 25, 2016, the company and 4-AB entered into a second license agreement with Ludwig, on substantially similar terms, to develop CTLA-4 and PD-1 antibodies. Pursuant to the December 2014 license agreement, 4-AB made an upfront payment of $1.0 million to Ludwig. The December 2014 license agreement also obligates 4-AB to make potential milestone payments of up to $20.0 million for events prior to regulatory approval of licensed GITR, OX40 and TIM-3 products, and potential milestone payments in excess of $80.0 million if such licensed products are approved in multiple jurisdictions, in more than one indication, and certain sales milestones are achieved. Under the January 2016 license agreement, Agenus is obligated to make potential milestone payments of up to $12.0 million for events prior to regulatory approval of CTLA-4 and PD-1 licensed products, and potential milestone payments of up to $32.0 million if certain sales milestones are achieved. Under each of these license agreements, the company and/or 4-AB will also be obligated to pay low to mid-single digit royalties on all net sales of licensed products during the royalty period, and to pay Ludwig a percentage of any sublicensing income, ranging from a low to mid-double digit percentage depending on various factors. During the year ended December 31, 2017, the company paid a percentage of sublicensing income totaling $2.0 million to Ludwig under the license agreements. The license agreements may each be terminated as follows: (i) by either party if the other party commits a material, uncured breach; (ii) by either party if the other party initiates bankruptcy, liquidation or similar proceedings; or (iii) by 4-AB or it (as applicable) for convenience upon 90 days’ prior written notice. The license agreements also contain customary representations and warranties, mutual indemnification, confidentiality and arbitration provisions.
University of Connecticut Health Center
In May 2001, the company entered into a license agreement with the University of Connecticut Health Center (“UConn”) which was amended in March 2003 and June 2009. Through the license agreement, the company obtained an exclusive, worldwide license to patent rights resulting from inventions discovered under a research agreement that was effective from February 1998 until December 2006. The term of the license agreement ends when the last of the licensed patents expires in 2028 or becomes no longer valid. UConn may terminate the agreement: (1) if, after 30 days written notice for breach, the company continue to fail to make any payments due under the license agreement, or (2) the company cease to carry on its business related to the patent rights or if the company initiate or conduct actions in order to declare bankruptcy. The company may terminate the agreement upon 90 days written notice. Agenus is required to make royalty payments on any obligations created prior to the effective date of termination of the license agreement. Upon expiration or termination of the license agreement due to breach, Agenus has the right to continue to manufacture and sell products covered under the license agreement which are considered to be works in progress for a period of six months. The license agreement contains aggregate milestone payments of approximately $1.2 million for each product the company develop covered by the licensed patent rights. These milestone payments are contingent upon regulatory filings, regulatory approvals, and commercial sales of products. Agenus has also agreed to pay UConn a royalty on the net sales of products covered by the license agreement as well as annual license maintenance fees beginning in May 2006. Royalties otherwise due on the net sales of products covered by the license agreement may be credited against the annual license maintenance fee obligations. Under the March 2003 amendment, the company agreed to pay UConn an upfront payment and to make future payments for each patent or patent application with respect to which the company exercised its option under the research agreement. As of December 31, 2017, the company had paid approximately $900,000 to UConn under the license agreement. The license agreement gives it complete discretion over the commercialization of products covered by the licensed patent rights but also requires it to use commercially reasonable diligent efforts to introduce commercial products within and outside the United States. If the company fail to meet these diligence requirements, UConn may be able to terminate the license agreement.
As of February 28, 2018, the company had 255 employees, of whom 81 were PhDs and one was an MD. None of its employees are subject to a collective bargaining agreement. The company believe that Agenus has good relations with its employees.
Historical Results of Operations
Three months ended March 31, 2018 compared to the three months ended March 31, 2017
Revenue: The company recognized revenue of approximately $1.6 million and $27.0 million during the three months ended March 31, 2018 and 2017, respectively. Revenues in the first quarter of 2018 and 2017, respectively, primarily included fees earned under its license agreements, including $20.0 million for the three months ended March 31, 2017 related to the acceleration of milestone payments, and $1.2 million and $6.3 million for the three months ended March 31, 2018 and 2017, respectively, related to the reimbursement of development costs under its Collaboration Agreement with Incyte, which have decreased due to the stage of programs under the collaboration. During the three months ended March 31, 2018 and 2017, the company recorded revenue of $0.5 million and $0.7 million, respectively, from the amortization of deferred revenue. See Notes B and J to its condensed consolidated financial statements for additional discussion of its revenues, including the adoption of ASC 606 during the first quarter of 2018.
