MacroGenics, Inc. (NASDAQ:MGNX) Q4 2022 Earnings Call Transcript

MacroGenics, Inc. (NASDAQ:MGNX) Q4 2022 Earnings Call Transcript March 15, 2023

Operator: Good afternoon. We will begin the MacroGenics 2022 Fourth Quarter Corporate Progress and Financial Results Conference Call in just a moment. 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 fourth quarter 2022 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 beginning approximately 2 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 would 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 year ended December 31, 2022, which highlight our financial position, as well as our recent progress. As described in our release this afternoon, MacroGenics total revenue consisting primarily of revenue from collaborative agreements was $151.9 million for the year ended December 31, 2022, compared to total revenue of 77.4 million for the year ended December 31, 2021. Revenue for the year ended December 31, 2022 included recognition of the $60 million approval milestone from Provention Bio related to Teplizumab’s approval in the fourth quarter, 30 million milestone payments from insight related to retifanlimab. MARGENZA net sales of , compared to for the year ended December 31, 2021, and $14 million in contracts manufacturing revenue.

Our research and development expenses were $207 million for the year ended December 31, 2022, compared to 214.6 million for the year-ended December 31, 2021. The decrease was primarily related to decreased retifanlimab manufacturing costs for Incyte, and decreased costs related to our discontinued studies. These decreases were partially offset by increased development, manufacturing, and clinical trial costs related to vobramitamab duocarmazine, or what we now refer to as vobra duo, increased expenses related to discovery projects and preclinical molecules, and increased clinical expenses related to lorigerlimab and MGD024. Our selling, general and administrative expenses were $58.9 million for the year ended December 31, 2022, compared to $63 million for the year ended December 31, 2021.

The decrease was primarily related to decreased selling costs for MARGENZA, as well as decreased legal, consulting and stock-based compensation expenses. Our net loss was $119.8 million for the year ended December 31, 2022, compared to net loss of $202.1 million for the year ended December 31, 2021. Subsequent to year-end and as announced last week, we sold to a wholly-owned subsidiary of DRI Healthcare Trust our Royalty Interest in future global net sales of TZIELD or Teplizumab. We retain all other economic interest related to TZIELD including future potential regulatory and commercial milestones from Provention Bio. As previously disclosed, we received a $100 million upfront payment from DRI for the sale of our single-digit royalty on global net sales of the product.

We retain the right to receive a 50% share of the royalty on global net sales above a certain annual threshold. In addition, we are eligible to receive up to 50 million from DRI, upon the occurrence of pre-specified events tied to the advancement of TZIELD for the treatment of newly diagnosed Type I diabetes and may also receive an additional 50 million of TZIELD achieved a certain level of net sales. In a few minutes Scott will briefly discuss Provention Bio’s recent announcement that it had agreed to be purchased by Sanofi. And so, before including cash received subsequent to year-end, our cash, cash equivalents and marketable securities balance as of December 31, 2022 was $154.3 million, compared to $243.6 million as of December 31, 2021.

Please note that this cash balance also did not include the $45 million receivable from Provention related to the November FDA approval of TZIELD. Subsequent to year-end, we received 15 million of this amount, while the remaining 30 million is due by September 1, 2023. Finally, in terms of our cash runway, we anticipate that our cash, cash equivalents, and marketable securities balance of $154.3 million as of December 31, 2022 plus projected and anticipated future payments from partners, product revenues, and $100 million proceeds from the DRI should extend our cash runway through 2025. Our expected funding requirements reflect anticipated expenditures related to the Phase 2 TAMARACK clinical trial, the planned Phase 2 study of lorigerlimab and metastatic castration resistant prostate cancer, that Scott will tell you about momentarily, as well as our other clinical and preclinical studies currently ongoing.

And now, I’ll turn the call back to Scott.

