Agenus Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Agenus is a clinical-stage immuno-oncology company developing antibody, vaccine and cell-therapy candidates. Unless otherwise stated, financial figures below are in millions of dollars.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $11.7 | $15.1; down 22.5% |
| Research and development expense | $36.7 | $36.4; up 1% |
| General and administrative expense | $16.4 | $10.6; up 54% |
| Operating loss | $(41.4) | $(27.5) |
| Net loss | $(54.4) | $(45.3) |
| Net loss attributable to common stockholders | $(53.7), or $(0.27) per share | $(44.7), or $(0.31) per share |
| Comprehensive loss | $(57.5) | $(43.5) |
| Net cash used in operating activities | $(42.7) | $(34.5) |
| Cash and cash equivalents at period end | $119.4 | $99.9 at December 31, 2020 |
- Revenue included $8.5 million of non-cash royalty revenue related to royalties previously sold to Healthcare Royalty Partners (HCR), versus $13.2 million a year earlier. The royalties are remitted to HCR; this accounting revenue is not cash retained by Agenus.
- Research and development revenue was $1.6 million versus $1.9 million. Service revenue was $1.6 million, primarily from collaboration services, compared with none reported in Q1 2020.
- Interest expense was $15.9 million, including $15.6 million of non-cash interest associated with the HCR royalty transaction. Non-operating income was $2.9 million, primarily reflecting foreign-exchange gains, compared with $1.1 million of expense in Q1 2020.
- Cash and cash equivalents increased by $19.5 million during the quarter, chiefly because $60.9 million of net proceeds came from at-the-market (ATM) share sales. Current assets were $135.7 million and current liabilities $138.4 million, leaving a $2.7 million working-capital deficit.
- Principal debt outstanding was $20.7 million at March 31; the balance-sheet carrying amount was $20.4 million. The $13.0 million 2015 subordinated notes bear 8% interest and mature in February 2023. A $6.2 million PPP loan remained classified as debt; forgiveness was undetermined.
- The net liability related to the sale of future royalties and milestones was $240.7 million. It includes $55.3 million current and $185.4 million long-term. The estimated effective annual interest rate for the HCR agreement increased to 28.3% during the quarter.
Material changes and financing
- G&A expense rose 54%, reflecting increased personnel costs, professional fees including commercial-readiness activity, subsidiary expenses and other costs. R&D expense was broadly flat.
- Common shares issued increased from approximately 196.1 million at year-end 2020 to 217.9 million at March 31, 2021. The company sold approximately 18.9 million shares through the ATM at an average price of about $3.31, generating $60.9 million net proceeds. After quarter-end through May 4, it raised a further $9.1 million from approximately 3.4 million shares; about 60.0 million shares remained available under the sales agreement.
- The lower loss per share compared with Q1 2020 occurred despite a larger net loss, as weighted-average shares increased to 200.3 million from 145.1 million.
- Holders converted 2.0 million Series C-1 preferred shares into common shares during the quarter; 10.5 million Series C-1 shares remained outstanding at quarter-end.
Outlook, management commentary and risks
- Management said quarter-end cash, together with anticipated funding from corporate events, was expected to meet liquidity needs through year-end and into 2022. Financing, partnership and out-licensing discussions were ongoing, but were not assured. The filing states that substantial doubt exists about the company’s ability to continue as a going concern for one year after filing without successful additional funding. Management said it could adjust spending to preserve liquidity.
- The company expects significant future losses and additional capital needs. Potential funding sources include partnerships and licensing, asset sales, debt and equity issuance. Failure to obtain funding could delay, scale back or end development programs.
- Agenus completed its rolling BLA submission for balstilimab monotherapy for second-line cervical cancer in April 2021. The FDA’s review and approval were not assured; the company planned a confirmatory Phase 3 trial and said its strategy for a combination filing with zalifrelimab remained subject to FDA discussions.
- Gilead’s return of AGEN1423 and termination of its license became effective February 4, 2021. Gilead’s option agreements for two other programs remained in place; Agenus was responsible for advancing those programs to option decision points.
- Clinical and commercial risks include uncertain trial outcomes, safety, enrollment and regulatory timelines; competitive therapies; manufacturing scale-up and supply; dependence on partners; reimbursement and market acceptance; and COVID-19-related disruption. Management noted that interim clinical findings may change as data mature.
- Other notable items: the fair-value adjustment to contingent purchase-price obligations reduced expense by $1.0 million; share-based compensation expense was $3.9 million. Disclosure controls were reported effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether financing, partnering or out-licensing transactions close in time and on terms sufficient to extend the stated cash runway, and how management’s going-concern assessment changes.
- The FDA’s response to the balstilimab monotherapy BLA, confirmatory-trial timing and design, and the regulatory path for the balstilimab/zalifrelimab combination.
- Actual cash burn and financing needs, including the effect of ATM share issuance and potential further dilution.
- HCR royalty estimates, the rising effective interest rate and the resulting future non-cash interest burden; also, whether the PPP loan is forgiven or must be repaid.
- Progress and economics of collaboration programs, including Gilead’s remaining options and the development decisions made by partners.