Research and development: Research and development expenses include the costs associated with its internal research and development activities, including compensation and benefits, occupancy costs, manufacturing costs, costs of consultants, and administrative costs. Research and development expense decreased 10% to $29.4 million for the three months ended March 31, 2018 from $32.6 million for the three months ended March 31, 2017. Decreased expenses in the three months ended March 31, 2018 primarily relate to a $3.0 million decrease in expenses for its foreign subsidiaries due to the closure of its facility in Basel, Switzerland in 2017, which decrease was partially offset by increased expenses attributable to its wholly-owned subsidiary in the United Kingdom, Agenus UK Limited (“Agenus UK”), a $1.0 million decrease due to a milestone payment made to Iontas in the quarter ended March 31, 2017, which did not reoccur in the quarter ended March 31, 2018, and a $0.4 million decrease in personnel related expenses. These decreases were partially offset by a $0.4 million increase in expenses attributable to its subsidiary, AgenTus, which did not yet exist in the quarter ended March 31, 2017, and an increase in third-party services and other related expenses of $0.8 million primarily relating to the advancement of its antibody programs.
General and administrative: General and administrative expenses consist primarily of personnel costs, facility expenses, and professional fees. General and administrative expenses increased 15% to $8.9 for the three months ended March 31, 2018 from $7.8 million for the three months ended March 31, 2017. Increased expenses in the three months ended March 31, 2018 primarily relate to a $0.8 million increase in personnel related expenses, primarily due to increased headcount, a $0.2 million increase in expenses attributable to its subsidiary, AgenTus, which did not yet exist in the quarter ended March 31, 2017, and a $0.1 million increase in professional fees. These increases were partially offset by a $0.1 million decrease in expenses for its foreign subsidiaries due to the closure of its facility in Basel, Switzerland in 2017, which decrease was partially offset by increased expenses attributable to Agenus UK.
Contingent purchase price consideration fair value adjustment: Contingent purchase price consideration fair value adjustment represents the change in the fair value of its purchase price considerations, which resulted from changes in its market capitalization and share price and changes in the credit spread since each year end. The fair value of its contingent purchase price considerations is based on estimates from a Monte Carlo simulation of its market capitalization and share price.
Loss on early extinguishment of debt: Loss on early extinguishment of debt of $10.8 million for the three months ended March 31, 2018 represents the payment of premiums and the write-off of unamortized debt issuance costs and discounts incurred in connection with the full redemption and termination of Antigenics’ $115.0 million principal amount of notes issued pursuant to the Note Purchase Agreement dated September 4, 2015 with Oberland Capital SA Zermatt LLC and the purchasers named therein.
Non-operating income (expense): Non-operating income increased for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 due to an increase in its foreign currency gain.
Interest expense, net: Interest expense, net decreased to approximately $2.8 million for the three months ended March 31, 2018 from $4.6 million for the three months ended March 31, 2017 due to the January 2018 closing of the Royalty Purchase Agreement with HCR and the simultaneous full redemption and termination of the notes issued under the Note Purchase Agreement.
Liquidity and Capital Resources
Agenus has incurred annual operating losses since inception, and the company had an accumulated deficit of $1.1 billion as of March 31, 2018. The company expect to incur significant losses over the next several years as the company continue to develop its technologies and product candidates, manage its regulatory processes, initiate and continue clinical trials, and prepare for potential commercialization of products. To date, Agenus has financed its operations primarily through the sale of equity and debt securities, and interest income earned on cash, cash equivalents, and short-term investment balances. From its inception through March 31, 2018, Agenus has raised aggregate net proceeds of approximately $1.12 billion through the sale of common and preferred stock, the exercise of stock options and warrants, proceeds from its Employee Stock Purchase Plan, royalty monetization transactions, and the issuance of convertible and other notes.
The company maintain an effective registration statement (the “Registration Statement”), covering the offering of up to $250 million of common stock, preferred stock, warrants, debt securities and units. The Registration Statement included a prospectus covering the offer, issuance and sale of up to 15 million shares of its common stock from time to time in “at-the-market offerings” pursuant to a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) entered into with Cantor Fitzgerald & Co. (the “Sales Agent”). As of March 31, 2018, the company had 13.8 million shares available for sale under the Sales Agreement. The company sold approximately 1.2 million and 0.7 million shares of its common stock pursuant to the Sales Agreement during the three-months ended March 31, 2018 and the month of April 2018, respectively, and received aggregate net proceeds totaling $8.5 million. On May 7, 2018, the company terminated the Sales Agreement.