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Scott Koenig: Thank you, Jim. Over the past 8 months, we demonstrated our ability to generate non-dilutive capital via partnering and royalty monetization efforts, which enabled us to achieve $250 million in non-dilutive funding, including $150 million from our partners during the second half of 2022 and another $100 million in funding in early 2023. As Jim mentioned, we are delighted to deliver on extending our cash runway through 2025. Beyond our financial position, I am exceptionally pleased to have two molecules originating from our portfolio over the regulatory finish line. During the fourth quarter, TZIELD joined MARGENZA as FDA approved medicines and stands as testament to MacroGenics’ ability to identify and develop product opportunities.

Of course, we believe the best is yet to come and have high hopes for our proprietary pipeline of product candidates, which I will now walk you through. Let me start by providing an update on vobramitamab duocarmazine or as Jim referred to as, vobra duo, our ADC designed to deliver 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 initiated the Phase 2 portion of the TAMARACK study of vobra duo in patients with mCRPC in late 2022. This study is designed to evaluate vobra duo in a 100 patients across two experimental arms. 2.0 mg/kg or 2.7 mg/kg every 4 weeks, and initially included a control arm in which patients received a second androgen receptor axis-targeted agents or ARAT.

The treatment landscape for patients with mCRPC has evolved with declining acceptability regarding the use of a second ARAT agent in patients who progress on earlier therapies and approval of a radiopharmaceutical medication last year. With this backdrop, we have modified the trial by removing the ARAT control arm and the Phase 3 portion of the study with regulatory approval of the modified protocol obtained to date in several countries. We believe that this modification allows us to enroll TAMARACK in-line with our objectives, determine an optimal dose expeditiously, and allow us to provide a clinical update in 2024 potentially in support of a subsequent Phase 3 study in mCRPC. Next, let me update you on lorigerlimab our bispecific, tetravalent PD-1 × CTLA-4 DART molecule.

At the ASCO Genitourinary Cancers Symposium a few weeks ago, we presented preliminary clinical results from a dose expansion single arm study of lorigerlimab in patients with advanced solid tumors in a poster session. Before I describe our data, I will remind you that checkpoint inhibition has not fared well in the treatment of patients with late stage mCRPC. Previously, anti-CTLA-4 therapy whether alone or in combination with an anti-PD-1 agent resulted in increased risk for immune-related toxicity with very modest anti-tumor activity. 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 . Highlights from the data we presented as of December 12, 2022 data cut-off were that 12 of 42 patients or 28.6% with mCRPC achieved greater than or equal to 50% PSA or PSA50 reduction, including 9% or 21.4% to achieve greater than or equal to 90% PSA reduction or PSA90.

9 of the 12 patients maintained their PSA50 response for three months or longer and we were very excited to report that 9 of the 35 patients or 25.7% who had measurable mCRPC achieved confirmed partial responses. Every one of the 9 patients who had confirmed had received a prior ARAT and all but one had previously received docetaxel. All 9 had reductions in their PSA levels of greater than 90% as of the data cutoff. The overall safety profile observed across 127 patients from multiple solid tumor expansion cohorts was manageable. Treatment related AEs occurred in 86.6% of patients with the most common among them greater than 15% being fatigue, rash, pruritus, hypothyroidism, and pyrexia. Rates of greater than grades or equal to grade 3 TRAEs and immune-related AEs were 35.4% 7.9%, respectively.

AEs resulted in treatment discontinuation in 25.2% of patients. There were no fatal AEs related to lorigerlimab. Based on the strength of this data, we plan to initiate a randomized Phase 2 study of lorigerlimab in combination with docetaxel versus docetaxel alone in second line chemotherapy naive mCRPC patients in the second half of 2023. A total of 150 patients are planned to be randomized 2:1. The current study design includes a primary study endpoint of radiographic progression free survival. We will tell you more about this study later this year as we approach it to start. And to repeat, as Jim mentioned earlier, both this study and the TAMARACK study are included in our cash runway. In addition, we continue to pursue the Phase 1 dose escalation combination study of vobra duo with lorigerlimab in patients with advanced solid tumors, including renal cell carcinoma, pancreatic cancer, ovarian cancer, the patocellular carcinoma, mCRPC and melanoma.

