Earnings Call Transcript - MGNX Q2 2022

Operator, Operator

Good afternoon. We will begin the MacroGenics' 2022 Second Quarter Corporate Progress and Financial Results Conference Call in just a moment. All participants are in a listen-only mode at this moment and we will conduct a question-and-answer session at the conclusion of the call. At this point, I will turn the call over to Chris James, Vice President of Investor Relations and Corporate Communications of MacroGenics.

Chris James, Vice President of Investor Relations and Corporate Communications

Thank you, operator. Good afternoon and welcome to MacroGenics’ conference call to discuss our second quarter 2022 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 announcement, 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. 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 statement statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change, except to the extent required by applicable law. And now, I'd like to turn the call over to Dr. Scott Koenig, President and Chief Executive Officer of MacroGenics.

Scott Koenig, President and Chief Executive Officer

Thank you, Chris. I’d like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key updates from our clinical programs as well as our restructuring plans aimed at extending our cash runway. But before I do so, let me first turn the call to Jim Karrels, our Chief Financial Officer, who will review our financial results.

Jim Karrels, Chief Financial Officer

This afternoon, MacroGenics reported financial results for the quarter ended June 30, 2022, which highlighted 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 $26 million for the quarter ended June 30, 2022, compared to total revenue of $30.8 million for the quarter ended June 30, 2021. Revenue for the quarter ended June 30, 2022 included MARGENZA net sales of $4.7 million compared to $3.2 million for the quarter ended June 30, 2021. As a reminder, MARGENZA was launched in the U.S. in March 2021 in coordination with our commercial partner, EVERSANA. Our research and development expenses were $51.7 million for the quarter ended June 30, 2022, compared to $55.8 million for the quarter ended June 30, 2021. The decrease was primarily related to decreased retifanlimab manufacturing costs for Incyte and decreased costs related to discontinued studies. These decreases were partially offset by increased development costs of discovery projects and preclinical model modules, increased clinical expenses related to lorigerlimab, and increased costs related to MGC018. Our selling, general, administrative expenses were $13.7 million for the quarter ended June 30, 2022, compared to $15.2 million for the quarter ended June 30, 2021. The decrease was primarily related to decreased margins and selling costs, as well as decreased consulting expenses, and net loss was $41.3 million for the quarter ended June 30, 2022, compared to a net loss of $39.9 million for the quarter ended June 30, 2021. Our cash, cash equivalents, and marketable securities balance as of June 30, 2022, was $133.7 million compared to $243.6 million as of December 31, 2021. The June 30, 2022 balance did not include $34.5 million, subsequently received from collaboration partners in July 2022. Finally, in terms of our cash runway, we anticipate that our cash, cash equivalents, and marketable securities balance as of June 30, 2022, was $34.5 million in payments subsequently received from collaboration partners, projected and anticipated payments from partners, product revenues, plus anticipated savings from our corporate restructuring plan announced today which Scott will walk through momentarily should extend our cash runway into 2024. This updated cash runway guidance now reflects anticipated expenditures related to the planned Phase 2 MGC018 Phase 2/3 study in metastatic castration resistant prostate cancer, as well as MacroGenics' other ongoing studies. And now I'll turn the call back to Scott.

