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Filed by Antigenics Inc. (Commission File No. 000-29089)
pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Aronex Pharmaceuticals, Inc. (Commission File No. 000-20111)
This material is not a substitute for the prospectus/proxy statement Antigenics
and Aronex will file with the Securities and Exchange Commission. Investors are
urged to read that document because it will contain important information. The
proxy statement/prospectus and other documents filed by Antigenics and Aronex
with the SEC will be available free of charge at the SEC's website (www.sec.gov)
and from Antigenics or Aronex.
This material contains forward-looking statements. These include statements
about the future financial position of Antigenics and Aronex Pharmaceuticals,
Inc. and their ability to generate positive cash flows, their ability to obtain
market approval for their products, their development and regulatory expenses,
the potential commercial success of programs in development and marketing and
the consummation and impact of the merger. Several risks and uncertainties could
cause actual results to differ materially from those projected in the
forward-looking statements. These factors include the ability to satisfy
regulatory requirements, the outcome of clinical trials, the efficacy of
products that are commercialized, the ability to convince the medical community
to adopt products, competition from pharmaceutical and biotechnology companies,
difficulties and costs associated with integration of the businesses, the
strength of intellectual property rights, the ability to raise capital and the
risk factors included in the Antigenics and Aronex SEC filings.
[The following is a portion of a transcript of an April 24, 2001 conference call
with analysts, investors and others regarding the proposed transaction between
Aronex and Antigenics.]
Gary Foster: Thank you, Andy. And welcome to our call. And I would just
like to repeat that we do have two items that we will be
discussing today. One will be the Antigenics first quarter
earnings and performance. And the other will be the
Antigenics and Aronex Pharmaceuticals merger.
I would like to remind everybody also that this call may
contain forward-looking statements by Antigenics' and
Aronex Pharmaceuticals' senior management based on current
expectations.
Various factors could cause actual results to differ
materially from those projected on this call, including
those predicting the timing of clinical trials, the
efficacy of products, or the availability of capital.
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All forward-looking statements are expressly qualified in
their entirety in my cautionary statement. These factors
are more fully disclosed in the company's periodic filings
with the SEC.
And because of the unique nature of this call, we do have
a larger cast of participants than usual. Let me just
introduce them -- Dr. Garo Armen, Chairman and CEO of
Antigenics; Dr. Elma Hawkins, Vice Chairman of Antigenics;
Dr. Jonathan Lewis, our Chief Medical Officer; Russell
Herndon, our Chief Operating Officer; Dr. Robert (Gail),
who's a Consultant with Antigenics; and last, but
certainly not least, Dr. Geoffrey Cox, who is Chairman and
CEO of Aronex Pharmaceuticals.
Before I turn the call over to Dr. Armen, I would just
like to remind everybody that the participants will take
questions after their formal remarks. Garo?
Garo Armen: Good morning. Thank you, Gary. We have two agenda items to
cover. One is obviously briefly our earnings and the
progress we've made in the quarter.
And secondly, I'd like to spend a fair amount of time,
joined by my colleagues, on the rationale for the Aronex
Pharmaceuticals acquisition and how do we plan on
integrating the company and taking the programs forward.
[Non-merger related matters discussed]
Garo Armen: Thank you, Jon. Let me now turn the subject matter to
Antigenics' proposed acquisition of Aronex
Pharmaceuticals.
As you may have seen from the press release, we entered
into an agreement - a merger agreement to acquire Aronex
Pharmaceuticals for a total
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consideration of approximately $28.6 million in Antigenics
stock and potentially the issuance of another 15 cents per
share for Aronex stock in consideration of meeting certain
milestones by a specific date.
Needless to say, we're very delighted with this
transaction. The transaction fits very well with our
infrastructure strength as well as our future plans for
expanding our cancer franchise significantly.
This will allow us to potentially get market approval of
our cancer products in North America a full year ahead of
plan, meaning we're targeting for product approval - the
first Antigenics product approval with the proposed
acquisition of Aronex Pharmaceuticals at the end of next
year versus the end of the year 2003.
The acquisition adds four products in intermediate and
late stage development to our pipeline. The first product,
as I said, is targeted for approval at the end of next
year.
This is a product for which Aronex had filed an NDA. And
the FDA issued a not-approvable letter for the NDA filing
subsequently. And Aronex has met with the FDA and gotten
comfortable with a game plan that perhaps will get us
there in an expedited manner.
The second product is an antifungal product that will be
again targeted for cancer specialists, sold through the
same sales force that we intend to put into place by the
end of next year. And this will be targeting a number of
broad fungal infections.
