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Fortunes of Agenus, Inc. (NASDAQ: AGEN) Appear to Rest on the Success of their Adjuvant QS-21 but Company Still Faces a Number of Short-Term Hurdles

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Earlier this year Antigenics opted to change their name to Agenus, Inc. (NASDAQ: AGEN), a move that the biopharmaceutical company said would better reflect the broadening of their product portfolio of clinical candidates and, as chairman and CEO Garo H. Armen, PhD stated, provide the company “the opportunity to emphasize our commitment to collaborations and strategic partnerships.” Unfortunately the name change has done little to erase the fact that the company has, since its inception in 1994, accumulated a deficit of $596.1 million, failed to gain FDA approval for any of their products, received its third delisting notification from NASDAQ for failure to comply with the minimum $1.00 bid price requirement, and a host of other issues that have led investors to lose confidence.

AGEN has once again bought some time as it relates to the potential delisting, having requested a hearing before a NASDAQ Listing Qualifications Panel. That panel could give AGEN an additional 180 calendar days from the date of their recent determination, which would be February 27, 2012, to regain compliance but with shares currently hanging around the 0.64 – 0.69 range, slightly above their 50-day moving average of 0.62 but well below their 200-day moving average of 0.85, it may take something creative to reach that NASDAQ minimum bid price.

Back in late August, with shares trading in the low to mid 0.50’s, Armen added to his position with the purchase of 2,150,980 shares, pushing his total to nearly 7.5 million shares. While there was no immediate impact on the share price things have begun to pick up for AGEN but it remains to be seen if Armen’s move will be enough.

There is also the very real possibility that AGEN could effectuate a reverse stock split of its common stock, a move that would put them in compliance with the NASDAQ regulations. Obviously such a move could be seen as a negative by existing shareholders but desperate times call for desperate measures and they may not have any other options.

That desperation has been brought on in large part due to the failure to move their kidney cancer vaccine R-100 through the FDA approval process. While the vaccine has been approved for sale under the name Oncophage in Russia the fact that it stumbled through the FDA process determined its fate in the U.S. market and ultimately cost them considerable lost revenue, not to mention the fact that the European Medicines Agency has also handed down a negative opinion on the company’s marketing authorization application (MAA). R-100 is just one of a series of patient specific applications within AGEN’s Prophage Series of cancer vaccines built on their Heat Shock Protein (HSP) technology platform. AGEN is also developing vaccine candidates G-100 and G-200 to treat newly diagnosed and recurrent glioma, respectively.

While AGEN has said early results from the G-100 and G-200 tests have been positive they also acknowledge that “there can be no assurance that we will successfully complete all clinical trials or obtain regulatory approvals for these products.” Given their history of regulatory failure it would be hard to put too much faith in the company’s Prophage Series.

That being said, AGEN doesn’t live or die with their Prophage Series, instead they may actually have more success with their Saponin Platform and specifically QS-21, an adjuvant that is added to a vaccine or other immunotherapy intended to enhance immune response. While an adjuvant does not receive FDA approval as a stand-alone product but instead as part of a registered vaccine adjuvant–antigen combination, AGEN has managed to secure some impressive licensees for QS-21, including GlaxoSmithKline and JANSSEN Alzheimer Immunotherapy. More than two dozen vaccines in clinical development contain QS-21 with four of those being in Phase III testing or malaria, melanoma, non-small cell lung cancer and shingles.

AGEN, which would be entitled to receive milestone payments and royalties from corporate partners that have licensed QS-21, has said they expect the first products containing QS-21 to be launched “in the 2013-2014 timeframe, and we are entitled to royalties for at least 10 years post-launch.” While AGEN doesn’t have to pick up any of the costs involved with the trials they really have no control over them either, meaning those trials could be shelved by the companies licensing QS-21, they could fail to gain regulatory approval, and even if they do receive approval they may never generate significant royalties.

Right now it’s a waiting game for AGEN and their shareholders and it appears as if their fate will be determined by the success of the multiple clinical trials that are implementing QS-21. The short-term does not look pretty for AGEN but if they could manage to work their adjuvant into a number of FDA approved vaccines then the fortunes of the company could change dramatically.

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