MacroGenics, Inc.
Q3 2016 Earnings Call Transcript

Published: 3 Nov 2016

[Operator:]

Good afternoon. We will begin the MacroGenics’ 2016 Third Quarter Conference Call in just a moment. All participants are in a listen-only mode at the 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 Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

[Jim Karrels:]

Thank you operator. Good afternoon and welcome to MacroGenics’ conference call to discuss our third quarter financial and operational results. For anyone who has not had the chance to review our results, we issued a press release this afternoon outlining today’s announcements, which is available under the Investors tab on our Web site at www.macrogenics.com. You can 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’d like to alert our 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. Now I will turn the call over to Dr. Scott Koenig, MacroGenics’ President and Chief Executive Officer.

[Scott Koenig:]

Thank you Jim. I would like to welcome everyone participating via conference call and webcast today. Thank you for joining us. I’m glad to report that during the third quarter MacroGenics continued to make good progress on our clinical developments as we advance our growing portfolio of potential treatment options for cancer autoimmune disorders and infectious diseases. This part of the business is attributable to our first-in-class antibody-based technology, including our Fc Optimization platform, which modulates antibody direction with immune effector cell. Our DART® platform that enables the targeting of two antibody specificities to a single recumbent molecule and the Trident platform, we announced last year that allows us to create molecules with three specificities. Through our progress and success in the clinic we remained focused on our greater problem of researching and developing treatment options for patients suffering from these diseases. And we believe we are moving in the right direction. As always, I will use our time today to review our growing portfolio of antibody based programs beginning with our most advanced clinical candidate in our portfolio margetuximab, for which we continue to enroll patients and activate two clinical sites in our Phase 3 SOPHIA trail for HER2-positive metastatic breast cancer. I will then toggle around B7-H3 franchise, which continues to advance to our ongoing trials of enoblituzumab and MGD009, as well our growing pipeline of DART molecules. As further demonstration of the continued expansion of our overall portfolio, I am pleased to announce the on time filing and FDA clearance of an investigation of new drug application for MGA012 and we’ve remained on track to submit two additional INDs in 2107. I will provide more details on these critical developments and upgrade our pipeline shortly, but now I would like to turn the call over to Jim to give an out review of our financial results.

[Jim Karrels:]

Thank you Scott. This afternoon we reported financial results with expenses generally in line with our expectations. Briefly as we’ve described in our release, MacroGenics had research and development expenses of $33.3 million for the quarter ended September 30, 2016, compared to $24.1 million for the quarter ended September 30, 2015. This increase was due primarily to increased activity in our preclinical immune checkpoint programs including MGD013, MGD014, which is funded by NIAID and NIH and the initiation of two Phase 1 clinical trials combining enoblituzumab with other compounds. We had general and administrative expenses of $7.2 million for the quarter ended September 30, 2016, compared to $6 million for the quarter ended September 30, 2015. This increase is primarily due to increased staff, recruiting costs and stock based compensation expense. On the revenue side, we reported total revenues consisting primarily of revenues from collaborative agreements of $33.3 million for the quarter ended September 30, 2016, compared to $14.7 million for the quarter ended September 30, 2015. This decrease was primarily due to recognition of a onetime milestone received from Janssen Biotech in 2015. For the quarter ended September 30, 2016 we had a net loss of $33.9 million compared to a net loss of $15.4 for the quarter ended September 30, 2015. Our cash, cash equivalents and marketable securities balance as of September 30, 2016 was $314.1 million. Based on our current operating plan, we believe that our cash, cash equivalent and marketable securities, combined with collaboration payments we anticipate receiving should fund MacroGenics’ operations for approximately two years assuming all of our programs and collaborations advance as currently contemplated. Finally, let me quickly mention that today we filed a shelf registration statement with the SEC. This provides us with flexibility to access the equity or debt capital markets most efficiently should the need arise. However, we have no immediate plan to undertake an offering. Rather we think that this registration as forward-looking and represent good financial planning. In that vein, we also filed an S-8 with the SEC today that relates to an employee stock purchase plan for our employees. And with that I will hand all that to Scott.