The third and the fourth products are liposomal
formulations of a (platin) analog and an (ethrocyclin)
derivative. And these products are targeted to be
commercialized sometime in the year 2005.
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The acquisition means the addition of a new technology
platform as well in the form of liposomal drug delivery.
All four products in question are liposomal formulations
of small molecules. And we intend to benefit from this
technology, because it certainly applies to these four
products, but perhaps for additional applications in the
future.
It also means our diversification into small molecules. As
you know, we have been a company that has been primarily
in the protein therapeutics field. With the acquisition of
(akrillus), we moved into naturally derived adjuvent.
That's QS-21. And certainly this acquisition will put us
in the field of developing and commercializing small
molecules.
We anticipate it could be potentially accretive to our
earnings in the year 2003 and beyond. In the next 18
months, it will mean a modest dilution to us. And beyond
that, it will be accretive.
We do not anticipate the acquisition to overburden our
cash position very significantly. That we have already
planned. And we can certainly finance these additional
developments from the cash level that we have on our
balance sheet.
With this, I would like to now turn it over to Dr. Elma
Hawkins to talk to you a little bit in more detail about
the status of ATRAGEN, the lead product of Aronex
Pharmaceuticals.
Elma Hawkins: Thank you, Garo.
As a preamble, I would just like to mention that there are
two members of Antigenics' senior management who have
quite a bit of working knowledge of ATRAGEN, the liposomal
formulation of all-trans-retinoic acid.
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And I am referring to Russ Herndon and myself in our
respective positions at Genzyme, who was a partner at the
time with Aronex Pharmaceuticals. This experience gave us
a head-start and additional comfort in our due diligence
and the decision to go ahead with the proposed
transaction.
And now as you know, and as Garo has already mentioned, an
NDA was filed for ATRAGEN by Aronex Pharmaceuticals at the
end of 1998. And this was followed by a not-approvable
letter earlier this year.
It is our opinion that the most important deficiency that
was cited in this letter was related to the demonstration
of an identifiable target patient population. We believe
that what is necessary to address this deficiency can be
obtained from existing data. It is our plan to work very
very closely with FDA on this matter and keep them in the
loop on both strategy and tactics.
Now should it turn out that the data not be sufficient, we
are prepared to run a really small, but targeted, trial.
And that has already been incorporated in our estimation
of a 15 to 18 month timeline for potential approval of
ATRAGEN.
We believe that in the aggregate the data are very strong.
And this was confirmed by an assessment of an independent
body that rated the drug's activity at about an 80%
complete response rate in patients who had not previously
received any treatment.
There's another fact that's quite important. And that is
that ATRAGEN is also quite far along in development for
lymphoma. And that program has received very favorable
input and response from the FDA. It is currently in Phase
II clinical trials. And it is slated for approval by mid
2003.
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The other - the remaining product - the other three
products also show promise in Phase II and Phase III
clinical development. And those are slated for approval in
the years 2004 and 2005.
Garo Armen: Thank you, Elma. I'd like to now introduce Dr. Robert
(Gail). Dr. (Gail) is a full time consultant with
Antigenics. And he's one of the world's leading experts in
leukemia and bone marrow disorders.
And he'll give you a perspective on the applications of
ATRAGEN and in general all-trans-retinoic acid, which
ATRAGEN is a formulation of, in patients with leukemia and
perhaps other cancers. Bob?
Robert (Gail): Good morning. I want to tackle the issue of
all-trans-retinoic acid, or ATRA as I'm going to refer to
it, in a specific kind of leukemia called acute
(proglandacidic) leukemia.
And this treatment has proved especially effective. It's
really the standard of care for this kind of leukemia. The
problem that we've faced is that the drug provided for
pharmacological consideration has only been available in
an oral form.
And something on the order of 25% of people who have this
kind of leukemia cannot take the oral formulation. So
there's an immediate need. And in fact, the FDA is
releasing the drug ATRAGEN, the liposomal form, on a
compassionate basis presently.
But in my estimation, there's little doubt that the
intravenous formulation ATRAGEN would become the preferred
route of administration. These are acutely ill persons
with leukemia. And the last thing that any of us want to
do is to give them tablets with uncertain absorption. And
as I said, many of them
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wind up in the intensive care unit. And we can't really
administer the drug properly.
The other exciting potential of this drug is that it
raises a new paradigm. This is not a cytotoxic agent. This
is an agent that causes the leukemia cells to mature and
is in some ways a completely different approach to human
cancers.