Next up, MGD024 is our next-generation bispecific CD123 x CD3 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 MGD024 is ongoing in patients with CD123-positive relapsed or refractory hematologic malignancies, including acute myeloid leukemia and myelodysplastic syndromes. As we previously announced in October 2022, we and Gilead entered into an exclusive option and collaboration agreement to develop MGD024 and up to 2 additional bispecific research programs. The agreement granted Gilead the option to license MGDO24 at predefined decision points during the Phase 1 study.

Next, let me provide an update of our product candidates being developed by our collaboration partners for which we retain certain economic rights. As Jim mentioned earlier, we are very pleased to see FDA’s November approval of Provention Bio’s TZIELD to delay the onset of Stage 3 type 1 diabetes in adults and pediatric patients aged 8 years and older with Stage 2 type 1 diabetes. We view this as a very important advancement for individuals and their families dealing with the risks and consequences of type 1 diabetes. And as we announced last week, as Jim mentioned earlier, we sold our interest in a specified portion of royalty payments based on future net sales of TZIELD to DRI for of $100 million. We have the opportunity to receive up to an additional $100 million from DRI upon pre-specified events.

In addition, you may recall that as part of our original sale of Teplizumab to prevention in 2018, we remain eligible to receive contingent payments from prevention, including $110 million upon the achievement of certain regulatory approval milestone and $225 million upon the achievement of certain sales milestones. On Monday, Provention Bio announced that it agreed to be purchased by Sanofi. We have seen the public statements about this planned acquisition driven by the potential of TZIELD. We’re excited for this may mean for the future of TZIELD and most importantly for diabetes treatment in patients worldwide. As for MacroGenics, we are in the process of evaluating the transaction in the context of our agreement with prevention. This is all we can say at this time.

To conclude, we believe that we have generated significant non-dilutive capital in the past 8 months, reprioritize our programs and reduced our corporate footprint and related costs and we are in a terrific position to execute on our plan of developing and delivering life changing medicines to cancer patients in 2023 and beyond. We would be now happy to open the call for questions. Operator?

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Q&A Session

Operator: Thank you. Our first question comes from Jonathan Chang with SVB Securities. You may proceed.

Jonathan Chang: Hi, guys. Thanks for taking my questions. First, on the TAMARACK study changes, can you provide some color on what you would hope to see in a Phase 2 study that give you confidence in a subsequent Phase 3 study and what that Phase 3 study might look like? Also, in terms of getting regulatory approval for the modified protocol, can you expand on your prepared remarks and give us a sense of where you are in process and what still needs to be done?

Scott Koenig: Thank you very much, Jonathan. So, as I pointed out earlier, given the changing landscape for the treatment of mCRPC, we felt that to achieve our goal of identifying the dose that reduce some of the side effects, we could achieve this quicker by just having the two active treatment arms as opposed to an additional control arm. And as I have pointed out earlier, our goal was to reduce the dose that in particular would reduce particular side effects and we modeled this from the data we had to date from our expansion studies. Particularly, palmar plantar erythrodysesthesia, the hand-foot syndrome, where a number of the patients who are getting Grade 2 side effects, which included pain in their extremities. And we found that patients would drop off because of the uncomfortable nature of this.

So, what we’re looking for is a reduction in the severity of such a side effect profile and a reduction in the number of side effects. We believe based on the data we have reviewed from patients treated to date, that achieving this and keeping these patients on longer may even lead to even more effective response rate from those patients. So that’s sort of what we’re looking for from the results of this study. And with regard to the FDA and going into Phase 3, we feel that we were planning in any case knowing that the landscape was changing that at the end of Phase 2 we were going to discuss with the FDA what the appropriate control group would be at that time to get the best benefit for patients going forward. So, we feel that we are €“ we’ll be in a very good shape in terms of the number of sites that we hope to participate in the current study, and then work with the regulatory agencies to implement that Phase 3 study quickly.

