Agenus Inc. (AGEN) Earnings Call Transcript & Summary

Good afternoon, and welcome to Agenus Inc.'s investor briefing call. [Operator Instructions] . As a reminder, this conference is being recorded. I will now turn the call over to Zack Armen, Head of Investor Relations.

Thank you, operator. Welcome to Agenus Inc.'s Investor Briefing Call. Earlier today, we issued a press release announcing a strategic collaboration between Agenus and Zydus Lifesciences, which we are here to review in more detail with you today. A copy of the press release is available on our website at www.investors.agenusbio.com. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements. These statements are subject to risks and uncertainties, which may cause actual results to differ materially from expectations. Please refer to our SEC filings for further detail. Joining me today are Garo Armen, Chairman and CEO; and Dr. Steven O'Day, Chief Medical Officer. I'll now turn the call over to Garo Armen.

Thank you, Zack, and good afternoon, everyone. Thank you for joining us. On today's call, we will be discussing an exciting new partnership between Agenus and Zydus. It's an exciting opportunity for both companies. And for trade between 2 great nations, the world's oldest democracy and the world's largest democracy. But before I get into the details, I want to start with why this is so important. As you've been hearing lately colorectal cancer is on the rise, particularly among the younger people under the age of 50. Colorectal cancer, which is known as CRC, incidences have doubled in the U.S. adults under 55 from 1995 to present. By 2030, colorectal cancer is projected to become the leading cause of cancer-related death in men under 50, that is in the U.S.A. These younger patients especially need treatments other than chemotherapy, radiation and life-altering surgeries. They deserve an alternative with life-changing side effects. And this was, by the way, a major topic of discussion at the ASCO meeting, which I attended along with 75 to 80 meetings that we had with KOLs and investigators who came to meet with us without getting paid a penny. I must stress the importance of that. The new leadership at HHS and the FDA recognize what I just said. One of the President's first action with Secretary, Kennedy was to set up the Make America Healthy Again Commission, which is focused on investigating the causes of America's worsening health trends. The commission issued its report last month and one major area of focus was the rise in the cancer incidences among younger people. This is alarming. Secretary, Kennedy has pledged to root out conflicts of interest. And the FDA Commissioner, Dr. Marty Makary, has repeatedly stressed the need to accelerate approval of meaningful treatments. I underline meaningful treatments in this context. This shifting regulatory environment is deeply encouraging to us and for the entire research community who is discovering and developing novel and effective therapies, not incremental therapies that extend life by marginal time lines, a few weeks to a few months with horrible side effects. And so it is an exciting time at Agenus. We have new data. We have added to our leadership, and now we have a new partnership and a new environment at the FDA. We'll talk about these one by one. Let's talk about new data. For botensilimab and balstilimab, which we call BOT/BAL, and by the way, the entire community now has started calling it BOT/BAL, we are generating consistent and compelling data across different lines of treatment, both in the neoadjuvant setting, all the way down to later lines of treatment for patients that have exhausted every single available therapy. And this is happening across multiple cold tumors that have historically defied standard immunotherapy treatments. These include MSS colorectal cancer, which, by the way, accounts for more than 85% of the colorectal cancer cases, certain hard-to-treat breast cancers like non-small cell lung cancer -- I'm sorry, triple-negative breast cancer, sarcomas, which have been a traditionally difficult target for patients; and hepatocellular carcinoma, among others. As I mentioned, I just got back from ASCO in Chicago, where we presented translational data showing that BOT/BAL elicited a response in MSS tumors, which, as I said, historically have not responded to any immunotherapy to speak of. Now all of this builds of Dr. Myriam Chalabi's presentation at AACR in late April of this year. Dr. Chalabi presented results from investigator-sponsored NEOASIS pan-cancer study trial in the neoadjuvant setting. This study showed pathologic complete responses across multiple cancers and importantly, no dose-limiting toxicities and all patients proceeded to our next level of treatment like surgery on schedule. Dr. Chalabi stated that these findings substantiate the importance of this immunotherapy in early treatment settings and highlight the broad potential utility of this combination as she was talking about that. Let me spend a second on new leadership that we've added. To support this next phase of development, we recently welcomed Dr. Richard Goldberg, a world-renowned GI oncology expert as our Chief Development Officer. He was with us at ASCO as well. His leadership will be pivotal as we advance