We would have liked to continue to treating patients with
leukemia and other cancers with ATRA. But that's not
possible. You can't really do this for prolonged periods
of time, because of toxicities and because the cells
become resistant.
So the availability of an intravenous formulation is
essentially a new cancer drug. I mean, there's no question
that it's going to work in acute leukemia -- these data
are already clear.
But whether it might be effective in other forms of cancer
-- we would also like to pursue a differentiation approach
rather than just trying to kill the cells -- is uncertain.
I mean, some of the trials are already underway in some
kidney cancer, in lymphoma, and whatnot. But I see this as
an exciting development that broadens the
(unintelligible), but more importantly is a totally
different paradigm of treating human cancers.
I think it has an immediate - it fulfills an immediate
need. And it in fact will displace the oral form of ATRA
as the preferred treatment of acute (promyelocytic)
leukemia. It could very well replace chemotherapy in
patients with acute (promyelocytic) leukemia. And it
might very well have uses in other cancer - types of
cancers.
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Garo Armen: Thank you, Bob. If I can now ask Geoffrey Cox, who is the
Chairman and CEO of Aronex, to express his view and his
board's view on behalf of Aronex shareholders for this
coupling.
Geoffrey Cox: Thank you, Garo. And good morning, everyone.
The board of Aronex Pharmaceuticals is strongly
recommending this merger to our investors. And we think it
is attractive on a number of fronts. And specifically,
Antigenics has a clear therapeutic focus in oncology and
infectious disease. And clearly the drugs which we have
been developing fit very neatly into that particular
profile.
Antigenics has a series of strong, proprietary, and unique
technology platforms. Not only are these, as you've
already heard this morning, generating a number of
targets. But they will continue to generate new targets
and new opportunities going forward. And that is very
important in terms of future value creation.
The company has an experienced management team to support
the development programs, obviously a very important part
of the process of successfully getting drugs through the
approval process.
And I particularly want to mention and reinforce Elma
Hawkins' comment, because I've known Elma and Russ Herndon
from many years of working together at Genzyme. I have a
great deal of respect for both of these people, together
with their colleagues in the management team at
Antigenics.
And that gives me a great deal of confidence that this
team has the capacity and the experience to be able to
move the programs which we are bringing to the merger - be
able to move those programs forward and positively impact
the progress of those programs.
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Antigenics also has resources to unlock the values which
we believe are presently in these programs. And obviously
one of our frustrations, particularly over recent months,
has been our ability to be able to really move these
programs forward in the way in which we would have liked.
And we are obviously very enthusiastic about the energy
and the anticipation which has already been expressed this
morning about being able to meet - move these programs
forward as quickly as possible and to create the value
which, as I said, we believe is inherently locked up in
these programs at the present time.
The other very important thing for shareholders of Aronex
is that we believe that Antigenics' stock has significant
upside potential going forward. And this is a very
important matter, a matter which the board took great
consideration of in terms of deciding to go ahead with
this merger.
And it's very important therefore for our shareholders -
the current shareholders of Aronex that they really get
the sense that the Antigenics stock, which they will
receive in this merger, really has long term potential for
significant upside and significant value creation in the
future.
So all in all this is a transaction which we as a board
and I personally feel we can wholeheartedly support. And I
thank you this morning, Garo, for giving me the
opportunity to comment on that.
Garo Armen: Thank you very much, Geoffrey. Thank you very much for
your kind words. We obviously are in complete agreement
and concur with everything that has been said.
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We're delighted to have the opportunity to take these very
worthy technologies and products to their next step of
advancement. And we fully intend on committing the
resources to do it.
So in conclusion, we're very pleased with the progress
that we've made with our own programs. We're very pleased
with the planned acquisition of Aronex Pharmaceuticals,
and having the opportunity to move along all of these very
exciting programs forward, and creating a successful fully
integrated commercial entity in the field of oncology in
North America.
Before we get to the questions, I'd like to remind you
that for replay information please visit our Web site at
www.antigenics.com. Or you may call Barbara (Bennett) in
our Investor Relations Department at 212-332-2436.
And now I'm delighted to take your questions and have our
colleagues collectively address any questions that you may
have.
QUESTIONS:
(Stuart) (Rashad): Thanks. First, Garo, my hat's off to you. What a steal,
it's like buying Manhattan for $24.
Two questions, first, are there any special payments to
the Aronex management? And second, could you go through
how you arrive at the 15 cent CVR? Is it based on the
worth of the four products in the pipeline? Or is it based
on the value that Geoff Cox has added over the past four
years?
