Agenus Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Unless stated otherwise, amounts below are in millions of U.S. dollars. Agenus is a clinical-stage immuno-oncology company; it had no product sales and no approved commercial product in the United States.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $26.9 | $15.7 | $42.1 | $95.6 |
| Research and development expense | $38.6 | $45.2 | $74.9 | $85.4 |
| General and administrative expense | $14.2 | $11.4 | $24.8 | $22.2 |
| Operating loss | $(33.3) | $(41.1) | $(60.7) | $(14.9) |
| Net loss | $(48.2) | $(51.9) | $(93.5) | $(34.4) |
| Net loss per share, basic and diluted | $(0.28) | $(0.38) | $(0.59) | $(0.24) |
| Net cash used in operating activities | Not provided quarterly | $(71.9) | $40.9 provided |
Six-month revenue fell substantially year over year, primarily because 2019 included $65.5 million of Gilead license revenue; 2020 included $13.9 million of Betta license revenue and $5.8 million of Gilead collaboration revenue. Q2 revenue rose year over year, largely due to the Betta license. The filing reports $13.9 million of Betta license revenue in Q2, although the $15.0 million upfront cash payment was received in July 2020. No meaningful product-sales margin is reported; the company remained loss-making.
Research and development expense declined year over year, mainly with lower third-party program costs. G&A expense increased. Six-month interest expense rose to $28.7 million from $18.9 million, primarily due to non-cash interest related to the HCR royalty monetization. The HCR arrangement generated $21.0 million of non-cash royalty revenue in the first half, offset by $28.0 million of related non-cash interest expense.
Balance sheet, liquidity and financing
- Cash and cash equivalents were $79.2 million at June 30, 2020, up $17.4 million from year-end 2019. Current assets were $104.8 million and current liabilities $142.3 million, implying negative working capital of approximately $37.5 million.
- Debt principal was $20.7 million at June 30; the balance-sheet carrying amount was $20.3 million. The 2015 subordinated notes were extended to February 2023, with $13.0 million outstanding. A $6.2 million Paycheck Protection Program loan was recorded as debt; forgiveness was not yet determinable.
- The liability for sold future royalties and milestones was $228.4 million net of transaction costs. Total deferred revenue was approximately $52.3 million.
- First-half operating cash use of $71.9 million compared with $40.9 million of operating cash provided in 2019. The prior-year inflow included a large deferred-revenue contribution. Financing provided $91.9 million in the first half of 2020, including $85.0 million net proceeds from at-the-market equity sales.
- From July 1 through August 3, the company reported $23.7 million of additional net ATM proceeds. Betta’s $20.0 million stock purchase also closed in July, alongside the $15.0 million upfront license payment. Common shares outstanding were 183.4 million as of August 3.
Changes, outlook and risks
- Management said existing cash, third-quarter financing proceeds and expected corporate transaction and milestone receipts were projected to fund liquidity needs into the third quarter of 2021. However, the filing states that substantial doubt exists about the company’s ability to continue as a going concern for one year after filing. Additional financing or partnership transactions were not assured.
- Management did not expect to be profitable in 2021, even if it launched its first commercial product that year. It planned to file a BLA for balstilimab monotherapy by the end of 2020, followed by a filing for the balstilimab/zalifrelimab combination; commercialization in 2021 depended on approval. These were forward-looking targets, not guaranteed outcomes.
- In March 2020, Agenus reduced headcount, slowed non-priority programs and redirected some R&D toward potential COVID-19 treatments. The CEO elected to receive base salary in stock for the remainder of 2020. Management said it could further reduce spending, capital expenditures or operations to preserve cash.
- COVID-19 disrupted clinical and partner activities. Of approximately $60 million in partner milestone cash expected for 2020, $15.1 million was received in the first half; the remaining approximately $45 million was delayed and considered unlikely to arrive that year, affecting the cash runway.
- The Betta agreement granted exclusive Greater China rights to balstilimab and zalifrelimab for $15.0 million upfront, up to $100 million in milestones and royalties. Future milestones and royalties depend on Betta’s development and commercialization performance.
- Key risks include clinical efficacy and safety outcomes, FDA review and accelerated-approval requirements, trial enrollment and COVID-related delays, manufacturing and supply readiness, reliance on partners, competition, and the need for further capital. The filing also reports a $2.7 million first-half loss on modification of debt and an $11.4 million fair-value liability for contingent acquisition consideration.
Important facts for investors to verify
- Whether subsequent financing, Betta proceeds and other expected receipts are sufficient to extend liquidity beyond the projected third quarter of 2021, and whether going-concern uncertainty changes.
- Timing and regulatory status of the planned balstilimab and combination BLAs, including whether the confirmatory trial meets FDA requirements and whether COVID-19 affects timelines.
- Whether the PPP loan qualifies for partial or full forgiveness and the resulting repayment obligation.
- Actual collection and timing of partner milestones, and the assumptions behind HCR royalty-liability amortization and its non-cash interest expense.
- Further equity issuance, dilution and share availability under ATM and other registration programs.