[Scott Koenig:]

Thank you, Jim. We ended the quarter with nine programs in clinical development between MacroGenics and our partners, with six DART molecules in Phase 1 clinical development. Two of these molecules are being advanced by our partners Janssen and Pfizer for the development of MGD011 or duvortuxizumab and PF-06671008 respectively. We believe we have created a strategy that those who didn’t have clinical development with externalized development opportunity through partner collaborations and allowed us to extend our pipeline and build value for stockholders. We continue to identify, discover and design antibodies in biological molecules and antibody-based molecules with therapeutic potential and I’m pleased to be meeting our goal of submitting at least one IND per year in 2016 with the expectation that we’ll submit two more in 2017. Before I dive into program updates, I will quickly mention that we announced in our earnings release today that we plan to host an R&D Day in New York on Tuesday, December 13, beginning at 8

[Operator:]

[Operator Instructions] Our first question comes from Michael Schmidt with Leerink Partners. Your line is open.

[Michael Schmidt:]

Thanks for taking my questions. I had one in margetuximab, question on enrollment in this trial, how is that going and if any guidance regarding timing of a potential interim analysis in this study?

[Scott Koenig:]

Thanks for the question Michael. As I had noted on our previous call and then on today’s call we have now advanced the startup to about 90% of the sites in now Europe and the U.S. So there’s been a nice uptick there, there’s also been a nice uptick in terms of enrollment over the last two months. And so what I plan to do at the time of our R&D meeting to provide a little bit more precision about our estimates with regard to the completion of enrollment and readout of data. So I would wait until next month to give you a little bit of a better idea. At this point as we had previously indicated we expected from the start of the trial, which was late last year, it would take about three years to enroll the study. I think again we’re in that time frame and my expectation is to provide little more detail next month. With regard to an interim analysis we had indicated and we intend to conduct a futility analysis when we reach a certain number of endpoints. And my expectation is still that this will occur in 2017.

[Michael Schmidt:]

Great thanks and one regarding MGD011, the CD19 ADC that’s partnered with Janssen. One of the studies was listed as suspended on clinicaltrials.gov, you’ve received some questions on that a while ago. I was wondering if you have some more information around that study.

[Scott Koenig:]

I have no word new update about that study as reported by Janssen. This was a study that was designed to look at MGD011 in combination with Imbruvica. As we understand it answer that gotten questions back with the IND filing from the FDA that would require a little bit more time to respond. The expectations as related to us was that this would not delay the start of the study, but we have not heard any further update since that initial announcement.

[Michael Schmidt:]

Great, thank you Scott.

[Scott Koenig:]

Thanks Michael.

[Operator:]

Thank. Your next question comes from Boris Peaker with Cowen & Company. Your line is open.

[Boris Peaker:]

Great, so my first question on the SOPHIA study, I’m just curious what fraction of patients are coming from Europe versus the U.S.? And how do those patients differ in terms of their baseline characteristics?

[Scott Koenig:]

Thanks so much Boris. At this point we are enrolling both in the U.S. and Europe. So I can’t give you any sense right now, where with what the balance will be between European and U.S. patients are allowed to enroll from either the continent. But right now it looks to be pretty consistent and equivalent. With regard to the type of patients that are enrolling, I haven’t heard any noted differences in those patients at this point.

[Boris Peaker:]

Got you. And also in terms of catalysts coming up, I mean, certainly your Analyst Day is going to be very important, but that is right after ASH. I’m just curious, anything that you will be presenting at the ASH meeting?

[Scott Koenig:]

At this point, there will be, I think, some submissions on trials in progress. But I think some of the data that we intend to present notably this year will be at the time of our R&D meeting.