Garo Armen: Let me address the contingent rights question first. It
was derived as part of achieving a negotiated price for
the acquisition.
And the 15 cent increment represents, in the event that we
get approval for ATRAGEN for any indication within 15
months of the signature of the letter, which is now, we
will be obliged to pay the 15 cent incremental value.
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In addition to that, there are also some upside limits to
the up-front costs associated with integrating the two
companies, which I do not anticipate will be hit. So
contingent rights will be not so much a function of the
maximum level allowable by those expenses.
In the form of - regarding your first question, whether or
not there are any special payments to the Aronex
management or employees, certainly this is our second
acquisition.
And I will tell you that any employment agreement related
costs for this acquisition are more modest than the
previous acquisition that we made, certainly nothing that
I would classify as being out of line, nothing that has
been put into place in the last several months before the
negotiated transaction occurred.
(Stuart) (Rashad): Thanks.
Martin (Ross): Good morning, gentlemen. This is only my second conference
call with you. We are fairly recent shareholders. I've got
a complex question. Let me break it into two questions.
One is that the Aronex acquisition appears to be mostly
liposomal-related. And there were three prominent
liposomal companies, Liposome, Liposome Tech, and
(Nextar), that were all acquired.
Each of them were pursuing very similar routes. Both of
them - all three of them were in (doxirubicin), as I
recall. And in addition, they were working on antifungals.
And one of the problems with liposome of course is that
they're taken up by the liver. So could you address that?
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And my second question is, it seems that you have now
decided with this acquisition that the company is going to
take its destiny in its own hands and become a cancer
marketing company and then license out your other
technologies. Could you comment on both please?
Garo Armen: Certainly. And let me address the last one first. It is
true that we have taken our destiny into our own hands,
which is something that we have signaled to the investment
community for quite some time.
It has always been our intention to build a commercial
organization to sell our own oncology products in North
America. And certainly this plays right into that in terms
of accelerating our plans to do so.
The first question - you asked about the liposomal
formulation. It is true that there have been other
companies that have had liposomal technology in similar
areas, but not in the same area.
The previous companies have had liposomal formulations of
(ampitheracin), which is a different fungicide, and
liposomal formulations of (doxirubicin), which is again a
different (anthrocyclin) compound.
The emphasis I'd like to make is that ATRAGEN is a product
that does work. It is a liposomal formulation of
all-trans-retinoic acid. It's the first liposomal
formulation of all-trans-retinoic acid, for which there is
no competition.
It works through a very different route than the previous
liposomal anticancer products that have been developed.
And so in terms of us being able to commercialize this
product, we will do it in the absence of any real
competition in an injectable form of this drug.
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The same thing applies to (niastatin). (Nyotian) is a
liposomal formulation of (niastatin), which is a fungicide
that's only used topically today because it's not soluble
enough to be used in an injectable form.
Liposome technology allows it to be an injectable product
and be administered for a broad spectrum of fungal
infections that (ampitheracin) doesn't directly address.
So it is a value-added product, because fungal infections,
as you know, are a major problem. And there are very very
limited products out there that have any efficacy - any
meaningful efficacy.
The latter two fall into the category that you described.
One is a liposomal formulation of (anthrocyclin), a
chemotherapeutic, not (doxirubicin). So this is a
different chemical entity. It's a new chemical entity.
And the same thing applies to Araplatin, which is also a
new chemical entity. It's a liposomal formulation of a
(platin) analog that substantially addresses some of the
major side effects of typical (platin) compounds that I
use in the clinic today.
Martin (Ross): Garo, could you explain this in terms of Johnson & Johnson
with their powerful position in vitamin D derivatives as
to what they may be doing in the (retinin-like) area? And
do you see them also working in this same mode?
Garo Armen: Okay. I'll ask Dr. (Gail) to perhaps answer this question.
Robert (Gail): No, these are all retinoids. It's like saying that a Fiat
and a Mercedes are both cars. This retinoic acid doesn't
work in leukemia. And it's been disappointing in cancer.
(Hatra), the oral form and the liposomal form, clearly,
you know, induce - their active agent is cancer. And
there's no question about it. There's, you
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know, more than 100 subjects treated with it. And they get
remission. So it's a black-and-white issue. It's an
effective - we know the liposomal form works.
It isn't targeted towards, you know, acne or any of the
other issues where the (unintelligible) form of the drug
is targeted. So it's just the same name, different
formulations, different biochemical properties and
different target diseases.
