Macrogenics Inc Q3 FY2023 Earnings Call

Good afternoon. We will start the MacroGenics 2023 Third Quarter Corporate Progress and Financial Results Conference Call shortly. I will now hand the call over to Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

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.

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.

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 the three 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.

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 and 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 been treated with one prior antigen receptor access targeted therapy. Participants may have received up to one prior taxane-containing regimen but no other chemotherapy agent. This study is being conducted to evaluate vobra duo in patients across two experimental arms of either 2 mgs/kg or 2.7 mgs/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 a randomized Phase 2 clinical trial of lorigerlimab in combination with docetaxel versus 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 a 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 two 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 two ADCs, we are exploring additional molecules for potential future IND submission. Stay tuned. To conclude, we believe we have the technical, developmental, 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.

Our first question comes from Charles Zhu with Guggenheim Securities. Your line is open.

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 the potential setting but also with the potential choice or choices of a control arm just given the current shifting landscape? Thank you.

Thanks for the question, Charles. So as you know, there have 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 are currently offered to them.

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.

Well, as you know, Charles, we have now a significant data set 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 a 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.

Great. Thanks for taking the questions.

Next question comes from Kaveri Pohlman with BTIG. Your line is open.

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 the 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?

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 with 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.

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 the CONTACT-02 trial could impact lorigerlimab efficacy?

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?

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?

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.

Our next question comes from Etzer Darout with BMO Capital Markets. Your line is open.

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.

Okay. Let me address the first question about the trial overlap. There are some sites participating in both studies, but for the most part, they are distinct sites. I believe we are in a strong position with the current sites established for LORIKEET to achieve good enrollment by late this year and into 2024.

Are you still there, Scott?

Scott, you faded out. Would you mind answering that again?

Okay. I didn’t hear the second question regarding the trial.

Can I ask the second question or?

Yes, please.

Yes. I was wondering about the progress with the vobra lori dose escalation and the factors influencing the start of the expansion trial in 2024.

Are you back, Scott?

Hello.

You're back. Now, Scott, we can hear you.

Okay, I switched computers.

Yes. We can hear you. Should I ask the question again? I’m not sure if you heard?

Please. No, I didn’t hear.

No, just curious to see sort of where you were with the dose escalation of the lori vobra combination? What sort of triggers here the expansion start in 2024, if you can just maybe provide a little bit more color on where you are with the escalation?

Yes. We’re pretty close to selecting the doses now. We are fine-tuning the individual doses. We expect that to occur by the end of the year and then would move into the expansion in early ‘24.

Our next question comes from Jon Miller with Evercore. Your line is open.

Hey, guys. Thanks so much for taking my question and congrats on all the progress. I guess one on LORIKEET. This is a phase – randomized Phase 2 here. But you were previously guiding to a Phase 2 expansion after the ongoing Phase 1. Are we still expecting to see a meaningful mCRPC data set here in an expansion setting in the first half ‘24 or is this taking the place of that? And then secondly, on the 024 program, are Gilead opt-ins, I mean I know they’re at unspecified points in Phase 1, but are we going to see public-facing data from that Phase 1 before Gilead has opt-in rights or is it possible they have opt-in rights before even Phase 1 data is available?

So let me start with the second one. They can opt in any time during Phase 1. And they will control the data with regard to public presentation. But they can have – they have to do it before the data Phase 1 is complete. With regard to the LORIKEET and the expansion study, that study is complete, but for the fact that several of the patients, three of the patients are still on lorigerlimab. This is now coming on almost two years from enrollment and that'd be encouraged by the activity and the ability to retreat patients over long periods of time. With regard to the LORIKEET Phase 2, the plan is to complete that study, not only for the chemo-naive population but also look at the opportunity of LORIKEET in other prostate settings, as we have described is opportunities to test this in other tumor settings and we should provide some updates very soon with regard to additional indications that we would like to pursue with lorigerlimab.

Great. Thanks for the color there, Scott, but maybe I missed it. Are we still expecting a lori expansion-update, an actual data set coming first half next year?