As of March 31, 2018, the company had debt outstanding of $14.1 million in principal. In February 2015, the company issued subordinated notes in the aggregate principal amount of $14.0 million with annual interest at 8% (the “2015 Subordinated Notes”). The 2015 Subordinated Notes are due in February 2020. The company and Antigenics entered into the Note Purchase Agreement with certain purchasers pursuant to which Antigenics issued, and the company guaranteed, limited recourse notes in the aggregate principal amount of $100.0 million, with an option to issue an additional $15.0 million principal amount of limited recourse notes, which the company exercised in November 2017. The limited recourse notes were due on the earlier of (i) the 10th anniversary of the first commercial sale of GSK’s shingles or malaria vaccines and (ii) September 8, 2030. In January 2018, the company entered into a Royalty Purchase Agreement with HCR whereby the company received proceeds of $190.0 million. The company used $161.9 million of these proceeds to redeem all of the notes issued pursuant to the NPA.
The company's cash, cash equivalents, and short-term investments at March 31, 2018 were $52.3 million, a decrease of $7.8 million from December 31, 2017. Based on its current plans, including additional funding the company anticipate from multiple sources, including out-licensing and/or partnering opportunities, the company believe that its cash resources of $52.3 million as of March 31, 2018 will be sufficient to satisfy its liquidity requirements through the first quarter of 2019. The company also continue to monitor the likelihood of success of its key initiatives and can discontinue funding of such activities if they do not prove to be successful, restrict capital expenditures and/or reduce the scale of its operations if necessary. However, in spite of these anticipated sources of funding and its ability to control its cash burn, in accordance with the requirements of ASU 2014-15, Agenus is required to disclose the existence of a substantial doubt regarding its ability to continue as a going concern for twelve months from when these financial statements were issued.
The company's future liquidity needs will be determined primarily by the success of its operations with respect to the progression of its product candidates and key development and regulatory events in the future. Potential sources of additional funding include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for its portfolio programs and product candidates with one or more third parties, (2) renegotiating third party agreements, (3) selling assets, (4) securing additional debt financing and/or (5) selling equity securities. Satisfying long-term liquidity needs may require the successful commercialization and/or substantial out-licensing or partnering arrangements for its antibody discovery platforms, CPM antibody programs, and HSP-based vaccines. The company's long-term success will also be dependent on the successful identification, development and commercialization of potential other product candidates, each of which will require additional capital with no certainty of timing or probability of success. If the company incur operating losses for longer than the company expect, and/or Agenus is unable to raise additional capital, the company may become insolvent and be unable to continue its operations.
The company's future cash requirements include, but are not limited to, supporting clinical trial and regulatory efforts and continuing its other research and development programs. Since inception, Agenus has entered into various agreements with contract manufacturers, institutions, and clinical research organizations (collectively “third party providers”) to perform pre-clinical activities and to conduct and monitor its clinical studies and trials. Under these agreements, subject to the enrollment of patients and performance by the applicable third-party provider, Agenus has estimated its total payments to be $213.4 million over the term of the related activities. Through March 31, 2018, Agenus has expensed $143.1 million as research and development expenses and $138.3 million has been paid under these agreements. The timing of expense recognition and future payments related to these agreements is subject to the enrollment of patients and performance by the applicable third-party provider. Agenus has also entered into sponsored research agreements related to its product candidates that required payments of $9.6 million, of which $8.4 million have been paid as of March 31, 2018. The company plan to enter into additional agreements with third party providers as well as sponsored research agreements, and the company anticipate significant additional expenditures will be required to initiate and advance its various programs.
Part of its strategy is to develop and commercialize some of its product candidates by continuing its existing collaboration arrangements with academic and collaboration partners and licensees and by entering into new collaborations. As a result of its collaboration agreements, the company will not completely control the efforts to attempt to bring those product candidates to market. For example, its collaboration with Incyte for the development, manufacture and commercialization of CPM antibodies against certain targets is managed by a joint steering committee, which is controlled by Incyte.
Net cash used in operating activities for the three months ended March 31, 2018 and 2017 was $40.2 million and $14.8 million, respectively. The company's future ability to generate cash from operations will depend on achieving regulatory approval and market acceptance of its product candidates, achieving benchmarks as defined in existing collaboration agreements, and its ability to enter into new collaborations.