towards reengaging the FDA for metastatic CRC and down the road for other tumor types as well. Now let's come to new partnerships and new opportunities. And of course, today is about our new partnership and new opportunities. It's expected that United States will reach a trade agreement with India any day now. And in both countries, there is renewed sense of confidence in Indian, American relations and trade. Leaders in America recognize the need to secure America's biopharma supply chain, a very important part of the agenda here. For all these reasons, now is a great time for this particular agreement that we entered into today. And that is why we decided it's now that's the right time to move on to this kind of agreement. I believe this agreement and our relationship will benefit Agenus and Zydus, but also our 2 great countries, which are already great trading partners. Let me go to Slide 2, if I may. And Slide 2 talks about the strategic collaboration, unites Agenus' pioneering research and development capabilities with Zydus worldwide manufacturing and operating strengths. Now if you sort of take a step back and look at the reasons why we consummated our Emeryville strategy to make commercial-grade product, I might add state-of-the-art facility that will make this commercial-grade product. It has to do with the fact that we wanted a reliable, consistent means of supplying in the event that our expectations and patients' expectations came true that BOT/BAL became a standard for the treatment of many difficult-to-treat cancers. That was the original reason why we did this because at that time, we realized that it would have been too risky for us to just depend on traditional CDMOs. Now what I'm delighted to announce with this agreement is that even though this transaction transferred the ownership to Zydus, we have the same drivers of integrity, reliability, efficiency and quality in Zydus in a facility that we've built and with a team that has played a major role in building this facility and running it right now. So that's one of the reasons why having this partnership with Zydus makes our relationship, not just in the context of generating additional funds for our own company, but also looking at the future and anticipating that future with a reliable partner. Okay. Now this partnership and the divestiture of our noncore assets mark a new chapter for us for the reasons that I told you. Agenus 2.0, that's sort of a good way of conceptualizing our next chapter, a focused innovation engine with a clear path to value generation through a streamlined execution and smart partnering. That is the desired outcome, and this is what we expect to execute on. For those of you joining that may not be as familiar with Zydus Life Sciences. They're a leading global pharmaceutical company with a fantastic reputation in India and beyond. With an $11 billion market cap, it is headquartered in India, employs over 27,000 people across 55 countries, including the United States. They bring deep expertise in manufacturing, clinical development and regional care delivery with $2.6 billion in 2024 revenues and an expanding chain of multidisciplinary hospitals and trial infrastructure across Southeast Asia. Now with this, Agenus is positioned for substantial value creation through a layered approach that integrates scientific advancements with commercial foresight opportunity. Now this is an interesting chart that tells you what our first phase of execution is, which is BOT/BAL approval in the U.S. being our focus. Next, of course, will be Europe shortly thereafter. And then after that, we have huge opportunities in indication expansion, other market approvals and also very importantly, and this was highlighted, by the way, at a number of our meetings at ASCO by some of the world's leaders in immuno-oncology who understand how immuno-oncology works and their mandate is to help the system understand how immuno-oncology works and how the endpoints should be evaluated in the context of immunological effect on the tumor. So we are positioned today for substantial value creation through a layered approach that integrates scientific advancements with commercial foresight. Together, we're combining scientific innovation and global operational strength to unlock the full potential of BOT/BAL and expand our research and to expand our patients worldwide. Strengthening financial foundations, of course, is key. And our focused strategy of capital infusion to power Agenus plays a major role in that. And having a like-minded partner is one of the best ways of accomplishing this. So with this transaction, we are divesting our noncore assets, which are hard assets, manufacturing is not our sweet spot, but it happens to be Zydus' sweet spot. That doesn't mean we haven't excelled in manufacturing. It simply means that we have very important agendas to execute on with innovation and bringing these products to patients as soon as possible. And Zydus will be a very important part of that execution. So looking at the deal structure, in addition to the $75 million upfront and the $50 million in contingent payments, we're also planning the divestment of land asset valued at $40 million to $50 million in the second half of this year. Of course, these types of transactions