MacroGenics, Inc. (NASDAQ:MGNX) Q3 2023 Earnings Call Transcript

MacroGenics, Inc. (NASDAQ:MGNX) Q3 2023 Earnings Call Transcript November 7, 2023

Operator: Good afternoon. We will begin the MacroGenics 2023 Third Quarter Corporate Progress and Financial Results Conference Call in just a moment. [Operator Instructions] At this point, I will turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

Jim Karrels: Thank you, operator. Good afternoon and welcome to MacroGenics’ conference call to discuss our third quarter 2023 financial and operational results. For anyone who has 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 beginning approximately two hours after the call is completed. We 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 CEO 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 result.

Jim Karrels: Thank you, Scott. This afternoon MacroGenics reported financial results for the quarter ended September 30, 2023 which highlight our financial position. As described in our release this afternoon, MacroGenics total revenue was $10.4 million for the quarter ended September 30, 2023 compared to total revenue of $41.7 million for the quarter ended September 30, 2022. The decrease reflects the recognition of $30 million in revenue under the Incyte license agreement during 3 months ended September 30, 2022. Revenue for the quarter ended September 30, 2023 included recognition of $4.5 million in contract manufacturing revenue and MARGENZA net sales of $4.7 million compared to $4.4 million for the quarter ended September 30, 2022.

Our research and development expenses were $30.1 million for the quarter ended September 30, 2023 compared to $48.2 million for the quarter ended September 30, 2022. The decrease was primarily related to decreased costs related to discontinued studies, partially offset by increased expenses related to preclinical Antibody Drug Conjugates, or ADC molecules and increased clinical expenses related to lorigerlimab. Our selling, general and administrative expenses were $12.4 million for the quarter ended September 30, 2023 compared to $15.4 million for the quarter ended September 30, 2022. The decrease was primarily related to, decreased selling costs for MARGENZA. During the quarter ended September 30, 2023 MacroGenics received a $50 million milestone payment from Sanofi related to the achievement of a primary endpoint in a TZIELD clinical study.

The accounting treatment for this milestone is consistent with that for the $100 million proceeds received from the sale of our single-digit royalty interest on global net sales of TZIELD to DRI Healthcare Acquisitions LP in March of this year. Accordingly, $50 million was included in other income as a Gain on Royalty Monetization Arrangement for the quarter ended September 30, 2023. Our net income was $17.6 million for the quarter ended September 30, 2023 compared to a net loss of $24.8 million for the quarter ended September 30, 2022. Our cash, cash equivalents and marketable securities balance as of September 30, 2023 was $256.4 million compared to $154.3 million as of December 31, 2022. Our cash balance as of September 30, 2023 did not include the $15.7 million milestone from Gilead subsequently received.

Finally, in terms of our cash runway, we anticipate that our cash, cash equivalents and marketable securities balance of $256.4 million as of September 30, 2023 the $15.7 million milestone subsequently received, 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 study, the Phase 2 LORIKEET study of lorigerlimab in metastatic castration-resistant prostate cancer as well as our other ongoing clinical and preclinical studies. 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, let me quickly remind you that since mid-2022, through our business development efforts as well as milestone achievements, we have received $335 million of non-dilutive capital. This includes $215 million from Provention, DRI, Sanofi in connection with TZIELD, $75 million from Gilead and $45 million from Incyte in connection with ZYNYZ. Vobramitamab duocarmazine or vobra duo is our ADC designed to deliver a DNA-alkylating duocarmycin 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 under a modified study protocol during the second quarter. I am thrilled to tell you that we recently completed enrollment of this study ahead of schedule. As a reminder, TAMARACK is being conducted in patients with metastatic castration-resistant prostate cancer, or mCRPC, who have previously treated with one prior antigen receptor access targeted therapy. Participants may have received up to one prior taxing containing regimen but no other chemotherapy agent. This study is being conducted to evaluate vobra duo in patients across 2 experimental arms of either 2 mgs/per kg or 2.7 mgs/per kg every 4 weeks.