Dan (Delong): Yes, good morning, gentlemen. What's going to happen with
the merger? Is Dr. Cox going to come over to the new - in
any capacity? And what will happen to the campus and the
employees in the Woodlands?
Garo Armen: Dr. Cox will be certainly a consultant for us for some
period of time. And he has expressed to pursue other
interests beyond that. But we certainly would love to
benefit from his knowledge of the company and his
expertise and tenure there for the last several years.
In terms of our intentions to continue with the facilities
in Houston, we'll go through a transition period, during
which all of the Aronex facilities, people, and effort, to
the extent that's feasible, will be consolidated to our
site in Boston. So the plan is over the next year or so to
wind down operations in Woodlands Texas and to consolidate
everything in Massachusetts.
Peter Ginsberg: [Non-merger matters discussed]
Peter Ginsberg: Sounds great. And switching gears then, in terms of -
Elma, you mentioned the most important deficiency
described in the FDA letter regarding ATRAGEN was the lack
of an identifiable target patient population. And I wonder
if you could go into a little more detail on that, since
these are APL patients, to learn how that would be
segmented.
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And then secondly, you mentioned that of course you worked
with Genzyme when Genzyme was partnered with Aronex. I was
wondering why Genzyme didn't exercise the rights to that
product, ATRAGEN, back in '99.
Elma Hawkins: Okay. Let me talk about - just very briefly about your
first question. I mentioned that it looks as though the
most important deficiency is one of not having in the
actual submission having established an identifiable
patient population.
And that patient population is the one who cannot take
oral all-trans-retinoic acid. So this could, for example,
encompass very small children, people with GI problems,
patients who are intubated, and so forth.
Now there are definitely those patients in various
clinical trials. And it is our job now to compile all of
these patients, document the need for an IV formulation in
those particular patients, and then take a look at what
the efficacy is within that target patient population. And
once again, as I said, it is possible that that
information could all come from the existing data.
Garo Armen: And, Peter - I mean, I will ask Dr. (Gail) to perhaps to
expand on this in terms of the specific patients out there
that are there who cannot take oral ATRA.
Robert (Gail): Hi, Peter. Yes, 25% of all of the patients with this
disease either start off or wind up in a circumstance
where you can't use the oral formulation, for example,
people that are intubated.
Now we've tried grinding up these tablets and putting them
in an (NG) tube, things like that. And it simply doesn't
work. We haven't been able to get measurable levels in the
blood. And we've been forced therefore to switch them to
chemotherapy.
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But I think more importantly is that giving these - these
are, as you know, acutely ill hospitalized people. It was
never the intention to treat them with drugs by mouth.
They're only being treated with the oral formulation
because there was no (perennal) formulation.
No one wants to face leukemia induction chemotherapy - or
therapy -- not chemotherapy, but therapy -- on an oral
medication with an unsure absorption, et cetera.
So, I mean, the model for this of course is a drug called
(busulfan), which is used widely in cancer -- it goes
under the name of (Myloran) -- which has been only
available as an oral formulation. Giving it to bone marrow
transplantations has been a nightmare with not
reproducible blood levels and unavoidable toxicities.
And now that there's been an intravenous form approved and
it's now available, I'd say 100% of patients have been
converted to the intravenous form. And that's what I
anticipate as being the ultimate target population, which
is essentially all of the people with this disease. But
the definition of the target for registration and
licensure is exactly the one that Elma mentioned.
Peter Ginsberg: What was the percent that you mentioned again, Bob, that
couldn't take it orally?
Robert (Gail): Well 25%...
Peter Ginsberg: Twenty-five.
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Robert (Gail): ...either initially or after the first two or three doses,
wind up in the ICU or they become untreatable.
Peter Ginsberg: Okay. Thanks.
Garo Armen: Back to your first question, Peter - second question,
sorry.
Elma Hawkins: Peter, as it pertains to the Genzyme agreement, I sort of
have to go back here in my memory. But if I recall
correctly, the agreement between Genzyme and Aronex -- or
actually at the time it was called (Argus) Pharmaceuticals
-- was to conduct a trial in Kaposi's sarcoma.
And that trial, I believe, was halted prematurely. And the
reason for that was pretty much the disappearance of that
particular patient population. And if there's any
information that Dr. Cox could add to that, I would
certainly draw on him as well.
Geoffrey Cox: Elma, I think that your recall is correct. The Kaposi's
marketplace, which was significant when we started doing
that trial, changed significantly with the advent of the
new drugs which came on the market at that time.
