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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: Aquila Biopharmaceuticals, Inc. (Commission File
No. 000-12081)
This material is not a substitute for the prospectus/proxy statement Antigenics
and Aquila 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 Aquila
with the SEC will be available free of charge at the SEC's website (www.sec.gov)
and from Antigenics or Aquila.
This material contains forward-looking statements. These include statements
about the future financial position of Antigenics and Aquila Biopharmaceuticals,
Inc. and their ability to generate positive cash flows, the potential commercial
success of programs in development, and the consummation 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
[The following is a transcript of an August 21, 2000 conference call with
analysts, investors and others regarding the proposed transaction between Aquila
and Antigenics.]
Ladies and Gentlemen:
Thanks for standing by and welcome to the Antigenics/Aquila conference call.
GARY FOSTER - Thank you, and thank you for joining us. I'd like to do a little
official business before we start. The following call will include forward
looking statements about a proposed business combination and the companies'
programs and perspectives, actual results may differ materially from projected
in the forward looking statements and listeners should refer to each company's
filings with the SEC, particularly the information under the captions "Risk
Factors", for cautionary information. Detailed information about the
transaction will be in a prospectus and proxy statement the companies will file
with the SEC . I now would like to turn it over to Dr. Garo Armen the chairman
and CEO of Antigenics.
DR. GARO ARMEN - Thank you Gary and thank you all for attending. I have Dr.
Allison Taunton Rigby here who will make remarks right after I, and then will
open it up for questions, I'd like to summarize the reasons for this transaction
in 5 bullets.
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-- Firstly the two companies, Aquila and Antigenics, have very complimentary
technologies, and I will elaborate on the first in just a bit.
-- Secondly we have very complimentary product pipelines, Aquila brings to the
table 11 mainly infectious diseases development programs mostly with partners
whereas Antigenics has 7 programs, clinical programs in cancer.
-- Thirdly, while Antigenics has kept most of the product in the pipeline to be
marketed directly by it in North America, Aquila has assembled a very impressive
group of corporate collaborators, which include some of the major companies in
the industry.
-- Fourthly, Aquila brings to us a very talented group of individuals. These
individuals have been with the company for a very long time, they've excelled in
research, they've excelled in operations and they are published extensively.
They understand the field of immunology as we do and culturally they constitute
an excellent fit for our company.
-- Fifth, Aquila brings to us a wonderful facility in Framingham, MA, which is
about 20 miles from our facility in Woburn, MA, and the facility is equipped to
make all the products for Aquila's line as well as conduct research, so .......
These are the five bullet points in a nut shell so let me go back and elaborate
a little bit on the first one.
When we talk about complimentary technology, as some of you may know,
traditionally we've always said there are two important pathways to human
response. There's the cellular arm and there's the antibody arm. While
Antigenics technology is the depth, we think, in the field for activating
t-cells, Aquila is a very good technology in the activation of antibodies and
also to some extent t-cells. These two allow us to position our company as the
premiere player in immunology, premiere player in the development of products to
be able to combat diseases such as cancer, infections and serious infections
such as aids, tuberculosis, herpes and so on, as well as degenerative diseases,
would classify as things like Alzheimer's, autoimmune diseases such as
rheumatoid arthritis, diabetes and so on. So it gives us a very powerful
combination of tools to be able to program the immune system appropriately in
order to combat these diseases. Also when I eluded to the pipeline in both
Aquila and Antigenics. Aquila has 11 products in the pipeline with corporate
collaboration these are in clinical development in various stages of clinical
development - stage 1, 2, and 3. The pipeline is placed between the areas of
infectious disease. There are some cancer programs and a very important
degenerative disease program where as our pipeline right now in the clinic is in
cancer as you know we have a stage 3 program in renal cell carcinoma and we
anticipate that additional stage 3 programs will be initiated over the next 12
months. We also add 6 additional cancer programs in various indications of
cancer: Colorectal cancer, Gastroid, Lymphoma, Sarcoma, Pancreatic Cancer and so
on. So the two product lines literally fit like a glove to allow us to be major
players in both areas and that gives us an ability to position our company to
lead the field of immunotherapy. Aquila's list of corporate collaborators is
also very impressive, it includes companies like Bristol-Myers Squibb, American
Home Products, Smith-Kline Beecham, Elan and so on, and that alone allows us to
be able to compliment our own product development for marketing directly in the
U.S. so with that
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I'd like to turn the conference over to Allison for her remarks as to the
reasons for engaging in this combination.