can be delayed. So with that qualification, our intent is to monetize on our real estate assets in California that are not part of this deal. And of course, together, we also have the $16 million equity investment from Zydus, which is also a very big vote of confidence in us at $7.50 a share. We're reinforcing our balance sheet, reducing our cash burn and focusing our capital where it derives the most value for us and our shareholders and also very importantly, for our patients. Our patients are in need of an innovative and potentially curative product. Our vision is centered on both science-driven innovation. And of course, BOT/BAL is the lead in this, but we have a whole bunch of clinical stage products behind BOT/BAL. But that innovation only delivers impact if it reaches patients efficiently. And that's why we are concentrating our resources on U.S. and U.S. registrational trials for BOT/BAL with an understanding that our moral responsibility is to go beyond the U.S. as soon as possible, and India is one of those territories. And while integrating Zydus' advanced analytics to streamline our development, improve trial design and optimize patient selection will be critical. Remember, Zydus is a company that's not just in pharmaceutical manufacturing, but they own a number of hospitals in India, including a cancer-dedicated hospital as well as a CRO that advances clinical trials, not just in India, but also other countries. I had the pleasure of visiting India several weeks ago and visiting 3 of their hospitals and also visiting with their CRO. And this is a meeting of the mind that has emerged to consummate this transaction. So our vision is centered on both again, science-driven innovation, but that innovation only delivers impact if it reaches patients efficiently. That's why we are concentrating our resources on U.S. registration, as I said before. The key is in our clinical trial development, reducing time lines, lowering costs and ultimately accelerating our path to regulatory approval. That is key. And having the ability to integrate with some of the subsidiaries or related companies of Zydus and execute clinical trials at record pace and allowing that to inform what clinical trials and what combinations and what indications should be pursued in the U.S. is a very substantial advantage that will add value to Agenus and very importantly, value to Zydus. So through this partnership, as I said before, we gain access to Zydus' extensive clinical trial network across India and beyond. And of course, this accelerates our ability to bring BOT/BAL to more patients and more indications, leveraging their operational scale alongside our scientific leadership. We also see significant strategic value in combining BOT with upcoming PD-L1 biosimilars, PD-1 and PD-L1, I might say, that Zydus will be manufacturing. They're already well ahead of their competition in this area. And this will give us an opportunity that could help unlock the current $50 billion global market segment in immunotherapy by adding BOT's strengths to the current state of affairs in immunotherapy, which reaches less than 1/3 of the eligible patients, but our expectation is that with BOT's infusion into these combinations, we can significantly expand that market, significantly expand that market. So with this partnership, Agenus is executing a dual pathway to strategy for BOT/BAL, prioritizing U.S. registration trials while simultaneously leveraging Zydus' extensive infrastructure to advance development in emerging markets. This, by the way, allows us to accelerate approvals. It is a model that pays scientific innovation with operational scale to maximize patient impact and shareholder value. Patient's impact must be the driver for shareholder value, not the other way around. And in conclusion, with new data coming at ESMO in July, continued regulatory engagement, both in the U.S. and in Europe and now through Zydus, we expect this to be with India as well and new regional partnership discussions underway, Agenus is positioned not just for progress, but for transformation. That is the Agenus 2.0 vision in action, science-led partner-enabled and patient-focused strategy. Now in conclusion, I just want to divert your attention to one thing, and that is the team that worked tirelessly over the past months and continues to work tirelessly for potential additional transactions is the team that we would like to reward and that is the subject of our ask at our shareholder meeting for resolutions. So as a final note, we will have our 2025 shareholder meeting on June 17, and it is critically important that all shareholders of Agenus as of April 24, 2025, record date, vote, very important. Agenus' proxy solicitor, Alliance Advisors, who has been with us for over 10 years, is available to assist you with your voting of shares even if you do not have access to your proxy card. This could be done on the phone. The phone number is (844) 202-6561, and you can also e-mail them at [email protected]. And please do this as soon as possible to ensure that the team who delivered on this transaction is motivated and continues to work to deliver and expand on this transaction and more. Thank you very much for your continued support. And operator, Tiffany, we are ready for questions.

