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Expert Financial Analysis and Reporting

Agenus (AGEN, Buy, $3.73) Thoughts on the Stock and Company in the Aftermath of Trial Failure of MAGE-A3 Cancer Vaccine

Agenus (AGEN) and GlaxoSmithKline (GSK) announced that the MAGRIT phase 3 study of GSK’s MAGE-A3 cancer vaccine in non-small cell lung failed to hit the primary endpoint of progression free survival and the secondary endpoint of overall survival. This cancer vaccine contained Agenus’ QS-21 Stimulon adjuvant.

After the failure of the MAGE-A3 in melanoma last September, expectations for success in non-small cell lung were small. Still, the announcement of this failure has caused the stock to trade down 15% in the pre- market. Success would have been a homerun, but this was an asymmetric event in which the stock might have doubled or tripled with success. As I write this, the stock is trading down 15% in the pre-market.

The study is continuing to a third prospectively defined endpoint that aims to identify a sub-group of patients who may benefit from the drug and can be identified by their gene signature. The companies stated that data on this third co-primary success on this endpoint might enable a regulatory filing. I think that expectations for success on this endpoint are exceedingly low

The major components of the Agenus story in my analysis are: (1) the Prophage cancer vaccine for recurrent and newly diagnosed glioblastoma, (2) the numerous other vaccines being developed by Glaxo using the QS-21 Stimulon adjuvants, (3) the herpes shingle vaccine program, and (4) most importantly, the acquisition of 4-Antibody.

The 4-Anibody acquisition was transformational as it positions Agenus as a player in the development of checkpoint inhibitors. This is one of the most promising cancer drug development areas. Using this antibody platform, 4-Antibody has created therapeutic antibodies to six key checkpoint targets that regulate immune response to cancers and other diseases. These target some of the most promising checkpoint targets: GITR, OX40, CTLA-4, PD-1, TIM-3 and LAG-3. Agenus now has a broad range of pre-clinical programs that will lead to numerous IND filings in the coming years. Prophage and these 4-Antibody programs are the key elements driving the investment thesis for Agenus.

Agenus for the last several years was cash strapped and had to do small financings once or twice a year. However, it recently completed an equity offering that brought in $49 million. I estimate that the cash balance at the end of 1Q, 2014 will be roughly $70 to $75 million. For a Company that has been living with small cash balances over the past several years, this is a tremendous positive for the investment case. There is no need to finance for perhaps two years.

At the indicated opening price of $3.65, the market capitalization based on 55 million shares is $200 million. I would be a buyer. I think that the shock of this trial failure will be short lived.

Tagged as , , , + Categorized as Company Reports


  1. Lawrence Braverman says:


    “7:03 am Agenus announces collaboration and license agreement with Merck (MRK) for novel checkpoint antibody-based cancer immunotherapies; Agenus is eligible to receive ~$100 mln in milestone payments as well as royalties on worldwide product sales (AGEN) : Co announced that it has entered into a collaboration and license agreement with Merck, known as MSD outside the United States and Canada, through a subsidiary, for the discovery and development of therapeutic antibodies to immune checkpoints for the treatment of cancer.

    Under the terms of the agreement, Agenus will discover and optimize fully human antibodies against two undisclosed Merck checkpoint targets using the 4-Antibody Retrocyte Display platform. Merck will be responsible for clinical development and commercialization of candidates generated under the collaboration.

    Under the terms of the agreement, Agenus is eligible to receive ~$100 million in potential payments associated with the completion of certain clinical, regulatory and commercial milestones for two candidates from Merck. In addition, Agenus is eligible to receive royalty payments on worldwide product sales.”


  2. I am hesitant to give a firm opinion as I am just beginning to do work on 4-Antibody’s technology. However, on the surface this announcement seems to indicate that 4-Antibody does have highly sophisticated and differentiated technology for making antibodies. In this case, the antibodies relate to Merck discovered checkpoint inhibitors. 4-antibody has a broad range of checkpoint targets itself and this collaboration strongly suggests they have the capability to develop antibodies against their own checkpoint inhibitor targets. This supports my initial instinct that the 4-Antibody transaction was transformative.


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