DR. ALLISON TAUNTON RIGBY - Thank you Garo and thank you all for joining the
conference call. I'd like to just give you a little bit of a description of
Aquila and its programs and talk about our reasons for doing this transaction
and what were the criteria that we used in deciding that merging with Antigenics
was the best option for our shareholders. Aquila as many of you know is a well
established Biotech Company the history of the company is quite long, which is
why we've got may programs at late stage development. We have two technology
platforms. The QS21 adjuvant, which is probably amongst the worlds best
adjuvants, it works extremely well in generating an antibody response as do
other adjuvants, it also is very well known for its ability to stimulate a
t-cell response. The adjuvant we have been using to develop products on our own
and also it has been licensed to a large number of corporate partners for use in
their programs. We also have a second technology. The CD1 antigen discovery
technology. This is a newly researched arm of the immune system, which is
complimentary to MHC presented peptides. CD1 responses are typically CTL
responses the angtigens that are presented through that system are carbohydrates
with lipid tales or lipo proteins so the technologies that we have between
Antigenics and Aquila are 3 very powerful, very complimentary, very synergistic
technologies. Aquila as many of you know is what's called or people call us a
microcap, we actually use the phrase nanocap here at Aquila, our market cap has
been very low for a long time, and we are to some extent orphaned by wall
street, if your market cap is below 100 million its very difficult to get the
attention of analysts and of bankers and to get the presence on wall street, and
that's been the primary reason why our board decided that its within the best
interests of our shareholders to merge the company with a company with a larger
market cap where the visibility for our programs could be achieved. We are well
financed in fact our current cash resources will take us into quarter 1 of 2002,
and that doesn't include any of the milestone payments and all of the revenues
that would in fact happen between now and then, our programs continue to be
strong, with good technology and good corporate partners so we are not in a
position where we have to do a transaction. This is one where we need to get the
visibility on Wall Street so that our programs and the full value of our
technology can be realized. We have a lot of criteria in terms of who we wanted
to merge with. First and foremost the company that we chose had to have a really
good set of technology, science and people because if the technology is not
there then it would detract from what we do and if you have good technology but
you don't have good people than you cant develop there, so our first criteria
was good technology and good people. There had to be a technology fit. Synergy.
We didn't want to be 2+2 to equal 4 we want 2+2 to equal 10. We also want - so
you think about company to have synergy fit, obviously the company that we would
choose would be one that had the ability to discover and develop antigens and
that is exactly the skills and technology Antigenics has. Location comes into it
a little bit, if your going to get the value out of true companies resources its
obviously easier if you are closer and then very importantly, for us we wanted a
company that was not overvalued on wall street, not undervalued but also not
overvalued because we want the combined company to in fact have an increase in
its stock price because we think that were putting together a very valuable
combination and I personally think that Antigenics fits all of our criteria and
most importantly I think its an undervalued company today and one that's got a
very strong future, so for us this transaction is a way of allowing our stock
holders to get recognition of the value in
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Aquila and we will be part of what is going to be I think one of the best
companies in this whole field and a very very successful company - with that I
will hand over to Garo.
DR. GARO ARMEN - Well I guess that will conclude our remarks thank you Allison
and now let's open it up to questions.
Questions
---------
MIKE KING of Robertson Stevens - Good morning everyone, congratulations on a
nice merger. Just wanted to ask a couple of quick questions. Any plans to
consolidate or are there any redundancies between Antigenics and Aquila
facilities in MA, where there may be some rationalizations available?
DR. GARO ARMEN - The answer is no, the transaction was consummated not for
reasons of consolidation but because the 2 organizations are very additive, very
complimentary to one another, there's really no redundancies between what our
organizations do and what our people do. As you may know Mike, we have been
hiring at a very rapid rate for the last year, we have established a very wide
range of functions within our organizations and we have been in the process of
deepening those functions in each area and having Aquila join us really
solidifies that position of depth if you will, so, we do not see any real
consolidation of any of the functions other than for efficiency purposes,
meaning that there are certain functions that may operate better together not
without one another but together and so those are going to be evaluated as we go
through the integration process.