Scott Koenig, President and Chief Executive Officer

Thank you, Jim. We made significant progress in the second quarter with regard to multiple investigational molecules. Before I walk through the progress we made on our pipeline, let me update you on MacroGenics' restructuring plan that we are announcing today. Listeners will recall that over the past several quarters, we have prioritized our pipeline of product candidates and discontinued certain studies to reduce our spending. We have initiated additional cost-saving measures to extend our cash runway with a goal of delivering value-creating data with our existing and anticipated financial resources. The additional decisive actions we have announced today should put MacroGenics in a stronger position to execute on our prioritized programs. The cost-saving measures include an approximate 15% workforce reduction in full-time employees and closure of two of our satellite facilities, including a Brisbane, California-based research site and a smaller scale non-commercial GMP manufacturing site in Rockville, Maryland. We believe these measures will provide resources to advance our pipeline of innovative product candidates. The reduction in workforce announced today will be implemented immediately in some areas and completed over time as certain projects are wound down and sites are closed. The decision to reduce our workforce and close two sites was not taken lightly, and we are grateful to every MacroGenics employee who has helped advance our company. With these actions, we believe our updated cash runway should enable the delivery of interim data from the Phase 2 portion of the MGC018 prostate cancer study by the end of 2024. Data from the Phase 1 dose expansion of lorigerlimab by early 2023. And data from the dose escalation of MGD024 in AML patients as well as execution of our other ongoing clinical and preclinical studies. In terms of our pipeline, since our last quarterly update, we completed enrollment of the Phase 1/2 dose expansion study lorigerlimab, a bispecific DART molecule targeting PD-1 and CTLA-4 in advanced solid tumors. Also in July, we dosed the first patient in the Phase 1 study of MGD024, our next-generation CD-123 X CD-3 DART molecule in patients with CD-123 positive hematological malignancies. In addition, we continue to dose patients in the dose escalation combination study of MGC018, or B7-H3 directed antibody drug with lorigerlimab in patients with advanced solid tumors. Also, I'm happy to announce that our planned Phase 2/3 study of MGC018 in patients with metastatic castration resistant prostate cancer has a name which is TAMARACK. We continue to expect to start the TAMARACK study by year end. In addition to these programs, we and our partners continue to progress our other clinical and preclinical candidates and expect to provide further updates as the data matures. With that backdrop, let me use our remaining time to walk through our updates on our portfolio of investigational clinical molecules, starting with MGC018, our ADC designed to deliver DNA-alkylating duocarmycin cytotoxic payload to tumors expressing B7-H3. B7-H3, a member of the B7 family molecules involved in immune regulation. MGC018 was designed to take advantage of this antigen's broad expression across multiple cellular tumor types. We continue to make progress as we operationalize the TAMARACK study. After constructive interactions with the FDA and EMA, we provided key details about the design of the TAMARACK study during the first quarter conference call. As a reminder, during the Phase 2 portion of the study, approximately 150 patients will be randomized one-to-one-to-one to receive either 2 mg per kg or 2.7 mg per kg of MGC018 every four weeks in the experimental groups or a physician's choice of an antigen receptor access target or ARAT agent, such as abiraterone or enzalutamide, not previously received in the controlled group. Following completion of the Phase 2 portion, an interim analysis of the data will be performed to further inform the Phase 3 portion in which we plan to randomize additional patients one-to-one to receive either MGC018 at the recommended dose or ARAT agent for the controlled group. We continue to expect to start the TAMARACK study by year end and anticipate the delivery of interim data from the study by the end of 2024. Next, let me update you on lorigerlimab. We continue to dose patients in the Phase 1 dose escalation combination study of MGC018 with lorigerlimab in patients with advanced solid tumors including renal cell carcinoma, pancreatic cancer, ovarian cancer, hepatocellular carcinoma, metastatic castration resistant prostate cancer, and melanoma. Based on data from our preclinical studies, anti-tumor activity with MGC018 may be enhanced by combination therapy with an anti-PD-1 agent without significant incremental toxicities. During the second quarter, we completed enrollment in a Phase 1/2 dose expansion study with lorigerlimab as monotherapy and cohorts of patients with microsatellite stable colorectal cancer, mCRPC, melanoma, and checkpoint-naive non-small cell lung cancer. We expect to provide a data update from this study by early 2023. Next up, I'll discuss our efforts to advance the treatment of patients with CD123 positive hematological malignancies. 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 to have a longer half-life. We recently dosed the first patient in a Phase 1 study of MGD024 in CD123 positive relapsed or refractory hematologic malignancies, including patients with acute myeloid leukemia and myelodysplastic syndromes. In July, we issued a press release announcing the closure of the Phase 2 study evaluating the investigational regimen of enoblituzumab in combination with retifanlimab, an anti-PD-1 monoclonal antibody or tebotelimab, our PD-1 x LAG-3 bispecific DART molecule in the first-line treatment of patients with recurrent or metastatic squamous cell carcinoma of the head and neck. The decision to discontinue the study was based on an internal review of safety data and a risk-benefit analysis in frontline patients with squamous cell carcinoma of the head and neck. We don't believe that decision has any impact on our other B7-H3 directed programs or our ability to develop enoblituzumab in other indications. At ASCO in June, investigators from Johns Hopkins presented a poster showing encouraging clinical activity from an ongoing Phase 2 study of enoblituzumab in patients with localized prostate cancer in the neoadjuvant setting. Enoblituzumab showed encouraging clinical activity, with 66% of patients having a PSA zero at one year post treatment, which correlated with the peripheral expansion of tumor-associated T cell clones. The published data from the ongoing investigator-sponsored trial to date provides rationale for further evaluation of enoblituzumab in prostate cancer. Next, I will provide an update of our product candidates being developed by our collaboration partners for which we retain certain economic rights. Our second investigational ADC, IMGC936, which targets ADAM9, a cell surface protein overexpressed in several solid tumor types, is being advanced under a co-development agreement with ImmunoGen. Under our 50/50 collaboration, ImmunoGen is leading clinical development and as indicated, our plan is to complete dose escalation in the Phase 1 study evaluating IMDC936 in multiple solid tumors with initial data anticipated before year end. Teplizumab is an anti-CD3 monoclonal antibody that Provention Bio acquired from us under an asset purchase agreement in 2018. Provention is developing teplizumab for the treatment of type 1 diabetes. On June 30th, Provention announced the FDA has extended its review period by three months for the BLA for teplizumab. MacroGenics is eligible to receive royalties on net sales of retifanlimab, if approved, in addition to milestone payments. In July 2022, MacroGenics received $30 million in milestone payments from Incyte as part of its collaboration agreement. Retifanlimab is currently being studied as monotherapy or in combination with other agents across multiple studies. In conclusion, we continue to believe 2022 will be another important year for MacroGenics. During the first half of the year, we initiated two clinical studies and we expect to start TAMARACK, a registration-directed study of MGC018 in mCRPC by year end. We remain committed to developing and delivering life-changing medicines to cancer patients. We would now be happy to open the call for questions.