Jonathan Chang: Understood. If I can just sneak in one more, as there was a recent unsuccessful Phase 3 study that tried to add on anti-PD-1 to docetaxel and mCRPC, what are the reasons for confidence in the Phase 2 lorigerlimab plus docetaxel study? Thank you.

Scott Koenig: Yes. We’re quite aware of the many failures with anti PD-1s and checkpoints in mCPRC. And that is why we are very encouraged by the recent data we presented as ASCO GU where both the response rates in terms of PSA50 and 90 reductions, as well as objective response rates were far higher than that seen from any other checkpoint study that we have €“ that has been reported previously to date. As you well know, particularly the studies that came out recently on CheckMate 650 showed a very poor response of the Nivo on the order of a 9.3% overall response rate. And as we noted here on this call and at the meeting, we were seeing responses of 25.7%. And also as you point out in a similar setting KEYNOTE-921, which was a study of pembro and docetaxel versus docetaxel recently failed as well.

We believe that by designing a molecule that has 4 binding sites, 2 each for PD-1 and CTLA-4 with a higher avidity to bind to co-expressing cells within the tumor microenvironment and with an opportunity to reduce side effects by the nature of heavy and IgG4 engineered into this molecule. So, there is no killing or ADCC of Treg cells, we believe that these patients will be able to now be treated for much longer periods of time taking advantages of both the effects of blocking PD-1, as well as CTLA-4.

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

Operator: Thank you. Our next question comes from Yigal Nochomovitz with Citi. You may proceed.

Unidentified Analyst: Hi, team. This is on for Yigal. Thanks so much for taking our questions. Just first to follow-up on one of the prior questions. Can you talk a bit more about what you’re looking to see specifically on the efficacy side in TAMARACK next year to support moving into a potential Phase 3 in this setting?

Scott Koenig: Thanks Carly, for the question. So, we have a very good historical data in that line of therapy for patients treated with docetaxel at control arm. As the study that Jonathan was alluding to, KEYNOTE-921, and an rPFS of 8.3 months, , also treated with docetaxel was an 8.3 months rPFS. And as you may recall, TRIDENT 3, in that control arm of docetaxel is also 8.3 as sort of remarkable as they were identical to the sub month in that study. And then if you also look at the overall median overall survival, it’s approximately 19 months. So, obviously, we would like to see some significant increase above those numbers. And clearly, we’ll also get a sense from the PSA50s, for example, in , the docetaxel arm of that study was PSA50s of 24%.

So, we feel that given that we’re seeing responses that are looking favorable just with the PD-1 CTLA-4 alone in a later line of therapy that now adding this on to earlier stage patients in addition to chemo has a great opportunity mechanistically to enhance the responses of both our PFS, as well as OS.

Unidentified Analyst: Okay, great. That’s helpful. I also did want to ask the similar question about vobra duo, just how you’re thinking about that efficacy bar in the Phase 2 cohort?

Scott Koenig: Well, as you know, in looking at later lines of therapy, typical control arms run about 3 months to 4 months. So, we’ll have to see where populations now with €“ treating with cabazitaxel. It was a little disappointing. I don’t know if you had a chance for instance looking at the CheckMate 650 study, as compared to €“ in the result of the in cabazitaxel, they had a nice control arm of cabazitaxel in a €“ obviously, study that was just done with a response rate of about 12%. So, it was much lower than the historical data from the . So, we’ll have to see where we go. So, clearly, the targets of getting our PFS close to 8 months would be something that we would like to aspire to, but we’ll have to see as the data evolves.

Operator: Thank you. Our next question comes from Etzer Darout with BMO Capital Markets. You may proceed.

Etzer Darout: Great. Thanks for taking the question. Another question here on vobra duo, just given the commentary around, sort of radio pharmaceuticals and mCRPC, just your thoughts around a Phase 3 monotherapy pivotal for vobra duo versus a combination like the lorigerlimab combination that you’re exploring now? And then again for lorigerlimab, maybe your thoughts around the Phase 2 studies that you could potentially initiate beyond docetaxel combo trial you plan to start in the second half of 2023? Thanks.

