MacroGenics, Inc.
Q2 2015 Earnings Call Transcript

Published: 5 Aug 2015

[Scott Koenig:]

Thank you, Jim. As always, I welcome everyone participating via conference call and webcast today. Thank you for joining us. I’d like to touch on three themes during this call that we consider essential to MacroGenics in our efforts to direct the immune system to treat cancer and other diseases. Those themes are MacroGenics’ diversified pipeline of novel clinical development candidates including margetuximab, a next-generation anti-HER2 antibody that has just commenced Phase 3 testing. MGA271, a first-in-class anti- B7-H3 antibody and several novel bi-specific DART molecules that have been strategically positioned to address unmet medical needs in patients with hematological malignancies and solid tumors as well as autoimmune disease. Second, our research including the antibody engineering expertise and target discovery efforts that are at the heart of our company. Our research and engineering efforts are constantly replenishing and strengthening our pipeline with additional development candidates in new data and third, advances in our operational infrastructure, which underpins our growing portfolio of programs. Following that, we’d be glad to have a discussion during the Q&A period, but first, I’ll ask Jim to conduct a review of our key financials.

[James Karrels:]

Thank you, Scott. This afternoon we reported financial results in line with our expectations briefly as we described in our release MacroGenics had research and development expenses of $22.7 million for the three months period ended June 30, 2015 compared to $17.3 million for the three months period ended June 30, 2014. This increase was primarily due to the clinical study preparations for the margetuximab Phase 3 SOPHIA study, the commencement of a DART Phase 1 Study and increased activity related to IND preparations for MGD009. Some of these expenses were offset by decrease in MGD011 spending after this program is transferred to Janssen following our submission of the IND in March. We had general and administrative expenses of $5.3 million for the three-month period ended June 30, 2015, compared to $4.1 million for the three-month period ended June 30, 2014, primarily due to higher stock-based compensation expense and labor costs, as well as information technology-related expenses. We recorded total revenues consisting primarily of revenue from collaborative research of $6.7 million for the three month period ended June 30, 2015 compared to $9.2 million for the three month period ended June 30, 2014. Collaborative research revenue includes the recognition of deferred revenue from payments received in previous periods as well as payments received during the year. For the quarter ended June 30, 2015, we had a net loss of $21.4 million compared to a net loss of $12.3 million for the three month period ended June 30, 2014. As of June 30, 2015, our cash and cash equivalents were $235 million, compared to $157.6 million as of December 31, 2014. Subsequent to the close of the quarter we completed an equity offering of 4,053,750 shares including full exercise of the underwriters' overallotment option generating net proceeds to MacroGenics of $141 million. In addition, as we announced last week, our collaboration partner, Janssen Biotech Inc. chose the first patient in the Phase 1 study of MGD011 which triggered the achievement of a $10 million milestone. Based on the company’s current cash balance, we believe that we continue to be in a good position to advance our growing pipeline of product candidates along with our recently announced efforts to accelerate the development of checkpoint inhibitor-based molecules and the planned expansion of our manufacturing capacity for anticipated clinical and commercial needs. With that, I will hand the call back to Scott.

[Scott Koenig:]

