Agenus MAGE-A3 Vaccine Non-small Cell Lung Cancer Trial Fails

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Early this morning, GlaxoSmithKline (GSK $53.91) reported negative top-line results from its Phase III MARGIT trial with the MAGE-A3 vaccine in non-small-cell lung cancer. Agenus’s QS-21 adjuvant is a central component of the vaccine and is being studied in 18 other investigational vaccines through a partnership with GlaxoSmithKline.

The Phase III trial was designed to assess disease-free survival in GlaxoSmithKline’s MAGE-A3 vaccine versus placebo in roughly 2,270 Stage Ib, II, and IIIa non-small-cell lung cancer patients. Recall that the MAGE-A3 vaccine contains Agenus’ QS-21 adjuvant. While not meeting two of the coprimary endpoints, no major safety signals have been observed thus far with the QS- 21 adjuvant in trials across of number of diseases, which we view as positive, given that GlaxoSmithKline has other ongoing programs containing Agenus’s QS-21 adjuvant. In addition, Agenus has no cost associated with the partnership with GlaxoSmithKline, thereby limiting the downside risk to the company.

We highlight that today’s news, while disappointing, does not diminish our enthusiasm for other partnered programs with GlaxoSmithKline. The malaria vaccine has reported positive Phase III trial results and regulatory submissions are expected in 2014 and 2015. Additionally, GlaxoSmithKline is conducting Phase III trials with a shingles vaccine containing the QS-21 adjuvant in over 30,000 patients. Results from these trials are expected in 2015. Lastly, GlaxoSmithKline will pay Agenus a low-single-digit royalty on worldwide commercial sales of any of the vaccines approved using the QS-21 adjuvant.

In addition to the collaboration with GlaxoSmithKline, Agenus has two wholly owned programs that are making significant clinical progress. The herpes program consists of an immunotherapeutic vaccine designed to suppress the virus in infected patients. A Phase II trial is underway and booster results are expected in the first half. The brain cancer program consists of two immunotherapeutic vaccines designed to target cancer cells in newly diagnosed and recurrent patients. A potentially registration-enabling trial with G-200 in recurrent brain cancer is ongoing, and we believe top-line results may be possible as early as 2016. Also, Agenus recently acquired six checkpoint antibodies from 4-Antibody and plans to move three of these compounds into preclinical development in the near term. Altogether, Agenus has a number of upcoming catalysts, each of which we believe could have a meaningful impact on the stock given current price levels. Refer to exhibit 1 for more details.

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