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Edited Transcript of AGEN earnings conference call or presentation 15-Mar-18 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2017 Agenus Inc Earnings Call

LEXINGTON Mar 16, 2018 (Thomson StreetEvents) -- Edited Transcript of Agenus Inc earnings conference call or presentation Thursday, March 15, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bruno Lucidi

* Christine M. Klaskin

Agenus Inc. - VP of Finance

* Garo H. Armen

Agenus Inc. - Founder, Executive Chairman & CEO

* Jennifer Buell

Agenus Inc. - Chief Communications & External Affairs Officer

* John Castle

Agenus Inc. - Head of Translational Medicine & Bioinformatics

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Conference Call Participants

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* Matthew Christopher Phipps

William Blair & Company L.L.C., Research Division - Analyst

* Michael George King

JMP Securities LLC, Research Division - MD and Senior Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Agenus Fourth Quarter and Full Year 2017 Financial Results Conference Call. As a reminder, today's conference is being recorded.

Now I would like to turn the conference over to Jennifer Buell, Head of External Affairs and Communications at Agenus. Please go ahead, Dr. Buell.

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [2]

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Thank you, and welcome to the Agenus Fourth Quarter and Full Year 2017 Financial Results Conference Call. Before I continue, I'd like to remind you that this conference call will contain forward-looking statements, including without limitation, statements regarding the company's potential income stream, research and developments and clinical trial and manufacturing plans and activities, the publication of data, the potential application of the company's technologies and product candidates towards the prevention and treatment of diseases and the company's plans to pursue its cell therapy portfolio through a separate business entity. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Reference to these risks and uncertainties is made in today's press release, and they are disclosed in more detail in our most recent filings with the U.S. Securities and Exchange Commission.

These statements speak only as of the date of this call, and Agenus undertakes no obligation to update or revise these statements except to the extent required by law. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. When evaluating Agenus' businesses and securities, investors should give careful consideration to these risks and uncertainties. As a reminder, this call is being recorded for audio broadcast.

Joining me today are Dr. Garo Armen, Chairman and Chief Executive Officer; Dr. John Castle, Head of Translational Medicine; Christine Klaskin, our Vice President of Finance; and Bruno Lucidi, CEO of AgenTus Therapeutics, Agenus' cell therapy subsidiary.

During this call, Garo will provide a corporate update and introduction to expansion of our leadership team. Christine will provide a financial review. We will then open the call for questions.

With that, let me turn the call over to Garo.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [3]

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Thank you, Jen. Good morning, and thank you for joining us on our quarterly and annual update. We believe, as a company, that innovation and speed defines the present and the future of immuno-oncology. Today, Agenus is set up to deliver on both of these.

Now let me tell you some of the highlights and how we are going to do this. I will also review our accomplishments for 2017 and tell you about our plans for key developments during 2018. Firstly, last year, we launched our Phase II combination trials of Agenus AGEN1884, which is our CTLA-4 antibody, with Keytruda, Merck's PD-1 antibody. This is in patients with first-line non-small cell lung cancer. These patients are tested to have PD-L1 expression levels of over 50%. They represent a clearly defined patient population and a potentially significant commercial opportunity for us. This trial can lead us to our very first approval submission for our CTLA-4 molecule by the end of 2019.

Secondly, we completed dose-escalation clinical trials of our CTLA-4 and our PD-1 compounds. We reported pharmacological and biologic activity of our antibodies at major conferences last year. This year, we also launched a Phase II combination trial of these proprietary agents in second-line cervical cancer. This combination trial may also support a BLA filing as soon as 2020.

Thirdly, and very importantly, we advanced 5 novel immuno-oncology antibodies discovered and developed by Agenus last year. We expect to file INDs for at least 3 of these antibodies this year. The first IND filing will be our next-generation CTLA-4 designed to deplete Tregs and improve T cell priming. Depleting Tregs is critical to overcoming the limitations of current immuno-oncology treatments. Successfully depleting Tregs will expand the market for immuno-oncology treatment significantly by including many more patients and many more cancers.

Fourthly, in addition to our next-gen CTLA-4 IND filing, we expect INDs to be filed on 2 undisclosed bispecific antibodies. The first of these bispecific antibodies improves the tumor microenvironment for better antitumor immune response. The mechanism and rationale for this has been recently confirmed in a number of high-profile publications. We have developed a promising bispecific antibody, which has shown potent activity via this mechanism.