Scott Koenig: Yes, very good questions. So, what we are hoping on the vobra duo in the setting of, again, the changing landscape in a Phase 3. Again, we’ll have to see where we’re going. As I’ve already noted, what a single agent targeting would look for both extending the rPFS, as well as the OS with the rPFS running, as I said, on the current studies, the vision study, for instance, etcetera, of approximately 8 months and then obviously OS in greater than a year was about 14 months depending on the study. As you know, we’re exploring the potential of vobra duo and lori in combination in multiple tumor types, but will include €“ and it includes a population of patients with prostate cancer. We haven’t identified the dose yet that would be one we would like to take forward and certainly we would look to do expansion studies once and if we can establish a safe and active drug.

Given where we are on the start of the TAMARACK study now, and this combination. And with the idea that we would have the data from TAMARACK hopefully by the second half of 2024, we may be in a good position to have different options. If in fact, we have identified an appropriate vobra duo and lori combo dose going forward. So, one could imagine additional arms to that study to be included to ask that question would a combination be better than a single agent in such a setting. So, we’ll have to see, time will tell. We have more work to do on that. With regard to additional studies for lorigerlimab beyond the Phase 2 we just talked about, in combination with docetaxel, we think that there are different opportunities given the profile of the drug either late to very early stages of prostate cancer.

So, for instance, one might consider the hormone responsive setting moving further up the line. We want to get obviously this study going first in the post and then we’ll consider other opportunities in other lines of therapy going forward to lorigerlimab.

Etzer Darout: Great. Thank you. Congrats on the progress.

Scott Koenig: Thank you.

Operator: Thank you. Our next question comes from David Dai with SMBC. You may proceed.

David Dai: Great. Thanks for taking my questions. So, just one question on the vobra duo and lori combo trial, we did see quite a bit of Grade 3 treatment related toxicity of around 35% as you mentioned, Scott. So, how should we think about the safety profile of the combined trial? What are some additional, kind of adjustments on dosing you’re thinking about to reduce the safety ?

Scott Koenig: Yes. So, just to put this in context so that people are looking at apples-to-apples comparison, particularly with what you’re commenting on the lorigerlimab in terms of discontinuations and the AEs, remember that combinations for instance of ipilimumab and nivolumab will require a reduction to 1 mg per kg of ipilimumab to get a tolerable combination going forward and it’s limited to four doses of that combination within continued use of nivolumab in various clinical settings. So, I should point out that the patients being treated with lorigerlimab that had objective responses with the PSA90s I described to you have now been on the drug for over a year and they’re getting on a Q3 weekly basis. So, it was not surprising that over time you’re going to accumulate more side effects in aggregate in such a population and discontinuation rates, which are often much later than that would have occurred would say .

In fact, if you look at the CheckMate 650 study, if you look at the arm that got nivolumab 1 and ipi 3, the plan was to treat those patients with four doses on a Q6 basis of ipi and the mean number of doses in that arm of the study was 2. So again, tolerability was an issue there. Now, with regard to combining going forward, that’s why we’re doing the study right now is to see if new side effects occur, if you look at the actual side effect profile of the individual molecules, there’s very little overlap in terms of the type of side effects that we’re seeing by treatment of patients individually, but we’ll have to see as we go forward with regard to how we envision optimizing the dosing, well, quite often because the mechanisms by which these drugs work are quite different.

It may be that lower doses may be quite sufficient in combination to achieve the response rates that we hope to see that are better than the individual drugs alone.

David Dai: That’s very helpful. Thank you.

Operator: Thank you. Our next question comes from Jon Miller with Evercore ISI. You may proceed.