Operator, Operator

Our first question comes from Jon Miller from Evercore. Please proceed.

Jon Miller, Analyst

Hi, guys. Thanks so much for taking the question and congrats on restructuring and making some difficult decisions to extend the runway a little further. I'd love to get a sense of exactly what the new guidance is, though, precisely because it seems like there were two different languages being used in 2024, I think was mentioned in the press release. But then it also, Scott, you mentioned having runway through year-end 2024 where the TAMARACK data was expected? So, can you just provide me with the exact guidance?

Jim Karrels, Chief Financial Officer

Yes, thanks Jon. I'll start and I think Scott will probably finish. So, the exact guidance is that our cash runway, which reflects not only the $134 million that we had at June 30, but the additional $34.5 million that we received subsequently in the month of July, plus product revenues and other anticipated payments from partners pushes our cash runway into 2024.

Scott Koenig, President and Chief Executive Officer

Yes, and just, first of all, Jon, obviously, we can get more precision on this when the study starts and how quickly the patients get enrolled. But given where we are right now in that process, we are confident that we'll be able to start the study before the end of the year, getting enrolled during 2023 and have the readout by the end of the year. So, we think that without exact precision right now, because in addition to milestone payments, which obviously, we can never guarantee, we have a considerable amount of business development activity ongoing, which could certainly extend the runway further. We should be able to provide further precision in the future with regard to how far into 2024 that goes.

Jon Miller, Analyst

Thank you very much. I have a question about the overlap between enoblituzumab and MGC018. Previously, having them separate made sense, but given your prioritization, I'd like to know your thoughts on maintaining both studies. Are they different enough to warrant keeping both active, especially as MGC018 progresses to later stage trials? Additionally, while not identical, can we expect similar dynamics for MGD024 as we saw with flotetuzumab? Should we be looking for comparable signals regarding patient subpopulations, such as refractory versus relapsed patients, as we anticipate early data? Thank you.

Scott Koenig, President and Chief Executive Officer

Great questions. So, we were very excited about the update that the Johns Hopkins group was able to provide at ASCO as you know that received a lot of positive feedback in a neoadjuvant setting, which as you know, is either not or very little research being conducted there and then in a fairly early setting. Despite the fact of the head and neck setting setback with regard to stopping the study for enoblituzumab, the safety profile for enoblituzumab in the early neoadjuvant prostate setting was excellent. And based on both the encouraging data, the biomarker data, and the patient's responses, the group that conducted that study is an expanded group that is very enthusiastic to look at it very early settings for prostate cancer and enoblituzumab. As you know, our current efforts right now with regard to MGC018 is in the later line metastatic setting and so we're again focused on both patients that have been experienced with ARAT agents as well as taxane agents, still opportunities to move up the line. But given that we need to have a very clean drug for treating patients with localized disease, we think enoblituzumab is better set up for pursuing that indication. Now, I should also indicate that we are looking at other possibilities of enoblituzumab beyond that of early-stage prostate cancer and of course, as you know, we have the ongoing combination studies of MGC018 and lorigerlimab in seven different tumor types. Based on the results of those studies, we can guide us in other solid tumor indications going forward with MGC018. Now with regard to the question you had about MGD024 with respect to flotetuzumab, as we've outlined in the last ASH meeting, we are very encouraged that the use of MGD024, both based on the better profiled and reducing cytokine release, as well as intermittent dosing will allow a much broader application of MGD024 beyond what we were able to do with flotetuzumab, both in late-line refractory patients as well as patients with early disease. In particular, we are extremely encouraged by the combination studies we had with MGD024 and other standard therapies and look to using this quite broadly after we initially do the dose escalation studies in patients with relapsed refractory disease. We're also looking at the opportunity of MGD024 beyond AML using it in tumor settings where CD123 is overexpressed, including myelodysplastic syndrome and other indications. So, there is certainly a differentiation and expansion of our intended use for MGD024 providing some of the rationale of why we stopped further pursuing the refractory development.