MIKE KING - Can you be more specific?
DR. GARO ARMEN - We will hopefully keep the operations in Framingham because it
is a state of the art manufacturing facility from QS21 as well as associated
research functions here.
MIKE KING - Can you be more specific, what in particular to you get from Aquila,
is it regulatory, clinical, what specifically?
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DR. GARO ARMEN - Aquila has been a very advanced company in certain functions.
They bring on board a wonderful research and manufacturing organization, in as
well as some capacity in clinical regulatory, Q.A. and Q.C. functions.
MIKE KING - O.K.
DR. GARO ARMEN - The main strengths are manufacturing and research
MIKE KING - I was wondering if I could ask Allison to just give us an update, I
know you've got some late stage products in development with partners, you've
got some very high quality partners, but can you put the two together and tell
us what are the most late stage products in development and who are they with
and what are the expected commercialization timelines for those.
DR. ALLISON TAUNTON RIGBY - We have a lot of late stage programs, phase III and
phase II are the programs normally put into that category, a number of those are
with Smith-Kline Beecham, Vaxgen, Bristol-Myers Squibb and Elan Corp. Most of
Smith-Kline Beecham's programs are therapeutic vaccines, they are for treating
people who have an infection, hepatitis B for example, human paploma virus, both
of these programs have completed the phase II trial and are moving into later
stage development. In addition Smith-Kline Beecham has a prophylactic vaccine
for malaria, there's a lot of news about that earlier this year Smith-Kline
Beecham is planning to take that product into pediatric clinical trials in
Africa starting this fall. We have 2 programs with Vaxgen, this is an HIV
vaccine prophylactic, Aquila owns the rights to pure GP120 and has licensed that
to Vaxgen and in addition we have licensed the use of QS21 the Aids vaccine
which is in phase III trials right now by Vaxgen, if that product is successful
we will receive royalties on that program and in addition there's a second
generation program with Vaxgen which involves the use of QS21 with GP120 and
what we found there is that you can reduce the dose of antigen GP120 to about
100th of the amount and that of course has a big ramification in terms of the
manufacturing costs and also will allow the development of a broad vaccine. The
program with Elan is an Alzheimer's vaccine officially it's for and undisclosed
antigen but everybody knows that Elan is working with the peptide beta amyloid.
The phase I studies in the U.S. have been completed and additional studies are
underway in Europe using multi-immunization schedule. We also have the program
with Bristol-Myers Squibb and Progenics which are cancer vaccines involving the
granulocyte GM2 and GD2 and one of those is in phase III trials the other in
phase II. We would expect to have news on some of these programs over the next
12 months, we expect to have news in the 2nd half of next year on the HIV
vaccine and on the human paploma program, there will be information within the
year on Hepatitis B and also Elan will of course get data on its trials, in
addition we have our own programs stretneumo for the elderly, malaria, and then
we have the monocloma antibody, this is the first program from our CD1
technology which stimulates NKP cells and it is actually a
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patient specific therapy which will fit very well with the thinking of
Antigenics. This monocloma will go into clinical trials for cancer early next
year.
PETER GINSBERG of Piper Jaffrey - Aquila has partnerships with 3 of the top
vaccine companies in the world, those being Smith-Kline Beecham, American Home
and Pastor Maria, any chance Garo that you could speak with those folks and
potentially partner Oncophage or other vaccines in Antigenics pipeline with
those groups, do you feel like you have a better in with those companies at this
point?
DR. GARO ARMEN - All of the issues need to be evaluated and obviously this is an
excellent question. As we said in the press release this morning we're very
committed to continuing and expanding all the corporate collaboration that
Aquila has established and a wonderful relationship. In the context of what we
may do, as you know we have reserved the cancer pipeline for our own marketing
and sales in North America and we have been discussing on a limited basis where
several potential partners as well as one existing partner in Europe for
marketing in Europe and the rest of the world. We have however also mentioned
that there are infectious disease programs within our company that are maturing
to the clinical stage early next year and as we enter clinical development with
those products and these are by the way non-products they are off the shelf
products, it would be appropriate to consider partnering them and the value in
it for us will go up significantly as we get closer to the clinical development,
which will happen in the next 6 months or so. So the answer to your question is
yes, we will fully explore partnering or developing for ourselves our assets
appropriately as we go forward, and the Aquila acquisition will help in that
process because of the established relationship.
