MacroGenics, Inc. (NASDAQ:MGNX) Q2 2023 Earnings Call Transcript

MacroGenics, Inc. (NASDAQ:MGNX) Q2 2023 Earnings Call Transcript August 9, 2023

MacroGenics, Inc. beats earnings expectations. Reported EPS is $-0.36, expectations were $-0.52.

Operator: Good afternoon. We will begin the MacroGenics 2023 Second Quarter Corporate Progress and Financial Results Conference Call in just a moment. All participants are in a listen-only mode at the moment and we will conduct a question-and-answer session at the conclusion of the call. At this point, I will turn the call over to Jim Karrels, Senior Vice President, Chief Financial Officer of MacroGenics.

Jim Karrels: Thank you, operator. Good afternoon and welcome to MacroGenics’ conference call to discuss our second quarter 2023 financial and operational results. For anyone who’s not had the chance to review these results, we issued a press release this afternoon outlining today’s announcements, which is available under the Investors tab on our website at macrogenics.com. You may also listen to this conference call via webcast on our website, where it will be archived for 30 days getting approximately two hours after the call is completed. I would like to alert listeners that today’s discussion will include statements about the company’s future expectations, plans, and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual, quarterly and current reports filed with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change, except to the extent required by applicable law. And now I’d like to turn the call over to Dr. Scott Koenig, President and Chief Executive Officer of MacroGenics.

Scott Koenig: Thank you, Jim. I’d like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key updates on our clinical programs. But before I do so, let me first turn the call back to Jim, who will review our financial results.

Jim Karrels: Thank you, Scott. This afternoon, MacroGenics reported financial results for the quarter ended June 30, 2023, which highlight our financial position. As described in our release this afternoon, MacroGenics’ total revenue was $13.1 million for the quarter ended June 30, 2023, compared to total revenue of $26 million for the quarter ended June 30, 2022. Revenue for the quarter ended June 30, 2023, included recognition of $1.6 million in contract manufacturing revenue and MARGENZA net sales of $5.1 million compared to net sales of $4.7 million for the quarter ended June 30, 2022. Our research and development expenses were $43.2 million for the quarter ended June 30, 2023, compared to $51.7 million for the quarter ended June 30, 2022.

The decrease was primarily due to decreased costs related to discontinued studies, partially offset by increased expenses related to preclinical antibody drug conjugate or ADC molecules and increased clinical expenses related to lorigerlimab and vobra duo. Our selling, general, and administrative expenses were $13.7 million for each of the quarters ended June 30, 2023 and 2022. You’ll notice approximately $100 million as a component of other income on our income statement. Let me take a moment to explain. Under GAAP guidelines and pursuant to FASB’s ASC 470 in March 2023, we recorded the $100 million proceeds received from the sale of our royalty interest on global net sales of TZIELD to DRI Healthcare Acquisitions LP, or DRI, as they “Liability related to future royalties.” This liability was to be amortized over the term of the arrangement using the effective interest rate method.

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Sanofi subsequently acquired both Prevention Bio and the TZIELD royalty interest and milestone obligations from DRI in April 27, 2023, obviating the need for MacroGenics involvement in the transfer of royalty payments to DRI. This resulted in a change to the arrangement, which was evaluated as a modification under the provisions of ASC 470. Accordingly, we recognized approximately $100 million as a component of other income on our financial statements for the quarter ended June 30, 2023. Our net income was $57.5 million for the quarter ended June 30, 2023, compared to a net loss of $41.3 million for the quarter ended June 30, 2022. Our cash, cash equivalents and marketable securities balance as of June 30, 2023, was $240.3 million compared to $154.3 million as of December 31, 2022.

Our cash balance as of June 30, 2023 did not include a $50 million milestone payment from Sanofi subsequently earned. Payment of this milestone was triggered pursuant to Sanofi’s July 28 announcement that the PROTECT placebo-controlled study investigating TZIELD or teplizumab in patients with newly diagnosed Stage 3 type 1 diabetes, met its primary endpoint, having demonstrated preservation of beta cell function. This milestone was part of the March 2023 agreement originally between MacroGenics and DRI. The royalty interest and milestone payment obligations of which were sold by DRI to a subsidiary of Sanofi in April 2023. And finally, in terms of our cash runway, we anticipate that our cash, cash equivalents and marketable securities balance of $240.3 million.