The second bispecific depletes Tregs in tumor microenvironment but not in the periphery. This, we believe, is going to be critically important for enhancing the efficacy of cellular therapies, other immuno-oncology therapies, targeted therapies, chemotherapy and radiation therapy. Hence, we believe this antibody can have blockbuster commercial potential.

Fifth, in connection to my earlier statements about commercial launch readiness and our antibodies -- for our antibodies in 2019 and 2020, we have supplied our clinical programs and achieved readiness with commercial supply CTLA-4 through the capabilities and leadership of our Agenus West team. If you recall, we acquired this facility only 3 years ago, and it has enabled us with our manufacturing capabilities today while saving us money and significantly increasing our speed of manufacture.

Sixth, we reported safety and immunogenicity of our first synthetic new antigen vaccine, AutoSynVax, which we also call, by the way, ASV. Combination studies of ASV with our own checkpoint antibodies are planned for 2018.

Seventh, we launched AgenTus, our cell therapy subsidiary. We appointed Bruno Lucidi as CEO; advanced our pipeline and our proprietary allogeneic cell format; and expanded our portfolio proprietary portfolio-related targets, which we believe could be key in targeting solid tumors.

And eighth, we completed a non-dilutive financial transaction of $230 million with HealthCare Royalty on royalties from GlaxoSmithKline, our QS-21-containing vaccine. This transaction netted us $28 million in immediate cash with additional $40 million in contingent payments.

Now I will expand more on key activities we have planned for 2018. As I mentioned earlier, innovation and speed defines the present and the future of immuno-oncology today. We are set up to deliver on both. To innovate is not a onetime challenge. It must be continuous. It requires the engines and the internal capabilities to identify a target, generate high-quality molecules, develop cell lines and manufacture products. And all of these need to be done rapidly. We have all these capabilities in-house with limited dependence on third parties. All are critical to innovation and speed.

For example, in the past 2 years, we took 4 antibodies and a neoantigen vaccine from discovery to the clinics. We are positioned to advance another 5 novel antibodies into the clinic in the next 18 months. We expect to initiate our first triple combinational proprietary vaccine with our own CTLA-4 and our own PD-1. Further, as you will hear from Bruno Lucidi, the CEO of our AgenTus cell therapy company, we expect to take our first cell therapy product into the clinics in the first half of 2019.

Last year, our speed set industry records. We took our proprietary anti-CTLA-4 antibody from first-in-man into a combination study with Keytruda as a first line treatment for non-small cell lung cancer in record time. We launched combination clinical trials of our proprietary anti-CTLA-4 and our own PD-1 antibodies, and we are rapidly advancing both of these programs.

To optimize our readiness for commercial launch of our first set of antibodies, we expanded and upgraded our manufacturing capabilities. We have recently produced commercial-grade CTLA-4. And in the next 3 months, we expect to do the same with commercial grade PD-1. Our supplies of these materials will support our programs as well as programs of our collaborators.

Over the past year, it has been clear that not all PD-1 antibodies are the same. A number of PD-1s do not show desired pharmacology. We have published that our PD-1, AGEN2034, is an active PD-1 antibody with desired clinical activity. Separately, clinical data reported earlier this year shows that adding CTLA-4 to PD-1 expands response rates and durability of responses as compared to PD-1 therapy alone for many different indications that this has been tested in, further validating our clinical strategy for combinations and, in particular, this combination.

As mentioned earlier, we expect to file INDs for at least 3 of our 4 -- 5 novel antibodies this year. The first filing will be our next-gen CTLA-4. Our scientists have discovered a novel mechanism that enhances the function of CTLA-4. This finding is expected to be published shortly in a peer-reviewed journal. With this feature, our CTLA-4 is designed to deplete Tregs and improve T cells -- T cell priming, rather, as I mentioned earlier. Once again, depleting Tregs is critical to overcoming the limitations of current I-O treatments.

Additionally, our bispecific agents selectively deplete intra-tumoral regulatory T cells as well as condition the tumor microenvironment. These compounds can address tumor escape mechanisms in solid tumors as well as hematological tumors like B-cell lymphoma, which share common escape mechanisms with solid tumors, by the way. As mentioned earlier, our next-generation CTLA-4 and bispecific antibody programs are advancing through IND filings this year.

Our position in antibodies, cancer vaccines, immunoadjuvants and differentiated cell therapy programs, along with our fully integrated capabilities, allow us the unique flexibility in delivering combination treatments rapidly and very importantly, with optimal flexibility.

Lastly, in 2017, we developed a high-throughput genome-wide genetic screening platform to identify additional novel immunomodulatory targets and additional novel bispecific antibodies.