BENTLEY OFFITT of Offitt Securities - Good morning, I'm interested first if
Allison could give us a feeling for what you mentioned about the burn rate which
you take into the first quarter of 2002 not including any milestone payments or
any revenues that the company might produce. I'm interested in basically, can
you give us a feeling for what type of revenues you feel could be produced
within the next 1 to 1 1/2 year, that's for milestone as well as production
sales and second I'm not familiar with Antigenics and I was interested if they
can do the same thing, give a feel for what type of revenue contributions that
you'll see from that company in the next 1 to 1 1/2 years.
DR. ALLISON TAUNTON RIGBY - Bentley as you know we have always done our
projections on a very conservative basis. We do not count on milestone and
likeness payments, until we actually receive them, but there are between now and
the beginning of 2002 - when they say that our current cash will take us to that
point, that is the cash that we have in the bank today, plus, the product sales
because product sales we can count on - the milestone payments that potentially
could come in will amount to quite a number of millions of dollars. I am loath
to project exactly what they will be because they depend on individual clinical
programs but we should expect to
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get some milestones from Vaxgen, from Elan Corporation and potentially some
other partners so that's the best answer I can give you on that one.
DR. GARO ARMEN - Let me address on the Antigenics side, We have been a company
traditionally that has financed our future with equity offerings and we have
been very successful in building a substantial war chest where by we have well
over 100 million dollars in our bank account, also we have kept up very modest
compared to what we have accomplished in the last 6 years of our existence. We
have raised approximately 150 million in capital market and used up about 40
million and change since inception, so given that our burn rate this year is
estimated by analysts to be somewhere in the neighborhood of 20 million dollars,
our cash requirements for our combined operations Antigenics and Aquila, given
Aquila revenue stream and cash balance will satisfy our needs in the foreseeable
future. In terms of revenue generation we're slated to develop our products to
be introduced in the U.S. in the next several years for our own marketing, until
then the source of revenue for us will be limited to revenues coming from
corporate collaborations, licensing fees and milestone payments, which we
anticipate will begin sometime in the next 6 months or so.
BENTLEY OFFITT - Sounds like a very interesting company in the case of Allison I
was interested in your product sales, can you discuss what your product sales
are, what they include and where you see those going?
DR. ALLISON TAUNTON RIGBY - The product sales currently come from the SCLV
Vaccine, the feline leukemia virus vaccine, we provide adjuvant and antigen all
made here in Framingham, the product is sold in Europe, U.S., Australia, New
Zealand and Japan. The sales are increasing slightly, they've been very
consistent with growth, the products been on the market for about 5 years, we
also provide QS21 to our partners, but because the product is not yet approved
we're compensated for the cost of producing the material through research
revenues and because our corporate partners are growing and expanding we know
that we will have increased revenues from the QS21 as well, however there not
classified because the products not approved as product sales.
CATHLEEN SPRINGER of Dbusiness.com - I just have a question about Antigenics
presence in New York City, I understand that that is your corporate
headquarters, and I'm just wondering if this merger will affect that presence in
any way?
DR. GARO ARMEN - Antigenics presence in New York City is modifying in terms of
numbers. We have approximately 25 people in New York and 80 in Woburn, MA. New
York includes some of the administrative functions, corporate functions, finance
as well as clinical functions so everything
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will be staying as is with no disruptions over a very long period of time
obviously we would like to be under one roof, and that will not happen for about
3 or 4 years.
MIKE KING - I just had a quick follow up question regarding CD1 typically
carbohydrate antigens aren't terribly immunogenic so I'm just wondering, can you
give me a little more color about proof of principle with respect to CD1, where
its discovery came from and why might it present itself as an interesting
target?