At that juncture also Genzyme was in the process of
reviewing their overall R&D expenditures and their
therapeutic focus, particularly in some of the gene
therapy areas. And it was taken a decision to not support
the action program going forward.
I have to say that Genzyme has continued to be actually a
very good partner to us in many other respects. As long as
we have progressed forward, it has always been extremely
cooperative and helpful with us at that - as that contract
has changed. So it continued to be a warm relationship. It
was just that there was a change of focus as far as
Genzyme was concerned.
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Peter Ginsberg: Okay. Thanks.
Steve (Har): Good morning, gentlemen. And I have a couple of questions
here for you. First of all, is (niastatin) a cytotoxic or
a cytostatic agent? And how do you expect it to compete
with liposomal (unintelligible), you know, with (Vefend)
and candida?
Garo Armen: I'll ask Dr. (Gail) to address the question.
Robert (Gail): No, it's a (polene) that integrates into the fungal cell
wall and is a very effective agent. It's cytotoxic.
It's a great drug against candida. And it's really been
limited by the fact that you can't give it (perennally).
And that has been the problem. And we are, I would say,
desperate for novel antifungal agents.
(Antho) is an effective, but toxic drug. And the liposomal
formulation is -- I hope I'm not misstating it --
marginally more effective. Everyone would like to have
another - you know, our armamentarium in fungal disease is
trivial when you compare it to bacterial disease.
So this would be a great drug. It actually is active
against (espergilla), and (toxigeodomicosis), and a bunch
of other fungi. And that hasn't been known, because one
hasn't been able to give this. So in vitro, in the test
tube, it acts against these other fungi. And I think it'll
be, assuming these trials go forward as they seem to be
going forward, really important.
Another issue with it is that the potential users of it
overlap the users of ATRA, for example. I mean, this is a
drug that's going to be focused on oncologists - mostly
medical oncologists.
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So it's - in a certain way, it's an anticancer agent. Or
it targets the same market. And I think that probably
would have implications for Antigenics in terms of their
ability to market it.
Steve (Har): Okay. And looking at Araplatin and (anomycin), do you
have - what is the active ingredient? Are they - have they
ever been studied in humans or in animals before?
Elma Hawkins: The active ingredient, obviously, in liposomal (anomycin)
is the paired product, (anomycin) itself. And in
structure, it is quite similar to (doxirubicin). But it is
designed to overcome the cardio-toxicity that is connected
with (doxirubicin).
Garo Armen: Jon will elaborate if you want.
Elma Hawkins: Let me talk after Jon.
Jonathan Lewis: Steve, this is Jon Lewis. Let me just add one other thing
about it. It's designed to do that. It's also designed
specifically to overcome the MDR phenomenon, which is the
muscle drug resistance gene.
And so with that, it has a very similar range of effects
in terms of (doxirubicin), but specifically will be far
less cardiac toxic and be able to overcome MDR. The other
agent, which is Araplatin, is a (platin) derivative. And
it has a very similar spectrum of action. But again,
there's much much less toxicity.
By far the most promising results of that to date have
been specifically treating a disease called
(mesocellioma), for which really there's no effective
treatment at all.
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And in some Phase II trials done at the Indiana Cancer
Center by Aronex, they have seen dramatic responses as
measured by pathologic responses in terms of patients
treated with this disease. Again, the specific ingredient
there is (platin). Again, the benefit here, it's just much
less toxic.
Steve (Har): Thanks. But one last question, are you guys going to owe
Genzyme any royalties going forward for ATRAGEN?
Elma Hawkins: There is an outstanding sum that needs to be paid. And we
can put it in - royalties in quotation marks. But it
essentially kicks into effect with the first few million
dollars in sales. And it is not a large sum.
Steve (Har): Thanks a lot, appreciate it.
Operator: Your next question comes from (Stuart) (Rashad) of
(Merlin) Biomed.
Frank (Zavro): Hi. It's actually Frank (Zavro). My congratulations to Dr.
Armen and the Antigenics team as well. My question is for
Geoff.
It's kind of - there's kind of an interesting analysis if
you look at the fact that the biotech index is down 1%
today, and we just, being generous, called it flat, and
Antigenics' stock is up between 50 and 70 cents today, and
about $1 is being recognized by Aronex shareholders.
If you add up all the pieces, it looks like the market is
recognizing between $1.75 and $2 as the value of the deal.
And I was just wondering if you could run through your
valuation analysis and why it is so different than the
market's. If you could explain that to me, that would be
great. Thank you.
21
Geoffrey Cox: Well I think that at the end of the day we have been
extremely careful about taking the advice of our bankers
about the fairness of this opinion - this deal.