[Operator Instructions] Your first question comes from Colleen Kusy with Baird.

Congrats on the deal. So you referenced future clinical trials. Any more color on what indications those might be and whether that be funded by Agenus or Zydus or both? And then I have a follow-up, please.

So Colleen, thank you for that question. When we were in India several weeks ago, Zydus brought together 8 of India's absolutely top-notch oncologists. They flew them from all over India. And as you know, India is not a small country. So it takes effort to travel to the city of Ahmedabad, where Zydus is headquartered. And so we had the opportunity to connect with them in person, by the way, no Zoom connections or Team connections. It was all in person. And we presented data from all the trials, which include certainly colorectal cancer because that's where we have the largest database, but also cancers in earlier-stage setting and most recently, the AACR presentation by Dr. Myriam Chalabi. And also in our interactions with Zydus owned or affiliated hospitals, we had the opportunity to meet with the head of the hospital that is specialized in cancer. I believe it's a 1,000-bed hospital, just dedicated to cancer. And the head of that hospital is a breast cancer surgeon. In our conversations, it became clear that there was very high interest in pursuing the triple-negative breast cancer. And based on the data, I admit that the data is small, but it's very compelling. I mean if you have neoadjuvant patients with triple-negative breast cancer that respond to your treatment in 6 weeks and a number of them respond with complete pathologic responses, that is an eye-opener. So when we went through that data, there's definitely high interest in pursuing indications like triple-negative breast cancer. And in India, by the way, it's much less competitive. It's much less competitive in terms of competing with existing standards of care or upcoming standards of care. So we have, I think, a terrific opportunity there to pursue this, to pursue other neoadjuvant trials like sarcoma and also specialty cancers. that come in small numbers in the U.S., but those numbers are a bit more in India. So there will be a very high level of interest for Zydus to pursue and expand things in India. And of course, with our resources, we will be focusing on CRC. No question about that, including starting our registration trials in CRC this year with a group that is specialized in conducting these trials at a fraction of the cost. We've referred to this before, at a fraction of the cost as regular CROs because they are a nonprofit and they've had a fantastic record with other products, both in terms of rapid enrollment and registration. So this is not an unknown entity, and we will have more on this to come in the second half of next year -- sorry, second half of this year. It is a very high priority for us.

Great. And yes, our follow-up is on CRC. Any update on the timing of your FDA meeting? And can you talk about what you plan to discuss at that meeting and talk about your level of confidence that the FDA will agree to an accelerated approval pathway?

Well, when dealing with the traditional FDA, I cannot make any unequivocal statements about their position. However, what I can tell you is that we have expanded our data set from last year's meeting to this year's. How so? We have more patients and we have more mature data. One of the questions of the FDA last year was based on their publication, they had some doubts about whether or not 20% response rates would translate to long-term benefit. Well, now we have more than 1 year of additional data, and the results have been absolutely consistent and persistent. Of course, they need to make that judgment in conscience for us to encourage for accelerated approval go ahead.

Your next question comes from Joseph Brusca (sic) [ Joey Brusca ] with H.C. Wainwright.

This is Joey on for Emily Bodnar. So briefly, you mentioned about the triple-negative breast cancer and the interest from Zydus. Do you believe they're going to initiate any clinical trials evaluating BOT/BAL in the near term? And what might the regulatory process look like in India?

So in terms of the regulatory process in India, of course, we will defer all of that to Zydus because they're the experts. They're very well established and very well-respected company by Indian authorities. And we have not yet worked out the details of the exact next steps for clinical trials in triple-negative breast cancer and other indications, but that's part of our work plan coming up in the next months.