Now let me turn to financing and partnering plans. A few words about our financial plans first. Top-tier banking firms, with whom we have had previous relationships, have approached us to gauge our interest in potential equity offerings. We have deferred any such considerations based on the level and the quality of partnership interest and the potential for near-term transactions. We think it is in the best interest of our company and our shareholders to concentrate on coming to closure on several of these transactions near term.

Turning now to our strategic transactions. Collaborations are core to our strategy and will allow us to maximize value of our extensive portfolio of platforms and technologies. To that end, we have delivered on successful partnerships so far with GSK, Incyte and Merck. In 2017, Merck announced the advancement of an undisclosed antibody under our license and research collaboration agreement, resulting in a milestone payment to Agenus. We are eligible to receive up to $99 million of additional milestones, plus royalties, on worldwide product sales.

In closing, let me say a few words about our expanded team. We have expanded our leadership team that include immuno-oncology experts, like Tyler Curiel, who has -- who was the first to publish on PD-1 mechanism. We added, as I mentioned, Bruno Lucidi, our newly appointed CEO of AgenTus Therapeutics, our cell therapy subsidiary. Bruno is currently in China meeting with interested parties and will provide an update on AgenTus right after me. By way of introduction, Bruno was the founding CEO of Idenix and the Chairman of Pharmasset, which were later acquired by Merck and Gilead for approximately $4 billion and $11 billion, respectively. Bruno brings extensive expertise in drug development and more than 30 years of experience in biopharmaceutical industry with a heavy concentration on cancer and vaccines.

I'm very proud of our team, the impressive pipeline and the capabilities they have -- we have built so far.

With this, I will now turn it over to Bruno, who will provide an update on AgenTus. Bruno?

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Bruno Lucidi, [4]

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Thank you, Garo and Jen. I'm actually very excited to be leading AgenTus. Cell therapy has shown life-saving potential for patients left with no option and has created significant value for shareholders. However, current adopted cell therapy have limitations, as you all know. Their benefit is largely restricted to hematologic tumors that showed major toxicities, and they also have manufacturing and logistical challenges and very high cost of production. We believe AgenTus technologies and capabilities can potentially address those limitations.

First, our proprietary platform has generated high-quality T cell receptor, TCR, libraries designed to target solid tumors. Secondly, our proprietary allogeneic format can address manufacturing and logistical challenges, thereby addressing scalability and costs. Thirdly, our proprietary library of phosphorylated agents is designed to optimize efficacy and improve safety potentially with an off-the-shelf mechanism. Most compelling is our unique advantage of access to de novo discovery platforms, core capabilities in bioinformatics, structural and compositional biology, molecular and cell biology and also importantly, a pipeline of validated checkpoint antibodies and bispecific tumor microenvironment conditioning agents to rapidly develop first-in-class combinations with potential curative benefits to patients.

We are advancing our lead programs through preclinical evaluation. I believe that AgenTus has great potential to provide substantial value to patients and for our shareholders by advancing a pipeline of highly differentiated cell therapies and partnership opportunities. I'm excited to lead AgenTus and our experienced and talented team that we call our star team.

Now I would turn over to Christine Klaskin to provide a financial update.

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Christine M. Klaskin, Agenus Inc. - VP of Finance [5]

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Thank you, Bruno. Cash and cash equivalents were $60.2 million at December 31, 2017. Subsequent to the end of the year, Agenus received net proceeds of approximately $28 million from a royalty bond restructuring. For the fourth quarter, Agenus' cash used in operating activities was approximately $25.8 million compared to approximately $26.2 million during the third quarter, while our reported net loss for the quarter was $35 million or $0.35 per share compared with a net loss for the fourth quarter of 2016 of $26.1 million or $0.30 per share. Cash used in operating activities for the year ended December 31, 2017, was $94.2 million compared to $80 million for the year ended 2016. The company incurred a net loss of $120.7 million or $1.23 per share for the year ended December 31, 2017. This compares with a net loss of $127 million or $1.46 per share in the same period in 2016.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [6]

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Thank you, Christine. Now I think I'll turn it back to the operator for any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Mike King with JMP Securities.

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Michael George King, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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I wanted just to ask you sort of how careful you're going to be looking for the results of the CheckMate -227 study that will be coming at AACR in a couple of weeks to see if there's any requirement or any just prudent judgment to resize your study of 1884 and pembro? That's the first question.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [3]

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So the answer to that question is we will be looking at it very carefully as we have to -- with all of the previous trials in order to define our strategy, clinical strategy specifically. But Jen, why don't you expand on that?