Operator, Operator

Our next question comes from David Dai from SMBC.

David Dai, Analyst

Thank you for taking my questions. I have a couple of inquiries. First, regarding MGC018, in the Phase 1 dose expansion study presented at ESMO last year, we noted that about 30% of patients experienced dose reductions and 55% of mCRPC patients had dose interruptions. Can you share what the lowest dose level was for those who had a dose reduction? Additionally, how long were the dose interruptions for these patients? Lastly, how should we interpret the implications of the reduced dose regimen for the TAMARACK trial, the Phase 2/3 study?

Scott Koenig, President and Chief Executive Officer

David, thank you very much for that question. And, obviously, we have spent a lot of time analyzing the data that we extracted from the study, not only in patients with prostate cancer but also those that we tested in other solid tumor indications. Again, just to refresh everyone's memory, the expansion cohorts for the studies have started out with a 3 mg per kg dosing to a three-week level. It turns out the majority of patients had either dose reductions or holding doses with longer periods before the patients were restarting dosing, largely due to side effect profiles. We took this into account, we looked at the full dataset from all patients treated with MGC018 and identified the ultimate dose that every patient was ultimately treated with during the course of therapy, and came out with an average amount of drug that was delivered to those patients. We sized up those results with their clinical responses, both in terms of side effect profiles as well as responsiveness. And by doing this, we were highlighting particular side effects that seemed most problematic to the continued treatment of patients. Ones that we highlighted before were hand-foot syndrome, where while the majority of patients had only Grade 1 or Grade 2 side effect profiles, very few Grade 3s, it turned out a significant number of patients had Grade 2s, which was manifested by the appearance of pain in those patients, causing many of those patients to stop continuing treatment. When we did an analysis of the actual dose that was both effective in inducing responsiveness, as well as reducing the incidence and severity of side effects, we saw a difference that fell in the range that we ultimately decided on treating these patients, 2 mg per kg on a Q4 weekly basis, up to 2.7 mg per kg on a Q4 weekly basis. So, we've boxed in that dosing range to ultimately move forward in this Phase 2 components of the Phase 2/3 study.

Operator, Operator

Our next question comes from Stephen Willey from Stifel.

Stephen Willey, Analyst

Yes, good afternoon. Thanks for taking the questions. Maybe just with respect to MGD024, is there anything that you can say about, I guess, how you're dosing this drug during cycle one? Is it just a flat dose that you're administering? Is there going to be some attempt to migrate over to some kind of titration regimen? And then if you could speak to the pre-medication that you're using as well, that'd be helpful. And then just had a quick follow-up on TAMARACK?

Scott Koenig, President and Chief Executive Officer

Yes. Steve, based on interactions with the FDA, we started out with MABEL dosing of this drug this was a requirement. And as you know, we spent a lot of time with flotetuzumab ultimately getting a dose escalation and a increase, particularly on the flotetuzumab in the first week. We ultimately believe on the dosing that this can be based on either weight or body weight or on a flat dosing regimen going forward. So, we'll have to see how that goes. But if particularly, it's at lower doses, we expect those to move up quite quickly, but we'll have to see as we move up the line.

Stephen Willey, Analyst

Can you discuss the number of sites you plan to use to enroll the 150 patients for TAMARACK? Additionally, when should we expect the interim analysis of the efficacy data to be presented? Will it rely on a specific threshold number of radiographic progression events, and is there anything you can share about that?

Scott Koenig, President and Chief Executive Officer

So with regard to number of sites, we haven't come up with a final number. We're obviously starting given the regulatory timing of things with US sites. Our plan is to have this as a worldwide study in the US, Europe, and Asia. So, I can't come up with a specific number that we will ultimately end up with. Obviously, it will be a large number of double digits initially as we do the Phase 2 study, then we'll expand – the intent would be to expand as we move over from Phase 2 to Phase 3. We hope by the time we start the enrollment at the end of the year, we'll be able to give a little bit more precision on site engagement and plans for expansion, especially when we get the feedback from the European sites. With regard to the analysis of the data we have, predefined analysis defined in our protocol that is being given to the DSMB. Again, we're not at liberty right now to disclose what those specifics will include, obviously, response rates going forward. We obviously have also had the ability to amend that at any particular time during the course of that Phase 2 study. There will be a futility analysis that is incorporated in this during the course of enrollment. Again, the plan is to enroll 150 patients in those three groups: two experimental groups and one control group.