Jon Miller: Hey, guys. Thanks for taking my question and congrats on all the recent progress. The Provention deal included warrants. I know you’re not talking much about the acquisition, but did you exercise as warrants and own prevention stock. And I also noticed that change of control looks like a payment in their filings earlier? Do you have any view on that at this point? And maybe since I know Scott, you said you wouldn’t want to talk about that much. Given that TAMARACK is now no longer controlled, I know you were going to have to go back to the Phase 3 anyway, but is your timing getting into the Phase 3 portion at all delayed by removing the control arm in Phase 2? And how should we think about moving into potentially pivotal cohorts there?

Scott Koenig: So, let me answer that first and then I’ll let Jim address the TZIELD story. Actually as we noted early in the call, we already have four countries and we expect many of these other countries to come on. The sites that are already opened in TAMARACK will continue to enroll patients and any patients that are on control arms will be just switched to an active arm So, really there is no delay. In fact, we believe that by going this route and now adding on additional sites with this amendment, we should be able to enroll the study, as well as getting readout much faster than we would have done with the controlled Phase 2. So, right now we’re still €“ given a lot of sites have to come on, we still need to get regulatory approval in some of the countries, which we expect to occur imminently. We think that we’re still targeting in the second half of 2024 to have clinical readouts here.

Jim Karrels: And Jon, thanks for the question about Provention. With regards to the warrants, we disclosed that we exercised those back in 2019 and we sold those shares, I think we averaged about $12 a share, which at the time seemed quite good. And then with regard to the other question, the Sanofi transaction, obviously, we have the ability to receive regulatory milestones from Provention, as well as certain additional consideration for rights that they grant with respect to the product and we are evaluating and we expect to continue to evaluate the details of the pending Sanofi Provention transactions in that very context.

Jon Miller: Fair enough. But Scott, I was trying to ask about the Phase 3 portion of TAMARACK around Phase 2. I understand that you’re trying to help enrollment along for Phase 2. But does having €“ just dropping the Phase 3 portion now delay your ability to get that going later?

Scott Koenig: I don’t think so. I mean, we’ll have to see as we go forward anticipate. Remember, we’ll get real time data on the Phase 2 study. So, we have the ability to prep what we would see in terms of the Phase 3. And the assumption is that the majority of sites that we would have in the Phase 2 would continue on the Phase 3. And in any case, we would have had to discuss with the FDA what the appropriate control was at that time given the changing landscape. So, ultimately, I think we will have enough lead time to not lose the ability to implement the Phase 3 in a similar timeframe.

Jon Miller: All right. Thanks so much.

Scott Koenig: Thank you.

Operator: Thank you. Our next question comes from Stephen Willey with Stifel. You may proceed.

Stephen Willey: Yes, thanks for taking the question. So, maybe just a point of clarification on the proposed Phase 2 or lorigerlimab trial. So, can these patients have seen docetaxel in the castration sensitive setting or is this a truly chemo-naive patient population?

Scott Koenig: We expect that most of the patients will €“ this will be in the castration resistant population we expect that most of the patients will be there. They may have seen, I believe, some chemo in the castration sensitive population, but expect to be a much smaller portion of that population.

Stephen Willey: Okay. And I think you touched upon it before, but I guess what’s the rationale for initiating this specific combination trial versus just waiting for combo data with vobra duo and then potentially resourcing that study instead?

Scott Koenig: Well, I think, first of all, we’re going to get our experience of combining this with the chemotherapy in a different chemotherapy. And as I pointed out earlier, Steve, that we see the prospects of this drug being used in very early lines, as well as late lines of therapy. So, I think this is our first foray into that. There’s no reason as we’re getting this data as we €“ if we identify a combo dose that looks good and can be moved forward that independently we can develop another trial using that combo. So, it’s not mutually exclusive.

Stephen Willey: Okay. Fair enough. And then I guess one of the assets to which you guys have some stake in and I don’t think was talked about earlier is the ImmunoGen ADC, IMGC936, I think. So, I think they said that they’ve initiated dose expansion now in lung and in triple negative. I think they’re going to have some data to share in 2Q. Can you just remind us what the next steps for this program might be from MacroGenics assuming that it does move forward beyond dose escalation? Is there a formal opt-in decision that you need to make just under the terms of the current agreement?