As of June 30, 2023, the $50 million milestone subsequently earned in addition to projected and anticipated future payments from partners and product revenues should extend our cash runway into 2026. Our anticipated funding requirements reflect expected expenditures related to the Phase 2 TAMARACK clinical trial, the Phase 2 study of lorigerlimab in metastatic castration-resistant prostate cancer as well as our other clinical and preclinical studies currently ongoing. And now I’ll turn the call back to Scott.

Scott Koenig: Thank you, Jim. We continue to believe our proprietary pipeline of product candidates has great promise and I will walk you through each of our key programs momentarily as well as tell you about our plans for upcoming clinical programs. But before I do that, I’ll quickly remind you that over the past year, through our business development efforts as well as milestone achievement, we have generated $320 million of non-dilutive capital. lorigerlimab, duocarmazine or vobra duo is our ADC designed to deliver DNA-alkylating duocarmazine cytotoxic payload to tumors expressing B7-H3. B7-H3 is a member of the B7 family of molecules involved in immune regulation. Vobra duo was designed to take advantage of this antigen’s broad expression across multiple solid tumor types.

We began enrolling the TAMARACK Phase 2 study of vobra duo in patients with metastatic castration-resistant prostate cancer under a modified study protocol during the second quarter. You may recall that we made this modification to address the changing treatment landscape for patients with mCRPC and enrollment has been proceeding nicely. We hope to enroll a majority of the 100 patients across the two experiment alarms of 2 mg/kg or 2.7 mg/kg every four weeks in 2023 and provide a clinical update in 2024. Next, I’ll update you on lorigerlimab, our bispecific tetravalent PD-1 x CTLA-4 DART molecule. We designed lorigerlimab to have preferential blockade on dual PD-1, CTLA-4 expressing cells, such as tumor infastrating lipocytes or TILs, which are most abundant in the tumor microenvironment.

You may recall that we presented encouraging preliminary clinical results from a single-arm dose expansion study of lorigerlimab in patients with advanced solid tumors in a poster session at the ASCO General Urinary Cancer Symposium in February 2023. Based on the strength of the mCRPC data presented, we plan to commence enrollment of a randomized Phase 2 study of lorigerlimab in combination with docetaxel versus docetaxel alone in second-line chemotherapy naive and mCRPC patients in the coming weeks. A total of 150 patients are planned to be treated in the 2:1 randomized study. The current study design includes the primary study end points of radiographic progression-free survival. In addition, we continue to enroll patients in the Phase 1 dose escalation study of Vobra duo in combination with lorigerlimab in patients with advanced solid tumors, including renal cell carcinoma, pancreatic cancer, ovarian cancer, hepatocellular carcinoma, mCRPC and melanoma.

We anticipate commencing the dose expansion portion of the study by year-end 2023. Next up, MGD-024 is our next-generation bispecific CD123xCD3 DART molecule that incorporates the CD3 component designed to minimize cytokine release syndrome while maintaining anti-tumor cytolytic activity and permitting intermittent dosing through a longer half-life. Our Phase 1 dose escalation study of MGD-024 is ongoing patients with CD123 positive relapsed or refractory hematologic malignancies, including acute myeloid leukemia and myelodysplastic syndromes. Recall that Gilead has the option to license MGD-024, at predefined decision points during the Phase 1 study. Finally, enoblituzumab is an Fc-optimized monoclonal antibody that targets B7-H3. Based on the recently published results from a Phase 2 investigator-sponsored study, of enoblituzumab in men with prostate cancer, MacroGenics and collaborators and multiple academic institutions plan to initiate an investigator-sponsored, randomized, translationally intense neoadjuvant prostate cancer study in high-risk population by early 2024.

And now I’d like to give you some perspective on where MacroGenics intends to advance. I’ll remind you that over our history, we have maintained our focus in developing innovative antibody-based therapeutics, having had a role in the development of three products now approved by the US FDA; MARGENZA, TZIELD and ZYNYZ. More recently, as an extension of the synthesis, we’ve accelerated our ADC efforts. This has been possible through the following: First, our technology-enabling partnerships, most notably our two collaborations with Synaptics, which has recently been purchased by Lonza. We have reviewed multiple linker payload technologies and are pursuing Synaptics’ approach, which utilizes various linker toxins conjugated to a site-specific glycan within the Fc-domain of antibodies.