[Boris Peaker:]

Got you. And so my last question is I certainly have a very broad pipeline in the J&J deal has been very important to the story. I’m just curious, are there any ongoing licensing partnership discussion maybe kind of in a somewhat advanced stages or should we be expecting something in 2017, in terms of partnering, licensing?

[Scott Koenig:]

What I’ve noted before, we have a very active business development group that is always engaging various parties, given the broadness of our pipeline, both pre-clinically and clinically that we either fully own – for many of these assets, we fully own, there’s clear interest in continuing to have a dialogue with companies. The one I would most know which I have made comments on before was with MGD010 was after the announcement that Takeda was not going to pursue whatever mean indications. We have received a lot of in-bound calls about this program and we continue to discuss this opportunity with various partners. And we are analyzing whether this is best served through a new partnership or advancing the program further ourselves. So nothing that is in pending near term, but there clearly is after discussions around that asset. And around several other pre-clinical assets, there are discussions, but nothing that’s eminent.

[Boris Peaker:]

Great, well congratulations on the progress and thank you for taking my questions.

[Scott Koenig:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Stephen Willey with Stifel. Your line is open.

[Philomena Kamya:]

Hi, this is Philomena Kamya in for Stephen Willey. Thanks for taking my questions. I just wanted to have a little bit more context with respect to the type of immunological information we will be receiving from the MGD010 program. You mentioned the modulation of antibody specific immune responses. If you just contextualize that that would be great.

[Jim Karrels:]

Thanks very much Philomena. As we noted and what was presented at the EULAR Meeting, we are very excited about the mechanism of this molecule, having demonstrated pre-clinically that we can inhibit signaling of B cells by co-engaging CD32B and CD79. We had demonstrated that you are with the initial data as of that point, that we were reproducing the inhibitory activity in B-cells. And this is also manifested by changes in surface signaling molecules, including surface IG, as well as CD40. And there was a dose-dependent reduction in circulating IGM levels, which would be consistent with the co-expression of these receptors on B cell plasma glass. We think that the current ongoing study right now which they said which just finished enrollment, is asking a more detailed question of beyond the reduction in IG levels can we see modulation in specific immune responses. Here in the current case we’re immunizing we have the vaccine to Hepatitis A. We’re co-administering about the same time the MGD010 molecule. So it would be very interesting if this leads to a change in the antibody responses and we will also obviously look again at the distribution of various activation molecules on the surface of these B cells during the conduct of the analysis. We will obviously look towards future use of this in multi dosing, obviously in the use of specific auto immune disease, but those that will be conducted in the future trial.

[Philomena Kamya:]

And sorry if I could just ask one follow up question, do you think that there is a role that this kind of mechanism can play in infectious disease setting perhaps?

[Jim Karrels:]

So in a setting of a specific immune response we would not want to likely down regulate a specific immunity in infectious diseases. There we would obviously like to do the opposite is to enhance immunity and obviously – and as you know we are using our DART platform in other ways either from targeting combination checkpoints, or recruiting T-cells or other immune cells to enhance immunity for infectious diseases. That certainly was the case of our MGD014 molecule where we are looking to eliminate the latent HIV infection. We are looking at the potential of similar mechanisms in the future for other infectious diseases. But for MGD010 per se I don’t think it would be useful outcome to treat infectious diseases there.

[Philomena Kamya:]

I am sorry just I was referencing the modulation of an antibody specific immune response [indiscernible].

[Jim Karrels:]

Okay. I thought this specific molecule. Absolutely there clearly is opportunity from our platform to enhance immunity against infectious diseases, but certainly not with 010.

[Philomena Kamya:]

Thank you very much.

[Scott Koenig:]

Yes.

[Operator:]

Thank you. Our next question comes from David Nierengarten with Wedbush Securities. Your line is open.