Well, from the prostate study that we presented, that, as you know, last February, there is, for that particular cohort, just the longevity of prostate with regard to the non-prostate indications, what we have said is that once we have decided to move forward with other indications, they may provide opportunities to present the data from which we based the decision to move forward.

Okay, thanks so much. And maybe one on the deeper pipeline then. You mentioned the topo payload on 026. But you previously talked about multiple payloads and linkers. So how diverse are those next couple of molecules that you mentioned coming just behind 026? Are they also representative of that multiple payloads, multiple linkers programs that you’ve got?

So we continue to look at the options. This will be in terms of the linker payload and because the way the Synaffix biospace there and toxin is set up, we can select one of several. What we’ve said is that the first one is a topoisomerase inhibitor. The second one will be a topoisomerase inhibitor. We’re evaluating not only a topoisomerase inhibitor but other toxins associated with other targets going forward but are not in a position yet to discuss either the targets or the particular payloads that we’ll use for the number three, four, or beyond.

Thanks so much, guys.

Our next question comes from Peter Lawson with Barclays. Your line is open.

Thanks, Scott. Thanks for taking the questions. Just on TAMARACK, why did that enroll faster than expected? And how much data should we expect to see from that in the first half since next year?

Well, I have to say that there were some technical difficulties in Europe, the U.S., and Asia. We observed great enthusiasm for the patients in the study. I can’t provide further details, but there is a significant opportunity with vobra duo in assisting their patients. The rationale behind our approach resonated well with both the investigators and the patients. The study was initially designed to include 100 patients, with 50 in each arm, but we have surpassed that number. It was an overworked study, so we anticipate a substantial amount of data to be released in 2024.

Okay. And then on ADAM9, any details why that readout was nudged back from the second half of this year to ‘24?

The study is completing – is being completed out, finalizing. And we’ll – as ImmunoGen has said, they will report out in the beginning part of ‘24. As I’ve indicated to you, one of the challenges has been always with identifying the appropriate dose moving forward. They are finishing out the patients that are in the non-small cell lung cohort currently. And we will report on that in the first part of the year and with regard to next steps for that program.

Our next question comes from Silvan Tuerkcan with JMP Securities. Your line is open.

Hi, good evening. Congrats on the update. And thanks for taking my questions. Maybe a more big picture question. Can you comment maybe on some key takeaways from ESMO and SITC on B7-H3 as a checkpoint that more and more presentation also what we can learn from the Daiichi Merck partnership. And then the second question is what is your role in the HEAT study on ENA? I know that investigator related and it’s earlier stage prostate cancer. But what is your role here and what’s your involvement?

Thank you. So with regard to the data from ESMO, first of all, as you commented on the partnership now with Daiichi, the cohort includes 7300 molecule. I have to think that we’re very encouraged by the way that that partnership was constructed. And the value that Merck placed on that relationship is 7300 being a very important part of the three target deal. It only heightens I think the value we see for vobra duo and our B7-H3 program. With regard to the specifics that they did, Daiichi presented in their poster session. If you recall, it was a lot more in terms of improved activity in the prostate cohort that they tested. They were seeing about five months of our PFS as first reported about a year for vobra duo and a 25% PSA50 response. The latter of which is no different than previously reported. So we feel, again, very good about where vobra duo sits right now. Having this additional data that will come out in ‘24 on the TAMARACK study to be able to move forward very effective drug with a proper dosing to mitigate some of the side effects we were seeing. With regard to the HEAT study, again, we have always had a very close relationship with and had a lot of funding with discussions with them on where the value we see lorigerlimab in settings like a neoadjuvant use of this drug. And we’re also rent also looking at opportunities for enoblituzumab in other settings as well. With regard to this being a collaborative study, it is mostly an IST. So they have full control over the execution and providing the data. But we have constant conversations back and forth with – regarding the opportunity for enoblituzumab and other B7-H3 molecules in the gene prostate cancer.

Our next question comes from Jonathan Chang with Leerink Partners. Your line is open.