This affords us the ability to exploit different cytotoxic mechanisms, including topoisomerase inhibition, microtubule inhibition and DNA damage in up to seven ADC molecules incorporating Synaptics’ technology. The second element, we believe, allows us to extend our reach into ADCs is leveraging our 20-plus year history of pursuing first-in-class target discovery in addition to our antibody engineering expertise. And finally, the third element is our proven ability to develop product candidates through FDA approval, coupled with our commercial scale manufacturing and external supply chain management capability. We are very excited about where this could take us in developing ADCs to treat cancer. As previously indicated, we intend to submit an investigational new drug or IND application to the US FDA by the end of this year for the first of potentially multiple new ADC molecules, which incorporate a topoisomerase inhibitor payload.

To conclude, we believe we have the technical development and clinical expertise and even the necessary financial resources to support execution on our plan of developing and delivering life-changing medicines to cancer patients in 2023 and beyond. We would now be happy to open the call for questions. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Jonathan Chang with Leerink Partners. Your line is open.

Jonathan Chang: Hi guys. Thanks for taking my questions. First question, can you give us a sense of how enrollment in the Phase 2 TAMARACK study has progressed? Just trying to get a sense of when in 2024 might see data?

Scott Koenig: Thank you, Jonathan. I’m very encouraged by the rapidity of enrollment at this point now as — and many of these sites have incorporated the amendments to the protocol. We still have additional site initiation visits to complete on additional sites but based on what we’ve been seeing in this group of sites, I stick with what I have said that the majority of patients should be enrolled in the study this year, and we should complete it in the first part of 2024.

Jonathan Chang: Got it. Thank you. And second question, what do you need to see from the — either the Phase 2 prostate cancer studies to support advancing these programs into the next stage of development?

Scott Koenig: So, with regard to TAMARACK, as you know, we had seen a very encouraging data with regard to late-stage mCRPC patients with regard to a PSA50 reductions as well as objective responses. The goal of this study, in fact, is to achieve responses in terms of efficacy that were similar to that observed at the doses that we had treated before, as you recall, 3 mg/kg on a Q3 weekly basis, but which most of those patients had dose reductions during those course. What is more important at this point is to see some improvement in the side effect profile. In particular, the most disconcerting side effect was hand-foot syndrome in these patients who developed Grade 2 with pain. So, we would like to see a reduction, obviously, in that grade and obviously the incidence as well.

With regard to the efficacy parameters, again, just to refresh everybody’s memory, we saw approximately half of those patients have PSA50 reductions, so of course, we would like to see in the order of around 40% to 60% or even better, obviously, if that is achievable in that population with concomitant tumor control and continued treatment. With regard to the lorigerlimab study in terms of outcomes. Obviously, we were looking for an acceptable safety profile in terms of efficacy, if you look at the historical data in terms of control groups, which we obviously include here of patients treating with docetaxel, historical data says RPFF of eight months is what you would like to exceed. So, we’ll have to see if we’re able to achieve that by certainly several months.

Jonathan Chang: Got it. Thanks for taking the questions.

Operator: Thank you. Our next question comes from Peter Lawson with Barclays. Your line is open.

Peter Lawson: Thanks. I guess initially, just as a follow-up to Jonathan’s question. The data that we could see for your B7-H3 for the Phase 3 — sorry, the Phase 2 data, could we see that in the second half of 2024. And for the Phase 1 combination data, is that something like a first half 2024 data sets go?

Scott Koenig: So, Peter, as things go now, as I said, it’s Jonathan, I’m the encouragement about where we are enrolling if this continues at this pace, I think the second half in presentation of data is certainly possible for the TAMARACK study. So, obviously, we’ll have to monitor that the rest of the year in terms of enrollment. I should also point out that this is an open study. So, we will take interim looks at that data along the way and may be able to come to some conclusions earlier before we even have the full body of data from that study. So, again, I would be consistent with targeting the second half of the year at this point. With regard to the combination study, as we pointed out, we are sort of trying to fine-tune the combination of vobra with lorigerlimab right now individually in combination.