[Unidentified Analyst:]

Hi this is Dilip sitting in for David. Just want to get your thoughts on the hope [ph] that was placed on a J&J study of CD123 x CD3 bio specific, that they were developing I believe with Genmab, what impact or read through do you believe this provides for the MGD006 program? Thanks.

[Scott Koenig:]

So I am again my knowledge about the particular hold there is what is available to the public. My understanding is this that soon after the start of the trial that we’re placed on clinical hold presumably for a safety concern. What I can say quite clearly is that we continue to enroll patients in our study of MGD006 targeting CD123 and CD3. As I have noted previously we have been very diligent in slowly moving up the dosing of our drug and looking at alternative dosing regiments to provide the best safety and ultimately efficacy signals for this molecule. And we continue on track with its development. And to date have no indication that the response by the FDA to J&J’s molecules has any implications for us.

[Operator:]

Thank you. Our next question comes from Debjit Chattopadhyay with Janney. Your line is open.

[Debjit Chattopadhyay:]

Hey thank you Scott for taking the question. So on the gpA33, any further updates on narrowing down either the dose of the dosing schedule. You had referred to it in the prior conference call? A - Scott Koenig` Yes, thanks for the question Debjit. Again as I have indicated on previous calls and various meetings, we are very excited about the potential for MGD007 targeting gpA33 and CD3. And as I have noted previously one of the challenges for this specific target in molecule is the expression of the antigen not only on colorectal cancers, but on the normal GI tract, which includes the colon, small intestine and the stomach. As I indicated previously, we had moved to looking at some alterations and pre-medications for the patients looking at alternative dosing, we have enrolled several patients, since we last spoke and continue with the plan to enroll additional patients. So right now, it’s still too early, whether we will be able to achieve the – an acceptable dose that provides the therapeutic range for safety and efficacy. We are including in those studies biopsying tissues from those patients to look at the infiltration of T-cells, looking at hopefully in analyzing the localization of the drug, as well. So it’s still too early. And as I indicated on the call earlier today, we hope to be able to update everybody, sometime in the first part of next year.

[Debjit Chattopadhyay:]

And then on the B7-H3 program, the combo studies with check-point, you mentioned it has moved onto the dose expansion phase, in terms of the dosing for B7-H3 by itself, how does that compare to the dose that you shared in the last Investor Day?

[Scott Koenig:]

Yes, so with regard to enoblituzumab, remember we have two molecules in clinical developments, so when we be clear that for enoblituzumab we have advanced enoblituzumab combination with pembrolizumab to the expansion cohort. And the dosing there is, as I had noted before is 50 mg/kg of MGA271 or enoblituzumab and 2 mg/kg of pembrolizumab, which is being given every three weeks.

[Debjit Chattopadhyay:]

And at the – sorry go ahead.

[Scott Koenig:]

No and as I said before, we are still in the last cohort, with the combo with the ipilimumab and hopefully we’ll be able to flip over very soon to the expansion for that as well.

[Debjit Chattopadhyay:]

Great and one last question, at your upcoming Investor Day, you said you will be sharing some of the B7-H3 monotherapy data. Beyond the B7-H3, any other programs that you plan to highlight, especially from a clinical perspective? Thank you, so much.

[Scott Koenig:]

As I noted earlier today, we’ll provide the update really of the journey we’ve been taking with MGD006. So we will include that – obviously the monotherapy for enoblituzumab. But we expect to provide you additional data, both on clinical, as well as pre-clinical program. So stay tuned.

[Debjit Chattopadhyay:]

Thank you so much Scott.

[Scott Koenig:]

Yes.

[Operator:]

Thank you. [Operator Instructions] And I am showing, no further questions. This concludes the question-and-answer session. I will now turn the call back to Dr. Koenig for closing remarks.

[Scott Koenig:]

Thank you operator. And thanks to everyone listening and participating. As always, we appreciate your interest and look forward to seeing many of you at our R&D Day in December. Have a good afternoon.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, you may all disconnect. Everyone have a great day.