We were quite - Robertson Stephens is helping us in that
process. And from that fairness opinion, we feel that what
we have been offered from Antigenics in relation to both
our trending averages over recent days and weeks, I think,
is appropriate.
Are we disappointed that we cannot recognize more value?
Clearly for all of us who have put a lot of effort and
time into trying to develop these products and to bring
value to our investors, we're obviously disappointed that
the scenario is not all that we could have wished for.
At the same time, I would repeat what I said previously,
the opportunity to bring these programs into Antigenics, a
company who believe - we believe has got the resources and
the abilities to be able to unlock the value in these
programs, and a company also which itself has significant
upside potential.
All the advice that we have been given, in a very rigorous
fashion, the board has adopted and has indicated that this
is an appropriate value for our company at this point in
time and a very fair approach from Antigenics.
Frank (Zavro): Thank you.
Geoffrey Cox: Would - I'd just invite Dr. Armen whether he wishes to
comment further on what I've just said.
Garo Armen: Thank you, Geoffrey. I think you have said it very well. I
mean, we went through a very exhaustive process of doing
our due diligence, justifying value so that we could
create a situation which would be beneficial for the
22
shareholders of both companies, because at the conclusion
of this transaction, there'll be one set of shareholders.
And we hope that the plan we have in place will create
significant value for both the Aronex shareholders on an
ongoing basis as well as Antigenics' shareholders.
Michael King: Okay, great. Sorry I'm so far back in the queue. I've been
sitting here trying to come up with a better superlative
than (Stu) (Wisebras). And I just couldn't do it.
So I just want to ask a couple of other questions just
sort of randomly. In terms of (anomycin's) potency, how
does the potency compare to (doxirubicin)?
Garo Armen: Michael, it's probably - (anomycin) is the fourth product
in the pipeline. And I may ask for Geoffrey's help on
this. But it is the least developed in terms of it having
been tested in people. For example, (araplatin) is tested
in over 160 patients. (Anomycin) is tested in, I believe,
somewhere around 70 patients.
So I don't - I think it's a little premature to make a
substantial judgment on direct comparison, particularly
since there has not been really a comparative trial done.
But, Geoffrey, would you like to add anything to that?
Geoffrey Cox: Yes, I'll try. I'll do my best. But I would also just say
that I'm speaking a little bit off the cuff in terms of my
memory on this.
But my belief is that (anomycin) and (doxirubicin) have
similar potency on a molecule-for-molecule basis. But I
think where the difference is is that there
23
is a very different profile in terms of the toxicity,
which means that you can use significantly larger
quantities of (anomycin) potentially in patients.
And in view of the fact that you don't get the same
cardio-toxic effect, it is pretty important, particularly
where you have patients who potentially already have heart
disease developing, where you don't want to give large
quantities of (doxirubicin), which clearly can impact on a
lifetime basis the long term cardiac health of a patient.
And certainly we're seeing a very very different profile
with (anomycin) in the trials that we've carried out. And
we do in fact have some data on (anomycin), which will be
presented at ASCO, on an (AML) trial which was carried out
here at M.D. Anderson, which will be at the upcoming
meeting in May. So it may be interesting for people to
look at that to get some guidance on that particular
point.
Michael King: Okay, we'll do that. Typically though the drugs that - it
seems that the drugs that (unintelligible), you know, have
showed improved side effect profile will also have, you
know, the liability of not having, you know, equal
potency. So we'll see if we can dredge up some
pre-clinical work on that.
A question also about (araplatin) and (anomycin), are
there any royalties owed to anybody on those molecules at
all?
Garo Armen: There are some modest royalties owed to M.D. Anderson,
Michael.
Michael King: To M.D. Anderson, okay. And then with ATRAGEN, can you
talk about why you chose renal cell? I assume it's
metastatic renal cell as well. And why was that chosen as
opposed to some other cancers?
Garo Armen: Geoffrey, would you like to address that first...
24
Geoffrey Cox: Yes, by all means. That actually developed out of an
investigative response at (IMD), Dr. (Nanus) (Bornell), I
believe, who initiated some of those studies. There was
quite a bit of evidence in the literature of the
synergistic activity between retinoid and interferon.
And he wanted to explore that particular synergy. And
we've been working with him in that particular area. So in
renal cells actually we've been working in a combination
therapy with interferon.
And there certainly appear to be some of these synergies
in that particular indication. Again, some of that data is
being published - is being presented, again, at ASCO in
the middle of May by Dr. (Bornell).