We anticipate having data from the study to share with you in the first half of 2024. Next, I will 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 infiltrating lymphocytes or TILs, which are most abundant in the tumor microenvironment. We recently began enrolling the LORIKEET study of randomized Phase 2 clinical trial of lorigerlimab in combination with docetaxel vs. docetaxel alone in second-line, chemotherapy-naive mCRPC patients. A total of 150 patients are planned to be treated in the 2:1 randomized study. The current study design includes a primary study endpoint of radiographic progression-free survival or rPFS.

Given that we just commenced enrollment, we’ll need more time to estimate when we might complete enrollment and have data to share from the study. In addition, we continue to enroll patients in the Phase 1/2 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 in 2024. Next up, MGD024 is our next-generation, bispecific CD123 CD3 DART molecule that incorporates 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 MGD024 is ongoing in patients with CD123 positive relapsed or refractory hematologic malignancies, including acute myeloid leukemia and myelodysplastic syndromes. Recall that Gilead has the option to license MGD024 at predefined decision points during the Phase 1 study. Also, as part of our collaboration with Gilead and as Jim already mentioned, we received a $15.7 million milestone from Gilead related to their nomination of the first of 2 potential research programs that leverage our DART and TRIDENT platforms for bispecific antibody. This nomination grants Gilead an exclusive option upon achievement of a predefined preclinical milestone to license worldwide rights to this first research program. MacroGenics will conduct the work related to this program on behalf of and funded by Gilead.

Next, enoblituzumab is an Fc-optimized monoclonal antibody that targets B7-H3. Recently published data from a Phase 2 investigator-sponsored study of enoblituzumab in men with prostate cancer prompted our academic collaborators to initiate an investigator-sponsored randomized translationally intense prostate cancer clinical trial. The HEAT study is expected to commence enrollment in early 2024. And we’ll evaluate the activity of neoadjuvant enoblituzumab, given prior to radical prostatectomy in men with high-risk localized prostate cancer. Eligible patients will undergo a pre-treatment prostate biopsy and conventional imaging CT and bone scan as well as PSMA PET and optional prostate MRI as per institutional preferences. Finally, on our second quarter earnings call, I described our ongoing efforts in developing preclinical ADC molecules utilizing linker payload technologies we licensed from Synaffix.

I’m very pleased to tell you we recently submitted an investigational new drug or IND application to the U.S. FDA for the first of these ADCs MGC026. This molecule utilizes a topoisomerase inhibitor based cytotoxic mechanism directed against an undisclosed solid tumor target. In preclinical studies, the activity of this linker toxin combination compared very favorably with that of other topoisomerase inhibitor-based ADC technology. We look forward to sharing the preclinical data with you at a future scientific conference and telling you more about this molecule in early 2024. In addition to MGC026, we are readying a second topoisomerase inhibitor-based ADC for which we currently expect to submit an IND in late 2024. And behind these 2 ADCs, we are exploring additional molecules for potential future IND submission.

Stay tuned. To conclude, we believe we have the technical, development and clinical expertise as well as financial resources to support our vision of developing and delivering life-changing medicines to cancer patients. We would now be happy to open the call for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Charles Zhu with Guggenheim Securities. Your line is open.

Charles Zhu: Hey, good evening guys and thanks for taking the question and congrats on the progress. Perhaps my first one here. How are you guys thinking about potential longer term registrational development for vobra duo within prostate cancer, particularly with, not only with the potential setting but also with the potential choice or choices of a control arm just given the current shifting landscape? Thank you.

Scott Koenig: Thanks for the question, Charles. So as you know, there has been some recent updates at the ESMO meeting with regard to PSMA-4. And clearly, we would like to see the results of the TAMARACK study, which as we described today, will occur earlier than we originally announced. We feel that there is great opportunity for treatment of patients in later line therapy. And we are evaluating now the potential options for a control population. These may include multiple choices by the investigator. But at this point, until we finish completion of the current TAMARACK study and have further discussions with the regulatory agencies, we will not provide guidance with regard to the specific control group. But it is clear from our interaction with key opinion leaders that this is a very, needed treatment advance for later line patients, giving them greater options than that are currently offered to them.

