Agenus Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013; filed August 9, 2013. Agenus is a biotechnology company developing cancer and infectious-disease therapies, including QS-21 Stimulon, HerpV and Prophage vaccines.
Key financial results
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Total revenue | $0.81 million | $0.63 million | $1.92 million | $14.00 million |
| Operating loss (income) | $7.33 million loss | $5.77 million loss | $11.94 million loss | $2.03 million income |
| Net loss | $11.14 million | $6.92 million | $16.98 million | $0.16 million |
| Net loss attributable to common stockholders | $11.19 million | $7.12 million | $20.03 million | $0.55 million |
| Basic and diluted loss per share | $0.40 | $0.31 | $0.76 | $0.02 |
| Operating cash flow | Not presented by quarter | Not presented by quarter | $9.56 million used | $7.93 million provided |
- Q2 revenue increased year over year, but six-month revenue fell sharply because 2012 included $12.8 million of one-time license-related revenue. Management cautioned that 2012 revenue and operating cash flow were not indicative of future results.
- Q2 research and development expense was $3.32 million and general and administrative expense was $4.64 million. For the six months, those expenses were $5.87 million and $7.53 million, respectively.
- Q2 included a $3.32 million non-operating loss on extinguishment of debt. Six-month common-stockholder loss also included a $2.91 million deemed preferred-stock dividend.
- Cash and cash equivalents were $13.44 million at June 30, down $8.02 million from year-end 2012. Cash used in investing activities was $0.59 million for the six months; financing activities provided $2.13 million.
- Current assets were $14.45 million and current liabilities $7.18 million, implying working capital of approximately $7.27 million. Total assets were $21.37 million; stockholders’ deficit was $17.26 million.
- Debt outstanding was approximately $10.2 million in principal, due April 2015. The debt exchange replaced $39.0 million of old notes with $10.0 million cash, 2.5 million common shares and contingent revenue interests. New financing consisted of a $5.0 million senior secured loan at 6.75% and $5.0 million senior subordinated notes at 10%.
- The noteholders received rights to 20% of Agenus’s revenue interests from certain partnered QS-21 programs and a 0.5% royalty on HerpV net sales. The related contingent royalty liability was valued at $19.1 million using Level 3 inputs.
Outlook, commentary and risks
- Management estimated 2013 annual cash use of $18–21 million and believed available cash, anticipated equity proceeds and potential collaboration or licensing proceeds would fund liquidity requirements into 2014. This outlook depends in part on raising additional capital; the filing warns that failure to obtain funding could require program cuts or threaten continued operations.
- After quarter-end, Agenus received approximately $4.6 million net from at-the-market common-stock sales. As of June 30, up to 8.3 million shares remained available under its at-the-market sales agreement.
- Management expected HerpV Phase 2 data in Q4 2013 and data from one or more licensee trials using QS-21 by year-end 2013. Conditional on positive results and regulatory approvals, the company anticipated first QS-21-containing product launches in 2015.
- HerpV was in Phase 2. Prophage G-100 Phase 2 follow-up was underway; G-200 Phase 2 results were being prepared for publication, and an NCI-sponsored randomized Phase 2 G-200 combination trial began enrollment in May 2013. Oncophage was approved in Russia, but sales had been minimal.
- Key risks include ongoing losses and dependence on external financing; clinical, manufacturing and regulatory uncertainty; reliance on licensees and collaborators for QS-21 development and commercialization; debt covenants and secured claims on substantially all assets; and limited patent protection for QS-21’s composition of matter.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the six-month period.
Important facts for investors to verify
- Actual cash burn, financing availability and runway relative to the company’s “into 2014” estimate; also confirm proceeds and share issuance from subsequent equity sales.
- Terms, carrying values, covenants and repayment capacity for the 2013 debt, and the economic effect of the revenue-interest and HerpV royalty assignment.
- Clinical data timing and outcomes for HerpV, QS-21 licensee programs and Prophage trials, plus any effect on partnering or commercialization prospects.
- Whether licensees advance QS-21 products toward approval and launch, and whether Agenus can realize royalties or supply revenue.
- Manufacturing progress and commercial prospects for Oncophage in Russia, including NewVac’s facility and reimbursement plans.