Operator, Operator

Our next question comes from Etzer Darout from BMO Capital Markets.

Etzer Darout, Analyst

Great. Thanks for taking the question. Just again on MGC018. Just wondered if you could speak to a little bit about perhaps the population of patients that you'll look at in the metastatic castration-resistant prostate cancer cohort? Should we think about it similar to what you looked at in the Phase 1/2? And then maybe if you can, again, speak to any appropriate benchmarks we should think about now for that study in terms of how to kind of compare responses that we'll see at interim analysis?

Scott Koenig, President and Chief Executive Officer

Thank you for that question regarding TAMARACK. Similar to what we observed in the expansion cohort of 40 patients, this will involve metastatic castration-resistant prostate cancer patients who have received one prior androgen-receptor targeting agent and one prior docetaxel regimen. We will also permit up to one prior cabazitaxel regimen, although that is optional, but no other prior chemotherapy. The patients will be categorized based on visceral disease and prior cabazitaxel treatment, as well as regional analysis of the drug. The benchmarks will vary depending on the lines of therapy, and as you know, there is a wide range of baseline responses for overall response rates, which can last from two to four months based on previous treatments. Due to this variability and the evolving treatment landscape for these patients, as well as the introduction of new agents in the metastatic market, we will include a control group. This will allow us to effectively benchmark against the current status of patients.

Operator, Operator

Our next question comes from Kim Masaga from FactSet. Your line is open. Please go ahead.

Scott Koenig, President and Chief Executive Officer

We can skip to the next one.

Operator, Operator

Our next question comes from Jonathan Chang from SVB Securities.

Faisal Khurshid, Analyst

Hi, guys. Thanks for taking the question. This is Faisal Khurshid on for Jonathan. I wanted to ask about the MGC018 plus lorigerlimab combination. Can you remind us the study design here, in particular, what dose of MGC018 is being used? And then also, when we might be able to see data for that combination?

Scott Koenig, President and Chief Executive Officer

The initial dose for MGC018 is 1 mg per kg, administered on a weekly basis starting in the fourth quarter. For lorigerlimab, the dose is 6 mg per kg, following the same dosing schedule. We plan to increase the MGC018 dosage, with the next expected dose being 2 mg per kg, and we will have other dosing intervals. Adjustments may be necessary based on side effects, but currently, we are focusing on advancing the lorigerlimab dose both as a standalone treatment and in combination, while gradually increasing the MGC018 dosage.

Operator, Operator

Our next question comes from Charles Zhu from Guggenheim.

Unidentified Analyst, Analyst

This is Edward on for Charles. Maybe regarding MGC018 and apologies if I missed this, but are you planning to present some of the expansion data that you had on the old dosing regimen? I think you talked about last time about maybe later this year, having some prostate and melanoma data.

Scott Koenig, President and Chief Executive Officer

Yeah, so thanks very much for the question. At the time, we discussed this, we were intending to add an expansion cohort for melanoma. And as you've heard today, with regard to the prioritization of the program, one of the things we said we're going to hold off on was adding additional patients to the melanoma cohort at this time, despite the encouraging data that we had seen. So our plans right now on updates on this program will depend on when we are going to initiate additional studies with other indications. At that time, we've got to update everyone regarding our experience with these other indications. So for the prostate, we have our feedback from the key experts from the regulators and the plan going forward with regard to the TAMARACK study. So right now, further updates on this will come in some sort of scientific publication at a future date.

Operator, Operator

Our final question comes from Peter Lawson from Barclays.

Unidentified Analyst, Analyst

This is Shay on for Peter Lawson. Thanks for taking the question. With the restructuring, could you help us how we should be thinking about the operational expenses for the remainder of 2022 and through 2023? Thank you.

Scott Koenig, President and Chief Executive Officer

We're not providing specific guidance today regarding expenses. However, we do want to share the information about our cash runway. The expected savings from headcount reductions should be about $10 million annually on a steady-state basis. This won’t apply to this year since we are already more than halfway through, but it reflects the full savings expected from the approximately 15% reduction in force.

Unidentified Analyst, Analyst

Thank you.

Operator, Operator

We do have a final question from Jim Masaga from FactSet. At this time, I would now like to turn the call over to Dr. Scott Koenig for closing remarks.

Scott Koenig, President and Chief Executive Officer

Thank you, everyone, for joining our call today. We look forward to updating you on the progress of our various programs in the near future. We hope you have a good evening.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's call. Thank you for your participation. You may now disconnect.