Scott Koenig: No, it’s €“ the way the deal is structured is it’s a 50-50, we €“ it’s a joint decision on both next steps the financing of the studies we actually have a very good relationship in terms of who would conduct the studies. And in the end, either of us could move forward there. And similarly, either of us could obviously opt-out and not choose to fund the study. I think that we still need some more time to look at the populations that ImmunoGen has disclosed of adding additional patients. I think on one of their last calls, they said that they are planning to add additional patients with lung cancer in the study and that would extend that further, but would provide an update. In the meantime, I think patients are being continuing to be followed at this point.

So, really nothing more to say right now. I think that finding the appropriate dose for treatment is the critical point here for continuing the study with other tumor type we both decide to move forward with.

Operator: Thank you. Our next question comes from Boris Peaker with Cowen. You may proceed.

Boris Peaker: Great. I have two questions. One on lorigerlimab and the other one on vobra. So, lorigerlimab, can you discuss how you decided on the dose for the Phase 2 trial and why you don’t think you need to have several doses like you were doing with vobra? And for vobra, how do you think will impact your ultimate Phase 3 trial design in TAMARACK of course?

Scott Koenig: Excellent questions, Boris. So, we as you know, dosed up to 10 mg per kg in the dose escalation study did not hit DLT. We did see increased new-related AEs at 10, so decided to continue at 6 mg per kg. As you know, on a Q3 weekly basis, as you know, we presented the safety data of 127 patients at ASCO-GU, which included the patients with prostate cancer as well as other tumor types in that safety analysis. We believe that 6 mg per kg is an active and safe dose. But the beauty of this molecule, if you recall the data from the dose escalation study, we had a 100% full occupancy of PD-1 positive cells at 1 mg per kg and higher. We were seeing objective responses at 3 mg per kg and higher. We were seeing evidence of biomarker activity based on and CD4s and CD8s and on CD4s as those lower doses as well as the 103 mg per kg.

So, we have a nice big window here with regard to picking the dose. So, I would assume that we wanted to start with one dose, get a response there, have the opportunity to modify it if something comes up. But ultimately, we will likely do a small study comparing 6 mg to a lower dose at some future time as we start accumulating the data from the ongoing lori study. Now, with regard to a Phase 3 study for vobra duo and the impact of , we just have to see. Clearly, there has been challenges with regard to getting enough drug into the market. We assume Novartis will improve that over the course of this year and next year. But still, as you know, this is being used mostly very large academic centers and the community physician has less opportunity to treat their patients with .

So, we’ll have to see where things go with regard to the importance of PLUVICTO treatments in the design of the subsequent study.

Boris Peaker: Great. Thanks for taking my questions.

Operator: Thank you. Our next question comes from Charles Zhu with Guggenheim. You may proceed.

Unidentified Analyst: Hi. This is Edward on for Charles Zhu. Thanks for €“ congratulations all the progress. My first question was on the lorigerlimab MGC018 combination study. I’m just curious if you can give any color on how the dose escalation is going? And then any further color on the future data update and what investors could expect there?

Scott Koenig: Thanks, Edward. As I said before, we’re still looking for the right dose combination there that provides both the activity and safety. As we had noted before, we had fixed the dose of the lori and started with a very low dose of vobra duo, but have nothing more to say with regard to identifying the final dose. We’re still in treating patients and looking to see what the appropriate combination would be. With regard to the timing of this, again, we would like to have picked a dose and then move into some expansion cohorts. And it depends on how quickly we will get to select that dose and move into those expansion. There’s an outside shot that maybe later this year more likely in 2024 we’ll have data to discuss.

Unidentified Analyst: Great, thanks. And maybe just as a follow-up question, you’ve got €“ so you’ve got lori and MGC018 and also the combination. I’m just curious how you’re thinking of positioning the or the individual monotherapy and prostate longer-term?