Okay. And just one follow-up. When can we expect the $50 million contingent payments to be made? And how do you plan to recognize the $75 million upfront payment in your financial statements?

So I think we have Christine with us about the recognition of the $75 million in our financial statements. So we'll get back to you on that. But there's no -- I just want you to know that there are no tax consequences to that. There's zero tax consequence. So we'll reflect that transaction appropriately in our financial statements with the realization that there's no tax consequence. That's number one. Number two, with regard to contingent payments, it is a function of how quickly we put in our orders for manufacturing in the Emeryville facility. And I'm confident that those will come very quickly. I'm talking about no later than the next 18 months, starting in the next few months.

Your next question comes from Mayank Mamtani with B. Riley Securities.

Congrats on the deal. So with $91 million coming in and you're getting close to a $50 million operating burn, now these noncore assets are off your P&L. Any color on impact on your cash runway you could provide and whether the Phase III U.S. study, assuming that remains on track to initiate later this year, is that part of your operating burn? And then I have a follow-up.

So our -- as I indicated in our last call, we expect that our operating burn will be annualized $50 million going forward, okay? That's what we anticipate. Now in terms of how we will fit in our plans for Phase III trials designed for full approval, full approval. And that I will tell you this year, if we initiate these trials, which I expect to initiate this year, our total expenditure for these trials this year will be approximately -- I'm talking about a very large randomized 2-arm trial. Our expenditures for this year will be no more than $5 million. Our expenditures next year will be no more than $12 million. And our expenditures in the following year, which will be the conclusion of the trial, will be no more than approximately $8 million for a total of approximately $25 million over 3 years, over 3 years.

Wow, I guess I have to ask a follow-up to that. Is that because the product -- the arrangement that you have with Zydus on product supply, so that $50 million will basically net out as contingent payments will net out as the cost for that drug. Is that essentially the cost savings and these costs that you're talking about are the CRO-related costs?

Okay. So let me answer this in 2 ways. We are not including any Zydus-related data management cost savings or anything else. This is if we were to do this trial on our own without Zydus, the numbers that I've given you would be the numbers. Now why is that such a cost saving? Well, the outfit, this is on their website that we're going to be working with is called CTCG (sic) [ CCTG ], okay? And this outfit is specializing. First of all, it's a nonprofit agency. And it does clinical trials in Canada, in France, in Australia and New Zealand. Only a small population comes from New Zealand. So the major populations are Canada, France and Australia, all reference countries, all reference countries. A part of the big cost savings is related to the fact that the standard of care treatment is covered in its entirety by those countries in its entirety. Secondly, another big cost saving is that because this is a nonprofit, there are substantial cost savings associated with their CRO function of the trial. They're very excited about this. They've already teed up centers, and we expect them to execute at record pace. And we met with them at ASCO a couple of days ago, and their level of enthusiasm is very, very high. So by the way, just for clarity, it's Canadian Cancer Trials Group, it's CCTG. I may have pronounced the sequence wrongly. CCTG, Canadian Cancer Trials Group, and they have already vetted with this program.

Understood. And then my follow-up to a prior question was around this data that you have accumulated for the Part B meeting. I appreciate there's been incremental survival data, more patients. I think a total of 250 patients, if you add the Phase I expanded cohort and then the Phase II BOT/BAL 2 arms, I get about 250 subjects. Are you able to comment on whether we'll get data on all of this at ESMO GI or would we get data on a specific Phase I expanded cohort at ESMO GI? Just trying to understand when the Street would be able to see that entire package that would be presented to the FDA.

Very best, Dr. O'Day is with us, and I'm going to defer to him to answer this question.

Yes. Mark, we haven't released, obviously, all the details, but we plan to update our -- and it's been accepted the extended Phase I data which includes an additional year of follow-up and a significant additional number of patients at ESMO GI, not the Phase II data at that time.

And we are tentatively -- we can -- we tentatively scheduled to have an investigator forum at ESMO GI, where we will be discussing everything, not just in the context of what will be presented.

