Agenus Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; the filing also reports unaudited fourth-quarter results. Agenus is a clinical-stage immuno-oncology company with antibody, cancer-vaccine, adjuvant and cell-therapy programs. It had no commercial product sales; reported revenue principally reflects collaboration activity and royalty-related accounting.
Key financial results
| Metric | 2018 | 2017 |
|---|---|---|
| Total revenue | $36.8 million | $42.9 million |
| Operating loss | $123.8 million | $103.8 million |
| Net loss | $162.0 million | $120.7 million |
| Net loss attributable to common stockholders | $159.9 million; $1.44 per share | $120.9 million; $1.23 per share |
| Research and development expense | $124.6 million | $116.1 million |
| General and administrative expense | $37.3 million | $33.7 million |
| Cash used in operating activities | $131.1 million | $94.2 million |
| Cash and cash equivalents at year-end | $53.1 million | $60.2 million |
Gross margin is not meaningful for this clinical-stage business, and the filing does not report commercial product sales. 2018 revenue included $19.5 million of research and development revenue and $17.3 million of non-cash royalty revenue associated with royalties sold to HCR. The royalty amount was recorded as revenue despite the royalties being remitted to HCR.
Fourth quarter: Revenue was $6.5 million, net loss was $48.8 million, and cash used in operating activities was $35.8 million.
Liquidity, debt and capital
- At December 31, 2018, current assets were $74.8 million and current liabilities were $68.1 million. Total assets were $136.4 million; stockholders’ deficit was $174.5 million.
- Debt principal outstanding was approximately $14.1 million at year-end. The $14.0 million 2015 Subordinated Notes bear 8% interest and mature in February 2020.
- The company recorded a separate net liability of approximately $210.3 million related to the sale of future royalties and milestones to HCR, including $27.4 million classified as current. This is distinct from debt.
- In January 2018, HCR paid $190.0 million for GSK royalty rights; about $161.9 million was used to redeem the prior royalty-backed notes, leaving approximately $28.0 million in net proceeds. Agenus may owe HCR about $25.9 million in 2021 if neither specified Shingrix sales threshold is achieved, and may receive up to $40.35 million from sales milestones.
- Management said year-end cash, together with $150.0 million received in connection with Gilead transactions after year-end, was expected to fund liquidity needs for more than one year from issuance of the financial statements. This is management’s estimate, not assurance of long-term funding.
Changes and notable items
- Revenue fell 14% year over year. Research and development revenue declined to $19.5 million from $42.7 million, while the new $17.3 million non-cash royalty revenue partly offset the decline.
- Operating loss widened as R&D and G&A spending increased. Net loss also included a $10.8 million loss on early debt extinguishment and $25.3 million of net interest expense, including non-cash interest related to the HCR royalty transaction.
- Operating cash use increased by $36.9 million. The year-end cash balance decreased by $7.1 million, with financing proceeds—including equity issuance and royalty monetization—offsetting much of the operating outflow.
- Agenus adopted ASC 606 revenue accounting in 2018; reported 2018 results use the new standard, while 2017 comparatives were prepared under the prior standard. The filing reports that this adoption affected the timing of certain revenue and deferred revenue.
Outlook, development and risks
- AGEN2034 (anti-PD-1) and AGEN1884 (anti-CTLA-4) were in expansion trials, including studies in second-line cervical cancer designed to support one or more BLA filings as early as 2020. The company described a potential 2021 commercialization timeline if approved. It had not yet initiated a confirmatory trial required for its accelerated-approval strategy, and stated that timing and approval were uncertain.
- In December 2018, Agenus agreed to collaborate with Gilead on up to five immuno-oncology therapies. The agreements became effective in January 2019 and provided $120 million upfront and a $30 million equity investment; up to $1.7 billion in additional fees and milestones is contingent. Gilead received rights to AGEN1423 and options on AGEN1223 and AGEN2373. These potential payments should not be treated as guaranteed revenue.
- Management planned to advance AGEN1181 into clinical trials, pursue additional antibody and vaccine trials, and file a first cell-therapy IND through AgenTus in 2019. These were plans subject to clinical, regulatory, manufacturing and funding risks.
- Management expects continued operating losses and states long-term liquidity depends on development success, partnerships, financing and/or commercialization. The company may need additional capital and could reduce or discontinue programs if funding is insufficient.
- Other material risks include clinical-trial failure or enrollment delays; strong competition; dependence on partners such as Gilead and Incyte; manufacturing and supply constraints; patent and licensing uncertainty; potential dilution from equity and convertible securities; and the HCR repayment contingency. The proposed BEST token offering had not closed on any token sales as of the filing, and proceeds were not assured.
- The company reported no material legal proceedings. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Important facts for investors to verify
- Current cash runway, operating cash burn and the extent to which subsequent Gilead proceeds have been deployed.
- Enrollment, efficacy, safety and regulatory status of AGEN2034 and AGEN1884, including progress on the confirmatory trial and feasibility of the stated BLA timeline.
- Whether Gilead exercises options or milestones are achieved; distinguish contingent collaboration economics from cash already received.
- Shingrix sales against HCR’s thresholds, any resulting milestone receipts, and the potential 2021 rebate obligation.
- Debt repayment timing, royalty-sale liability accounting and cash interest obligations.
- Potential dilution from outstanding preferred stock, options, warrants, registered shares and subsequent equity transactions.