Scott Koenig: Well, I think it all depends on what the €“ both the activity and safety profile is as I pointed out. We want to improve the vobra duo. At this point, we see this in the context of treating prostate cancer to probably more the later line therapy. We look at the opportunity for lori, pretty much across the board from early disease to late disease, but I should point out and one should not forget the fact that the reason why we move forward with molecules targeting B7-H3 and obviously checkpoints as well, is that with regard to B7-H3, most solid tumors expressed B7-H3. So, we see this as an entry point into treating cancer with a great opportunity for the needs of patients with prostate cancer given that even current therapies are not curing patients number one, particularly in later line, and there is no checkpoint that has been approved in prostate cancer.

But ultimately, we look at forward to using both these agents either alone in combination and many other solid tumors as well. And again, depending on how much capital we have available, partnerships going forward, etcetera, will determine how quickly we’re able to expand the use of both drugs.

Operator: Thank you. Our next question comes from Silvan Tuerkcan with JMP Securities. You may proceed.

Silvan Tuerkcan: Thank you for taking my question and congrats on the progress with the quarter. On vobra duo, it seems like enrollment in the trial was going slow, so you remove that control arm, what gives you confidence that enrollment will speed up because your active arm of technically unproven therapy is still competing now with these radiotherapies that are new and that people seem to like. Yes, have you noticed anything in terms of uptake there with the removal of the control arm? And then I have a follow-up regarding the prevention sale. Thank you.

Scott Koenig: So, as we noted, these changes have occurred just recently. So, I have no view on how quickly the enrollment is going to go with the removal of the control arm. The expectation based on and as well as investigators has been very positive. What we had seen is that patients did not want to ultimately go on to a study at this point with a controlled population. That was the biggest obstacle that we were facing as we started this study. And as you know, there was a significant editorial in talking about ARAT €“ second ARAT control arms in studies that came out just as we were starting the study. And so, there is much more reluctance from the Europeans with regard to using that. So, given all those conditions, we didn’t wait and we said, alright, we’re going to make these changes.

We did it rapidly. The team did a fantastic job of implementing these changes and working with the regulatory agencies. And so, I think we’re in a good position based on the feedback we’ve heard from investigators around the world. In fact, I can tell you is that when we were at ASCO GU, we were just about to make these changes and had and investigators who were on the trial and they were very enthusiastic about these changes. So, we’ll have to wait and see.

Silvan Tuerkcan: Great. Thank you. And could you €“ with respect to TZIELD, could you help me understand some of the wording. So, it says that the company retains the right to receive 50% share of royalties on global net sales above a certain annual threshold. Is that still something that could come your way or is that also now going to the way of DRI, post the deal €“ if that deal closes?

Scott Koenig: No, no, no, that was the part of the agreement we made with DRI. This was a, what I call the kicker in addition to the $250 million potential milestone payments, which we described today. If sales reach a particular total on a given year, everything above will be shared 50-50 between DRI and MacroGenics on the net sales above that level. So, this €“ given what Sanofi just paid for this drug, I presume they have a lot of confidence of being able to achieve significant sales of this drug and certainly this particular sales target could be achieved.

Silvan Tuerkcan: Great. So, you did not all of the royalties ?

Scott Koenig: No, exactly. That’s the point. We sold significant royalties, but above a certain level, we will participate in a significant single-digit royalty there.

Jim Karrels: And to add to that, we fully retained the $335 million in milestones from the original Provention transaction.

Scott Koenig: Right. So, just to put a point on this whole thing is that, if you look at the total milestones between what Provention Bio might owe us and DRI might owe us, given Sanofi’s payment here, we believe that these are potentially achievable milestones, all of them and that totals by itself without this , which I just described to you is a total of $435 million.

Silvan Tuerkcan: Great. Thank you so much.

Operator: Thank you. This concludes the Q&A session. I’d now like to turn the call back over to Dr. Scott Koenig for any closing remarks.

Scott Koenig: I want to thank everybody for participating in the call today. And as you heard from our excitement about the progress we’ve made on many of these studies. We look forward to updating you in the very near future. Hope everyone has a good evening.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.