Agenus Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Agenus is a clinical-stage immuno-oncology company developing antibody therapies, cell therapies through MiNK, and vaccine-adjuvant programs through SaponiQx. Figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless otherwise noted.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $22.8M | $253.0M | $69.6M | $275.4M |
| Operating (loss) income | $(41.6)M | $187.5M | $(121.7)M | $79.8M |
| Net (loss) income | $(56.7)M | $177.3M | $(156.6)M | $38.9M |
| Net (loss) income attributable to Agenus common stockholders | $(54.3)M | $178.5M | $(149.1)M | $41.4M |
| Basic loss per share | $(0.19) | $0.76 income per share | $(0.54) | $0.19 income per share |
| Research and development expense | $46.0M | $42.9M | $133.4M | $125.1M |
| General and administrative expense | $18.1M | $21.4M | $56.0M | $54.4M |
| Net cash used in operating activities | Not presented separately for the quarter | Not presented separately for the quarter | $(128.0)M | $33.1M provided |
The prior-year comparison is heavily affected by a $220.0M BMS upfront license fee and milestone recognized in Q3 2021. 2022 revenue included $25.3M of royalty sales-milestone revenue for the nine months, including $7.9M in Q3, and $27.0M of non-cash royalty revenue. The filing reports no product-sales revenue; conventional product margins are therefore not meaningful. Nine-month interest expense, net, was $44.5M, down from $49.1M.
Financial position and liquidity
- At September 30, 2022, cash and cash equivalents were $208.4M and short-term investments were $9.9M, totaling $218.2M. Cash, cash equivalents and restricted cash at period-end were $211.0M.
- Cash, cash equivalents and short-term investments declined $88.7M from December 31, 2021. Operating activities used $128.0M; investing activities used $27.2M; financing activities provided $72.1M. Investing included $38.7M of equipment purchases and $10.0M of property-sale proceeds. Financing included $75.2M net proceeds from equity sales.
- Current assets were $251.4M and current liabilities $173.1M. Total assets were $429.0M; total stockholders’ equity was a deficit of $11.8M. Accumulated deficit was $1.6B.
- Outstanding debt principal was $13.5M, including $12.9M of 2015 subordinated notes due February 2023. The royalty-sale liability was $271.3M net of transaction costs, of which $72.6M was classified current. It generated $44.5M of non-cash interest expense during the nine months.
- Agenus sold approximately 34.6M shares through its at-the-market program in the first nine months, raising $75.2M net. From October 1 through November 4, it raised a further $22.3M from approximately 9.9M shares. Common shares outstanding were 304.8M on November 4.
Material changes and unusual items
- Revenue and earnings fell sharply versus 2021, principally because the prior-year period included the BMS payment. R&D expense rose 7% in both the quarter and nine-month comparison; management attributed increases partly to personnel and subsidiary activity, offset in part by lower third-party program costs. Nine-month G&A rose 3%, while Q3 G&A fell 15% year over year.
- The final $25.3M HCR sales milestone was achieved after GSK vaccine sales exceeded the contractual threshold. The milestone is paid through royalties remitted to HCR; Agenus recognized revenue as underlying royalties were earned. This is distinct from cash proceeds available to Agenus.
- Nine-month non-operating income included a $6.6M gain on sale of property, plant and equipment and a $2.8M gain from partial forgiveness of a liability.
- Stockholders approved an increase in authorized common shares from 400M to 800M in August 2022. The filing also reports a $1.3M clinical-trial-services contract with Protagenic Therapeutics, where CEO Garo Armen is executive chairman and holds more than 10% equity interest.
Outlook, management commentary and risks
- Management stated that $218.2M of cash, cash equivalents and short-term investments at quarter-end was expected to fund liquidity needs for more than one year from issuance of the financial statements. It also noted that spending can be reduced, programs deprioritized, and capital expenditures restricted to preserve liquidity. No quantified revenue, earnings or cash-burn guidance was provided.
- Agenus expects continued significant losses and says additional capital will be required to complete development of current programs. Potential funding sources include partnerships, milestones, asset sales, project financing and equity issuance. Future financing may dilute shareholders or require rights to be licensed or relinquished.
- Botensilimab development was advancing in worldwide studies for microsatellite-stable colorectal cancer and melanoma; management expected a worldwide pancreatic-cancer trial to begin by year-end 2022. MiNK planned data readouts from three AGENT-797 trials by the end of 2022. These are stated plans, not assurances of results or timing.
- The balstilimab monotherapy BLA for second-line cervical cancer was withdrawn after FDA recommendation following full approval of a competing therapy. Agenus said it was no longer pursuing U.S. registration for balstilimab plus zalifrelimab in that setting.
- Key risks include clinical efficacy, safety and enrollment uncertainty; regulatory delays or rejection; manufacturing scale-up and supply constraints; dependence on partners for development and milestones; continuing losses and financing needs; and competition. The company also cited foreign-exchange exposure and does not use derivatives or hedging for it.
- Agenus and Recepta are litigating over their collaboration agreement in Massachusetts and Brazil; Recepta obtained a temporary injunction in Brazil. Agenus opposed the action and stated it did not expect the litigation to materially affect its business.
- Management concluded that disclosure controls and procedures were effective at September 30, 2022, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company’s cash-runway estimate remains valid given operating cash use, clinical spending, and subsequent financing activity.
- Clinical-trial enrollment, safety, mature efficacy data and timing for botensilimab and AGENT-797; verify progress against the filing’s stated trial and readout plans.
- The terms, timing and dilution impact of further ATM share sales, alongside other potential funding sources.
- The February 2023 maturity and repayment or refinancing plan for the 2015 subordinated notes, and the cash-flow implications of the HCR royalty-sale liability.
- Developments in the Recepta litigation and the effect, if any, of the Brazilian injunction on collaboration rights or programs.