Charles Zhu: Got it. Great. Thanks for that. Maybe one quick follow-up on the vobra duo with the lorigerlimab combination, regarding the potential expansion cohorts starting from next year, which tumor types might you prioritize and why? And would you presumably also need to demonstrate contribution of components for this? And if so, would your current single-agent data suffice or would you need to demonstrate this data for each given individual histology? Thank you.

Scott Koenig: Well, as you know, Charles, we have now a significant data of individual treatment arms for vobra duo and lorigerlimab in prostate cancer, for example. So again, this would be a discussion with regards to the design of such study if we were moving forward with prostate. It is likely that prostate would be one of the expansion arms once we have established the final combination dosing for the individual components. As we have said previously, it is likely we will add one to two other tumor types in addition to prostate cancer. But at this time, we are not ready to describe the ones we have selected.

Charles Zhu: Great. Thanks for taking the questions.

Operator: [Operator Instructions] Next question comes from Kaveri Pohlman with BTIG. Your line is open.

Kaveri Pohlman: Hey, good evening. Congrats on the progress. So I guess my question is similar to the previous question that was asked for vobra. If you can just tell us how you are thinking about its development after readouts from TAMARACK trial in the first half of next year. Do you think you will have sufficient efficacy data to directly move into a pivotal study or you would be running another randomized trial?

Scott Koenig: Kaveri, the purpose of the current study was to fine-tune the dosing from what we had previously reported on the expansion dosing at 3 mgs/kg. Obviously, the data is still early in the feedback of the current trial. But I’m very pleased on how this trial has both enrolled and is performing. Clearly, we feel that we will be in a great position to select the dose for a control study, a Phase 3 study with one of those two doses. But at this point, as I described previously, we are not in a position to describe the other control arm. But I imagine it will look similar to what we had previously described in the Phase 2/3 original design last year.

Kaveri Pohlman: That’s helpful. And for lorigerlimab and docetaxel combination trial for chemo naive patients, how are you thinking about competition from radiopharmaceuticals? Are you allowing enrollment of patients who have gone through a defile like PSMA4/or eclipse regimen? And can bone marrow and kidney toxicities from these drugs provide a big market opportunity? And maybe a follow-up on that, do you think the prior use of atezo, if approved based on CONTACT-02 trial could impact lorigerlimab efficacy?

Scott Koenig: So, lots of questions there, the opportunities for patients who have been exposed to radiopharm is possible in the study of the lorigerlimab and docetaxel. As you know, this is a randomized study, 2 to 100 of the combo and 50 of the controlled docetaxel. We do believe that there will be great opportunities for patients. It expands the opportunity here despite the fact of encouraging data for pluvicto in the earlier line therapy. Clearly, we are not curing these patients even from that treatment. As you know, there was some question with regard to the overall survival benefit because of the high crossover of pluvicto. And certainly, there will be challenges for patients who have a history of bone marrow toxicities from the radiopharmaceutical or from other agents going forward.

Clearly, at this point, we’re still in the early phases of enrolling in this study. And we’ll have more to speak about this in 2024. I didn’t catch your last question. Could you repeat that one?

Kaveri Pohlman: Yes. So if you think that atezo, if it gets approved based on the CONTACT-02 trial, do you think it could impact lorigerlimab efficacy?

Scott Koenig: I don’t think that that’s going to be a – that the activity of lorigerlimab based on the data we report to-date should have a superior outcome in various prostate settings.

Operator: [Operator Instructions] Our next question comes from Etzer Darout with BMO Capital Markets. Your line is open.

Etzer Darout: Great. Thanks for taking the question. Just a couple of quick ones. So the first one; just was curious Scott, how much overlap a trial site overlap you have between TAMARACK and sort of the LORIKEET trial? And could we sort of see maybe a similar sort of trajectory in terms of enrollment for that study if sites are sort of similar between those two studies? And then, for the vobra lori dose for the combination, just curious as to sort of maybe where you are currently with the dose with the dark escalation and sort of the drivers here for the expansion start in 2024? Thanks.