DR. ALLISON TAUNTON RIGBY - The CD1 technology, the whole system was first
discovered and developed at the Brigham Women's Hospital in Boston by Michael
Brenner and Steven Porccelli and they in fact filed the original patent on the
technology. CD1 is a protein, it has a very similar structure to MHC1 and MHC2
but with some critical differences and the protein is present on antigen
presenting cells alongside MHC1 and MHC2, the two critical differences are that
the CD1 molecule has a very deep groove in top of the molecule lined with
hydrophobic amino acids and obviously what that does is it binds to lipid like
molecules and the molecules that are presented mostly appear to be carbohydrates
with lipid tales. If you think about the many bacterial pathogens, the antigens
that are currently use in vaccines are carbohydrates and the carbohydrates when
used on their own are notorious for being very poor immunogens and its probably
because we've never understood how those molecules could be presented to the
immune system because until CD1 was developed, we knew nothing about the lipid
tales that are part of the presentation and today things like strepneumo
vaccines are simply the carbohydrates from the bacteria and the vaccines are not
particularly good. Up until CD1 was discovered, nobody knew how these
carbohydrates could be presented because as all of you know MHC1 molecules
present peptides, proteins, with the discovery of the CD1 system, of course that
opened up a whole avenue towards understanding how these molecules we're
presented and there are a number of vaccines that are in development in the
clinic or approved that have lipid components that we now believe and in fact
know are presented through CD1 and I'll give you some examples like lyme rid,
which is the lyme vaccine developed by Smith-Kline Beecham it is a lipo peptide
it's a peptide with a lipid tale, if you take the lipid off, the vaccine's very
poor, it does not work very well and of course you have to say why is the lipid
there? So that it can probably be presented through CD1. The granulocytes are
carbohydrates with lipid tales, we know we've proved it through animal studies
that they have been presented through CD1 so this opens up a whole new pathway
to develop vaccines where we've been pretty unsuccessful so far both in cancer
and in infectious diseases, not viral infectious diseases but bacteria,
parasites etc. CD1 also is very interesting because the immune response to the
stimulated is a CDL response, the reason why, because that's the sort of
response you need to get rid of a cancer cell or to remove a pathogen that is
inside its cell, such as malaria, CD1 is also interesting because unlike MHC1
and 2 every one of us has the same CD1 molecule so one vaccine will fit all. We
wont need to make several different sub types to in fact cover the population
and then finally CD1 is improved if you use QS21. MPL will also work, that's the
only 2 acumens that we find work with CD1 and of course we have patents covering
both of them, we have a very broad patent that covers the use of, basically, if
I can paraphrase the main claim, its using a CD1 molecule to stimulate the
immune response so of course any molecule that
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works through that pathway will in fact be covered by the base patent in
addition to that what we've been doing as we identify antigens we file patents
on them and today we have discovered antigens for tuberculosis and for chlamydia
and we have also got cancer antigens. We've also discovered the relationship
between the t-cells and this is with CD1 and that is the monoclomal antibody
which stimulates the same set of t-cells, the MK t-cell therapy. A little
complex but I hope I've answered your question Mike.
BENTLEY OFFITT - After that brilliant description by Allison could you tell me
what the management structure would be under this proposal would be. Allison
what would your position be there?
DR. GARO ARMEN - Let me address that question, the combination of the companies
will keep everything intact, Allison has decided that she would like to take on
other opportunities and this has been done voluntarily. Allison's input toward
combination will be key to us so we'd like her to stay on as long as she can but
surely cannot ask her to stay on forever, she's been accustomed to operating as
CEO and we cannot deny that opportunity to her in the combination, so I believe
the company's CFO has taken an opportunity elsewhere and Allison will be
exploring her opportunities as well, while doing that we'll be working with her
very closely for the transition period, everybody else in the company stays
intact as they are.
DR. GARO ARMEN - If there are no other questions, let me just close by making
some remarks on our combination, as Allison said this is a very exciting
combination, exciting in the sense that our respected technologies address two
very important immunological pathways and this is not just we saying or us
saying these things, both of our technologies both the Antigenics technology as
well as the Aquila technology has been extensively published, validated by
scores of companies and academic institutions around the world, so we feel that
we have two very powerful technologies, in order to be able to harvest the power
of the immune system to combat very serious diseases so with that I will close
and thank you again everyone for participating and I'm delighted to take any
questions along with Allison throughout today and in the future.