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [4]

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Thanks, Garo. Mike, thanks very much for the question. And I'll just reiterate that certainly, we'll be looking out for these results. But I just wanted to remind you something that we've spoken about before, is we are taking our agent, AGEN1884 on top of Keytruda in an indication in first-line lung where Keytruda is approved, where patients are selected based on an approved diagnostic, thereby removing the regulatory and technical risk and ensuring a high probability of success. With the results that we anticipate, seeing now a host of data most recently coming out of ASCO-TI where our PD-1 is active, we see that a CTLA-4 add-on in lung and MSI high colorectal cancer increases the response rate and the durability of response. We know that Keytruda has a 46% response rate in the patient population, and we expect a significantly higher response rate with the add-on of our AGEN1884. So we believe that we have the sufficient samples today, but we'll certainly be monitoring the competitive landscape as we go forward.

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Michael George King, JMP Securities LLC, Research Division - MD and Senior Research Analyst [5]

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Maybe you could talk about how you -- what's a win for you guys? Is it both -- showing superiority, non-superiority if, let's say, numerically, efficacy-wise, you're a bit lower but provide a better tolerability profile? Is that a win? I don't know if you can sort of discuss the various potential outcomes that favor you.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [6]

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So let me first take a crack at it. Let me tell you what is not a win. What is not a win is a marginal improvement on efficacy and marginal improvement on take. That is not a win. What we're looking for in all of our trials is a significant delta with regard to efficacy. That is the foremost in our strategy not just in the context of the first-line non-small cell lung cancer trial, but in pretty much everything that we're doing today. Hence, our preoccupation, our prioritization of combinations. Because with single agents, we do not believe that you will get to the kinds of outcomes that will differentiate us as a company and put us on a rapid commercialization time line. Jen, do you want to add anything to that?

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [7]

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I think you covered it, Garo. Mike, I hope that addresses your question.

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Michael George King, JMP Securities LLC, Research Division - MD and Senior Research Analyst [8]

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It does. We'll obviously look, as everyone else will be, for CheckMate -227. I maybe wanted a quick follow-up on the novel CTLA-4. Garo, I know you said it's going to be published soon, so I don't know how much you can talk about in advance of the publication. But just in terms of the -- forgot exactly what your words were as far as the improvement in activity is concerned. But should investors also be concerned about the potential for, like, increased toxicity or adverse events?

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [9]

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So -- I mean, with a new molecule, clearly, you always have to watch for what may be a hurdle in terms of adverse events. But just a couple of things on this. One, we cannot elaborate and give you more details on this compound and its activity for both IP reasons as well as the fact that we have an upcoming publication, and we don't want to jeopardize that certainly. Having said that, Mike, as you know, our research capabilities are quite extensive. We have the ability to design very carefully property into molecules and generate these candidates also very rapidly in a way that minimizes these potential risks. You can never eliminate them, but the design of these molecules, both the next-gen CTLA-4 as well as our bispecific antibodies are to address both optimization of efficacy and minimization of side effects. Now as I mentioned before, for example, one of our bispecifics does intra-tumoral depletion of Tregs. Now this is a very important issue. Very important issue because if you deplete Tregs, broadly speaking, yes, you may risk other safety issues, but if you do it intra-tumorally, it gives you a big advantage. Hence, we think our molecule is the best-in-class and the first-in-class to be able to do this effectively. Jen and John, if you'd like to add any more color to this, please?

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [10]

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I'll just add one thing because I'm really quite excited about this particular mechanism. Agenus, we believe, will be the first to publish on this mechanism. I think it may be something that we usually -- we certainly engineered it into our antibody, and it will likely change the way that antibodies are made in the future, at least some of them. What we are looking for, Mike, is to get to -- we may be able to achieve an optimal pharmacologic dose at a lower dose than what we see with some of the current first-generation CTLA-4. So again, as Garo mentioned, we will need to validate that in the clinic, but we're really quite enthusiastic about it. And as soon as possible, we'll make sure that you'll get visibility to that publication.

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John Castle, Agenus Inc. - Head of Translational Medicine & Bioinformatics [11]

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As Garo pointed out, I think just reiterating the dual effect of both looking at the Treg depletion and also the increased priming is going to be very essential, and so we're looking forward to that. It's going to be in the publication as well.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [12]

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Thank you, John.

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Michael George King, JMP Securities LLC, Research Division - MD and Senior Research Analyst [13]

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Great. Sounds exciting, guys. And then just one other quick question on AgenTus. And apologies if I should know this, but I'm just wondering what sort of timing you might want to talk about revelation of your -- of the first target or set of targets for your cell therapy.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [14]

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I would like Bruno to address that question at his discretion.