Martin (Ross): Yes, hi. I don't believe in congratulating management on
their acquisitions or moves. But I do put my money where
my mouth is. And I'm a shareholder. And so far I'm happy.
My question is concerning ATRAGEN -- and this was touched
upon with the other product -- whether it permits through
the liposomal formulation larger doses for those patients
that would normally be on an oral form.
And also related to Aronex, I would assume that there were
other projects - back-burner projects that Aronex might
have addressed had it the ability to fund these programs.
Are there any things on the shelf that we might see under
the combined aegis of both companies?
Garo Armen: Let me address the second question. And I'll turn it over
to Dr. (Gail) to address the first one.
25
It is true that Aronex does have some technologies which
are worth looking into. They did not factor into our
valuation of the company simply because they're very early
stage development programs and technology platforms that
perhaps require additional attention.
We intend on diligently looking at all of that and
uncovering value where there is value. It's very premature
to make any judgments or to hold any hope that we will
have something out of those programs. But is it worth
looking at diligently? The answer is yes. And we intend on
doing it.
And if Dr. (Gail) could address the first question on
(unintelligible)...
Robert (Gail): Yes, that's a very good question. This is one of these
unique situations where everyone who could is already
going into remission.
That is, if the remission rate with ATRAGEN or with ATRA
-- I've indicted the reasons for preferring ATRAGEN -- is
approaching 80%, then the 20% of people who don't go into
remission don't go into remission because they die of the
complications of the disease, not because they have
resistant cancer.
So while it is true that serum levels are almost 15 times
higher with a (perennal) form of ATRAGEN, that in fact is
not - it's a good thing. And it's a reliable thing. And
it's a quantitatible (sic) thing. But in fact the drug
works. And it works exquisitely well.
But the real, I think, question here is - our current
strategy is to use ATRA or ATRAGEN to get people into
remission. But because you can't give the oral formulation
for prolonged periods of time, we have to switch after
that to cytotoxin chemotherapy with all of its adverse
effects to prevent them from getting their leukemia back.
26
Now the ATRAGEN has a different pharmacology and a
different biodistribution and can be given for prolonged
periods of time. And therefore it is potentially usable as
the sole treatment agent in these patients with leukemia.
And in fact there are published data of such patients
which suggest that the outcome for persons who never seek
chemotherapy is as good as giving them chemotherapy.
So that is another whole market. That is, would ATRAGEN
replace chemotherapy entirely, not just remission
induction, but for the treatment and the cure of
(proglandacidic) leukemia? And I think there's a
reasonable chance and preliminary data in humans that
suggests that might be the case.
And because it's a different drug than ATRA, as I said,
its potential role in other cancers needs to be explored,
especially in combination with agents like interferon with
the target being this different paradigm of
differentiation rather than cytotoxicity.
Martin (Ross): One other question, if I may, Garo. I asked in the last
conference call what your plans were regarding licensing.
Given all the patents that you're building, are you yet
entering any kind of early negotiation stages?
Garo Armen: The answer is several-fold. As you know, with our QS-21
program we have a very robust partnering program actually.
And that is mostly being explored, Number 1.
Number 2, as you have mentioned very correctly, there are
a number of other technology platforms that we have within
Antigenics, including our heat shock protein technology,
our newly discovered CD91 small molecule
27
discovery program, and two additional technologies in the
form of CD1 and KT cells.
And we have very active efforts right now in all of these
areas to partner indications and products that we cannot
fully develop with our own resources. And you will see
some of these things come to fruition towards the end of
the year. It is factored into our revenue estimate for
this year. And we intend on delivering them by - during
the course of year 2001.
[Non-merger matters discussed]
Peter Ginsberg: [Non-merger matters discussed]
And second of all, Aronex' spend rate in the fourth
quarter was about $4 million. Should that continue going
forward? Or should that go up or decline?
Garo Armen: Let me ask - I'll answer the second question, Peter. The
burn rate of Aronex right now is somewhere around $500,000
a month. We anticipate that that burn rate will go down as
we unwind the Houston facility over the next, you know,
number of months.
So the burn going forward will be associated with clinical
trial development and regulatory expenses rather than
carrying a large infrastructure on an ongoing basis
forward.
[Non-merger matters discussed]
Jonathan Lewis: That (unintelligible).
Garo Armen: Okay.
Peter Ginsberg: Thanks.
28
Garo Armen: Well thank you, ladies and gentlemen, for joining us to
get a debriefing on all of the developments at Antigenics.
And thank you, (Andy), for your attentive service.
END