Would that be released to the -- as part of some corporate deck update, the Phase II active comparator control data?

Of course, we will share the Phase II data with the investigators.

And with investors, would that be shared around ESMO GI?

Yes, Mark, we've said since ASCO GI, we've reported the response data and which was the primary endpoint of the study. We continue to wait for follow-up and time-sensitive endpoints. And hopefully, by the second half of the year, those will be mature enough to present or convey data in the Phase II trial.

On the same, can you give us clarification?

Steven, is it fair to say that so far, the response rate data in Phase I first cohort, Phase I, second cohort and Phase II has been consistent across the board?

Absolutely.

So that's the most important thing. And Mayank, one thing that you need to factor into this is that these 3 different cohorts are maturing sequentially. And so far, the response rate is consistent. And in the Phase I, first cohort and second cohort, the survival and the tail of the curve is consistent. And in the Phase II, we need to have a little bit more time to demonstrate what I just said in the first cohort and the second cohort.

Okay. I just got this question coming in. When do you think base case, Garo, you should be in a position to file? And any planning as you think about the scenarios for this FDA meeting? Any -- what are in your mind, the scenarios that you're preparing for?

I think it would be inappropriate for me to presume what the FDA will say or will do. But I'd say stay tuned.

Your next question comes from Matt Phipps with William Blair.

This is Madeleine on for Matt Phipps. Congrats on the update. In terms of the next steps for BOT/BAL in CRC, are you just prioritizing registrational trials in late-stage CRC at this time? Or are you considering pursuing a potential path in neoadjuvant setting as well?

Right. So based on our current plans, we're going to sprint with a randomized trial for registration in the late-line setting. That's a trial that I spoke about, CCTG, and then we plan on executing that trial on our own by the end of this year. Now with regard to neoadjuvant, your question is very pertinent because neoadjuvant data that we have published is unequivocal. I mean, when you see the results and you have from the first trial, which was NEST at Cornell, a second trial, UNICORN, which was across 11 centers with more than double the number of patients, we observed absolute consistency. And what is that consistency? We're talking about 100% pathological response in a significant number of patients in record time. We're talking about in 4 to 8 weeks. And then subsequently, the NEOASIS trial, which is the one that was presented at AACR, and there'll be updates on that trial because that trial continues to accrue at a very fast pace across multiple cancers, including CRC, have also shown absolutely consistent outcomes across the board. So it's sort of a no-brainer to go after that market because the earlier you treat patients, the better the outcomes. And these trials confirm that. So there's no question about is there a contribution for another product that's being used because we're not using this in combination with chemo or radiation or anything else. So with that, the market opportunity is very large. And of course, patient opportunity is profound. And what that means is that the quality of life for these patients, should they undergo chemotherapy radiation and mutilating surgery is horrible. And so if we can replace that over time, it will mean a great deal for the patients and a great deal for the market opportunity as well. So what do we do with that? I think I'd say stay tuned. We have plans for funding that trial through innovative mechanisms, and that's one of the things that we're working on as the next phase.

That will conclude our question-and-answer session. I will now turn the call back over to Garo Armen for closing remarks.

Thank you very much for everyone participating in this call. Like all good things, things take a little time. We have been working on this transaction and 8 other transactions, 8 other transactions simultaneously over the last 6 months, okay, over the last 6 months. So we're grateful that we brought the most important elements of our next phase with Zydus to life today. But we continue to explore opportunities along the lines of what I just mentioned, for example, for the neoadjuvant setting trial. And so I apologize for how much this takes. Thanks to lawyers, regulators and others. But I think we are destined to deliver only because we have a product. We're blessed by a product that has profound activity, and we've demonstrated this now in well over 1,200 patients and counting. So I'm very grateful to our team for making this a reality for us, for working hard and to generate some superb clinical data as well as executing on transactions that we're talking about simultaneously. So this is a big feat, and that's one of the reasons I drew your attention to working with us, with our proxy solicitors to make sure that our team is appropriately recognized. Thank you very much.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.