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Bruno Lucidi, [15]

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For now, we're not disclosing any information about our cell therapy. We believe that we should be starting to disclose some information during the third quarter -- during the second quarter this year, by sometime May, June.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [16]

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Thank you, Bruno.

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Operator [17]

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(Operator Instructions) And our next question comes from Matt Phipps with William Blair.

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Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [18]

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I guess, first, I was wondering if you could talk about your bispecific platform. Is this based off of single-chain variable fragments? Or maybe knob-into-hole for full-sized antibodies? Anything you can disclose there?

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [19]

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Okay. So one thing that I can tell you is that we're not using the traditional proprietary platforms. So we've very carefully examined where our freedom to operate lies and engineered our bispecifics based on that and based on our ability to engineer the Fc regions as well as specifically target the relevant binding domains. We have become experts at doing this. And -- but unfortunately, because of the fact that I can't even disclose to you which bispecifics they are, for reasons of confidentiality, our partnership discussions as well as competitive reasons.

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [20]

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Matt, I'm going to add just one thing. We've had a chance to discuss this publicly available information related to our approach. We have established a high-throughput ability and capability to be able to identify optimal combinations. We have some research collaborations and exploiting those capabilities. And what that allows us to do is agnostically identify what are the best combinations to address an area of unmet need for a novel target development. We then -- and that's where we think the major differentiation is. We then move to a platform that we know works and we know that has freedom to operate, and it leverages parts of our own proprietary platforms that bring the molecule to life essentially, if I may. But essentially, the -- for us, the critical feature is the optimal combination that actually creates that novel molecule and less so the bispecific platform.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [21]

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Thank you, Jen.

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Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [22]

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So now moving on to, I guess, non-small cell. Has 1884 completed dose escalation with Keytruda at this point?

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [23]

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Jen?

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [24]

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Yes, it has completed dose escalation.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [25]

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We have picked the optimal dose and the dose regimen.

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Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [26]

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So how many patients do you think will be needed to generate a large enough data set to go to the FDA in this biomarker-defined patient population?

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [27]

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Okay. So based on our concerns about competitive reasons and also with our assumptions for this trial, when Mike earlier asked the question of what do we consider a success or what will we consider a success, a, significant data, which -- delta rather, in benefit, which we haven't disclosed. So if I give you the patient numbers, one can work backwards and figure out what that delta is. And we don't want that to happen for competitive reasons. That's one of the reasons we will be quiet on this.

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Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [28]

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Okay. So Merck recently started KEYNOTE-598, which is a 550-patient trial of pembro plus YERVOY and people with PL-1 positive or 50% non-small cell lung cancer. So I guess, how do you see that playing a role in kind of the competitive landscape and regulatory discussions?

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [29]

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Based on public information, the maturity date for that trial is longer than ours. So it will be contingent on how quickly they enroll versus how quickly we enroll. But with our assumptions and their assumptions, their maturity date will be somewhat later than our maturity date.

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Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [30]

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And then lastly, Merck also just got a priority review for a single-agent Keytruda in cervical and advanced cervical cancer. Have you guys changed your development plans at all there for the wholly owned combination? And what's the plan there? I know that was kind of one of the target indications for rapid development.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [31]

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So one, let me start, and Jen will elaborate more, if you like. So clearly, we believe that combinations in cervical cancer will exceed, by some margin, the efficacy of a single agent. And that's one of the reasons we've chosen the indication and we've chosen the combination strategy. So that's key to our assumptions. And should that happen, then we will have an important competitive advantage. Jen?

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Jennifer Buell, Agenus Inc. - Chief Communications & External Affairs Officer [32]

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That's right. And actually, we were excited to see this validation of PD-1 in second-line cervical cancer. Again, this is one of those tumors largely HPV-induced, cervical cancer is, in more than 90% of cases. And what we know with those tumors, of course, is that you generally have higher mutational burden. You have higher response rate. We know that they're responsive to PD-1, but very similar indication HPV-induced tumors and otherwise, we see where PD-1's active, the addition of CTLA-4 increases the response and the durability of response. So we believe that this only validates our strategy and gives us an opportunity that may help to accelerate our programs.

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Garo H. Armen, Agenus Inc. - Founder, Executive Chairman & CEO [33]

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So with that, we have some time constraint. Unfortunately, we need to end the call, and so I will ask the operator to wrap up. And if you have any other questions, please contact us separately. Thank you very much.

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Operator [34]

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The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.