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.

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.