Hi guys. This is Atif Malik on Yigal. Thanks for taking my questions and congrats on all the progress. Just a couple of quick ones. Will there be an interim look in LORIKEET? And if so, what might trigger that interim look? Also curious if you are able to share any color on powering assumptions and remind us what the trial is designed to show in terms of separation rPFS between the arms. Thanks.

There is a technical difficulty and LORIKEET will likely involve a futility analysis. We have not provided the statistics for that. However, I should point out that historical data from multiple control trials in a chemo-naïve population has shown that the median progression-free survival is around eight months. Our goal is to surpass that milestone.

Okay. Got it. And then maybe one on MGD024, I guess can you remind us what you would view as an acceptable CRS profile for this program? And then maybe on the efficacy side, what you would see as a worthwhile complete response rate in the Phase 1 dose escalations that have been in the move into expansion of Phase 2? Thanks.

This study, as we mentioned, involves Gilead, so I can't comment on their specific goals for it. Historically, with enoblituzumab, the precursor to this molecule, we observed response rates over 20% in the control arm among late-line patients. Clearly, we hope for higher rates. We believe we now have a foundation due to the reduced CRS profile and the capability for intermittent dosing and infusion. Regarding tolerance and safety, having significantly lower-grade CRS and limiting it to the initial dosing phase would provide a favorable profile for both early and late-line patients. However, the final decision will rest with Gilead based on their expectations.

Okay. Got it. And then last one for me, just a very high level. We are just wondering if you received a lot of inbounds for potential partnerships on with Vobra Duo. And if so, maybe when you entertain partnerships, would that be more around the Phase 3, or is that something you would rather do sooner rather than later?

So, the answer is we have had very encouraging discussions historically about Vobra Duo with many large companies, both pharma and biotech companies. What we have described to them is our interest in getting additional data in the TAMARACK study before we would engage in further discussions on potential partnerships. Back to the point I was making earlier because of the efficacy here for Vobra Duo to treat many different tumors, that is something we as MacroGenics did ourselves. And so at the appropriate time, I would envision if development continues to iterate in aerosols which would both expand the opportunity not only in prostate cancer but other tumor types as well with a partner who has the resources and capabilities to support it along with us.

Got it. Very helpful. Thanks very much.

Our next question comes from Stephen Willey with Stifel. Your line is open.

Yes. Good afternoon. Thanks for taking the questions. Maybe just a quick one on the next-gen ADC efforts, and Scott, I know you are not going to be disclosing target antigens anytime soon. But just wondering philosophically how you are kind of thinking about selecting target antigens for this next round of ADCs that you put into the clinic? And I guess how far out on the risk curve are you willing to step considering you are tethering a novel linker and payload to these things? And I guess when you declare the target for the first candidate, the first half of next year, is this something that we should expect to fall into kind of the highly competitive buckets of ADC antigens that we have seen across the landscape or is this thing going to be kind of maybe a little bit more differentiated and unique? Thanks.

Thank you, Steve. We've had extensive discussions about selecting both the targets and the linker payloads. There's a lot of competition, so we want to be strategic in our choices. We believe that Synaffix has demonstrated a superior platform, particularly in using a DART with exatecan in different configurations, alongside our preclinical data that supports this. In terms of specific targets, I think you'll find a combination of markets that are somewhat validated but do not yet have approved products, where we can establish a competitive edge. There are certainly opportunities to explore novel targets. Additionally, some areas with limited prior data, where past efforts have been disappointing due to molecule design, may offer new prospects. Over the next six months, you can expect to see initial presentations on these targets at scientific meetings. By late 2024 and into 2025, we plan to add more targets. Currently, our momentum is strong, and we're pushing our team to achieve a new IND annually or slightly beyond. This could lead to organic growth opportunities and attract non-dilutive capital through potential partnerships. It's also worth noting that Synaffix has collaborations with other companies that will use their linker toxins, and as we validate our own work, it will enhance the perceived value of these efforts.

Great. Thanks for taking the question.

I am not showing any further questions at this time. I would like to turn the call back over to Scott for any closing remarks.

Well, thank you, operator, and thank you all for joining today. We look forward to providing updates in 2024, both on our clinical and preclinical studies. I hope you have a good day.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.