Agenus Inc. Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2017. Agenus is a clinical-stage immuno-oncology company developing antibody therapies, cancer vaccines and vaccine adjuvants. It had no approved commercial products described in the filing.
Financial performance
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $4.2 million | $6.6 million | $31.2 million | $12.6 million |
| Research and development expense | $25.8 million | $22.4 million | $58.5 million | $47.4 million |
| General and administrative expense | $8.1 million | $7.1 million | $15.9 million | $16.3 million |
| Operating loss | $28.9 million | $23.6 million | $42.1 million | $51.6 million |
| Net loss | $31.7 million | $28.3 million | $48.8 million | $60.1 million |
| Net loss per common share | $0.32 | $0.33 | $0.51 | $0.69 |
Revenue was principally collaboration-related. First-half 2017 revenue included a $20.0 million accelerated Incyte milestone payment and $9.5 million of Incyte development-cost reimbursements. Q2 revenue declined year over year, while first-half revenue increased substantially because of the milestone and higher reimbursements. The filing presents no gross profit or gross margin measure.
Six-month net cash used in operating activities was $42.2 million, versus $40.0 million in 2016. Cash and cash equivalents were $81.8 million and short-term investments were $14.9 million at June 30, totaling $96.8 million. Financing activities provided $63.4 million, including $63.7 million of net equity proceeds. Total assets were $176.5 million; stockholders’ deficit was $17.5 million.
Debt principal was $114.1 million at June 30. The balance-sheet carrying amount was approximately $138.7 million, including accrued non-cash interest and net of discounts and issuance costs. Net interest expense for the first half was $9.1 million.
Material changes and significant transactions
- In February, Incyte paid $20.0 million in accelerated development milestones and purchased 10 million Agenus shares at $6.00 per share for $60.0 million. Incyte’s GITR and OX40 programs shifted from profit-sharing to royalty-bearing arrangements: Agenus may receive a 15% royalty on global net sales if products are approved, while Incyte funds development and commercialization.
- Agenus is eligible for up to $510.0 million in additional potential development, regulatory and commercial milestones across the Incyte collaboration. Incyte has exclusive decision-making authority for the royalty-bearing programs.
- R&D expense rose 23% for the first half, principally reflecting antibody-program development costs, milestone and license fees, and higher payroll. Q2 G&A expense increased 14%, primarily due to payroll and share-based compensation.
- The 2015 subordinated notes’ maturity was extended from February 2018 to February 2020. Their principal is $14.0 million, with an 8% annual interest rate.
Outlook, liquidity and risks
- Management said available cash, cash equivalents and short-term investments were expected to fund operations through the first quarter of 2018 without additional financing. The filing nevertheless states that substantial doubt exists about Agenus’s ability to continue as a going concern for at least one year from issuance of the financial statements.
- Agenus expected to pursue additional funding before year-end through partnering or out-licensing, renegotiating agreements, asset sales, debt financing or equity issuance. It could also curtail spending, capital expenditures or operations if needed. Funding is not assured.
- Management expects continued significant losses. Drug candidates are in early development and require clinical trials and regulatory approvals; results, timing, costs and eventual commercialization are uncertain. The company depends substantially on collaborators, including Incyte and GSK, and does not control all development and commercialization decisions.
- GSK vaccine products containing QS-21 were anticipated to launch in 2018, subject to regulatory approval. Royalties from GSK’s shingles and malaria vaccines are pledged to service the $100 million limited-recourse notes, which accrue interest at 13.5% compounded quarterly. The notes include potential put, make-whole and default payment obligations, with Agenus acting as guarantor.
- A manufacturing services agreement for AGEN1884 and AGEN2034 is expected to cost approximately $20 million per molecule, with payments through 2020. The company also disclosed substantial remaining payments under clinical-trial and sponsored-research agreements.
- Agenus announced a reduction in force and plans to close its Basel, Switzerland office and transfer capabilities to the United Kingdom by the end of 2017. It also disclosed plans to seek external funding or partnership for its preclinical cell-therapy portfolio; neither funding nor a spinout is assured.
Most important facts for investors to verify
- Whether Agenus secured sufficient financing after the filing to address the stated going-concern uncertainty and extend its cash runway.
- Actual cash burn and the effect of R&D spending, clinical progress and manufacturing commitments on liquidity.
- Clinical, regulatory and commercial progress under the Incyte collaboration, including whether any milestones or royalties are realized.
- GSK vaccine approval and launch timing, royalty generation, and the resulting effect on the royalty-backed notes and guarantee exposure.
- Whether the cell-therapy funding or spinout plans and the Switzerland-to-UK transfer proceeded as anticipated.