Thanks, Jim. Again I’ll review our pipeline, our platform and then touch on operational infrastructure before we open up the call to your questions. Our pipeline as I have often emphasized, is deep in terms of its number of product candidates as well as the very indications we are pursuing. We are part of the fact that each of these candidates was generated using MacroGenics’ proprietary platform which includes our Fc-optimization, Dual Affinity Re-Targeting or DART and cancer stem like cell technology. Starting off, I am very pleased to announce that we recently enrolled the first patient in the pivotal Phase 3 SOPHIA Study of margetuximab in patients with metastatic breast cancer. As a brief review SOPHIA is a pivotal study on margetuximab plus chemotherapy in patients with third-line metastatic breast cancer. A total of 530 patients with higher levels of HER-2 expressions will be enrolled in this study. For these purposes, we mean expression of HER-2 at the 3+ level by immunohistochemistry or 2+ level by IHC with gene amplification. Eligible patients who have progressed on earlier lines of HER-2 directed therapy. This is important to note when considering the potential position for margetuximab in the treatment landscape as there is currently no consensus regarding the standard of care for treatment of HER-2 positive patients who have progressed despite standard first and second-line treatments. As many of you know, data from our Phase 1 study margetuximab represented at the ASCO Annual Meeting earlier in the quarter. To summarize, monotherapy anti-tumor activity was observed across several tumor types including patients with gastric, colorectal and head and neck cancer, as well as patients with breast cancer who had received extensive prior therapy and progressed on prior HER-2 directed therapy. Tumor reductions were observed in 13 of 19 evaluable patients with breast cancer including 4 of 19 patients with confirmed partial responses. The most common adverse events were grade 1 to 2 constitutional symptoms and infusion-related reactions. These data reinforce both the safety profile of margetuximab as well as the rationale for the SOPHIA study. Finally, we continue to advance our efforts to initiate a Phase 1(2) combination study in gastroesophageal cancer later this year. MGA271 is our FC-engineered antibody that targets B7-H3, a member of the B7 family of molecules involved in immune regulation. We are currently enrolling patients in multiple Phase 1 expansion cohorts across various tumor types including the triple-negative breast cancer, head and neck cancer, renal cell cancer, melanoma in patients who have progressed despite prior checkpoint inhibitor treatments, non-small cell lung cancer and bladder cancer. Further, we are leveraging the potential power of immunotherapy combinations via the investigation of MGA271 in combination with checkpoint inhibitors including ipilimumab and pembrolizumab in patients with B7-H3 positive melanoma, non-small cell lung cancer and head and neck cancers. The study of MGA271 in combination with ipilimumab has begun already and we anticipate the combination of pembrolizumab will begin in this quarter. Looking forward, we expect to present clinical data from the ongoing clinical study of MGA271 in the fourth quarter. I would like to next discuss our DART portfolio. We believe that our DART platform offers significant benefits over competing by specific technologies and we are actively engineering DART molecules to exploit the therapeutic possibility enabled by simultaneously accessing a combination of target. The versatility of our DART platform allows for the generation of antibody-based molecules with a variety of intended mechanisms of actions including re-directing T-Cells to cancer targets, cross-linking targets on the same cells to up or down regulated signals such as in an autoimmune disorders, simultaneously targeting multiple checkpoint inhibitors or targeting multiple infectious disease targets. Our first new clinical candidates are in the redirected T-cell category, we have one in the autoimmune category and additional research efforts are underway in all four categories. First off, MacroGenics is currently enrolling a study of MGD006, a DART molecule that recognizes both CD123 and CD3. CD123 is expressed on leukemia and leukemic stem cells. The primary mechanism of action of MGD006 is its ability to redirect T-cells via their CD3 component secure these CD123 expressing cells. MacroGenics continues to enroll patients in the DART escalation portion of a Phase 1 study of MGD006 in the treatment of acute myeloid leukemia. Second on this list is MGD007, our first clinical DART molecule designed to target solid tumors and to have prolonged circulating pharmacokinetics. MGD007 recognizes both the glycoprotein A33 antigen or GPA33and CD3. GPA33 is a gastrointestinal antigen that is highly expressed in patients with colorectal cancer. The primary mechanism of action of MGD007 is its ability to redirect T-cells via their CD3 component to kill GPA33 expressing cells. We are beginning to enroll patients in the dose escalation portion of a Phase 1 study of MGD007 for the treatment of patients with colorectal cancer. Third on our list of DART molecules in clinical evaluation is MGD011, a DART that targets CD3 and CD19, a key targeted effort to treat B-cells immunological malignancies through immune modulation. MGD011 is designed to redirect T-cells be it in their CD3 component to eliminate cells expressing CD19, a marker expressed in B-cell malignancies. MGD011 is engineered to achieve favorable pharmacokinetic properties that enables convenient intermittent dosing regimens in the clinical setting, something that is not possible with Blinatumomab that currently approved by specific molecule for treating patients with ALL. As you may recall, Janssen is developing MGD011, also known as J&J 6405 2781 under our partnership we announced last December. Importantly, the first patient was treated in an open-label Phase 1 study in late July which triggered a $10 million milestone payment to MacroGenics. This Phase 1 study will evaluate the safety, tolerability, and preliminary clinical activity of MGD011 when administered to patients with relapsed or refractory B-cell malignancies including the diffuse large B-cell lymphoma, follicular lymphoma, mantle cell lymphoma, chronic lymphocytic leukemia and acute lymphoblastic leukemia. We are excited about the development of MGD011 and retain options to co-promote the product in the United States and Canada, as well as to invest in later-stage development in exchange for a share of potential profit. Fourth, in the autoimmune category, MGD010 is a DART molecule that simultaneously targets CD32b and CD79b, two B-cell surface proteins. MGD010 is engineered to enable extended pharmacokinetics without imparting other FC-effective function. MGD010 is being developed for the treatment of autoimmune disorders and is designed to inhibit B-cell activation by exploring the inhibitory function of CD32b, a checkpoint molecule expressed by B-cells. We continue to enroll patients in a Phase 1 a study of MGD010 in normal healthy volunteers which we expect it will be completed in 2016. Finally, regarding the DART programs that we will discuss today, we expect that our fifth DART molecule MGD009, a molecule that can target multiple tumor types will be in the clinic by year-end and it’s worth noting that MacroGenics retains 100% of worldwide development and commercialization rights to MGD009. We look forward to sharing with you the molecular targets of MGD009 and the indications we intend to pursue with this molecule in the near future. I’ll conclude with a few words about the developments of our operational infrastructure that parallel the growth of our expanding pipeline that I just described. As I mentioned at the outset, our operations play a key role in supporting the promising R&D efforts that I described. We’ve made important accomplishments across several operational areas recently and I want to outline them here. As Jim described, in July, we completed a follow-on offering raising $141 million in net proceeds which includes the full exercising of the underwriters overallotment option. These additional financial resources considerably bolster our already strong balance sheet. We intend to use a portion of the proceeds of this offering to expand our manufacturing capacity to accelerate the development of – as we have undisclosed immune checkpoint based product candidates and to advance other research and development programs. Pursuant to my comments about manufacturing, I want to highlight that we recently signed a lease for additional space with a focus on expanding our manufacturing capability. With this initiative, we are taking steps to ensure that we can meet the material needs of our development plans as we advance our product candidates through clinical studies with an eye towards potential future commercialization of material produced in this facility. We intend to complete the initial design for this new manufacturing space this year and will subsequently initiate the build out. Finally, to provide additional insights around our technology platform as well as our various clinical programs, we plan to host an R&D Day in New York on Tuesday, October 13, 2015. I am extremely enthusiastic about this event and we will provide additional details soon. We hope to see you there. With that, I’ll ask the operator to open the call to questions. Operator?

[James Karrels:]

Apparently, we cannot hear the operator. We are trying to…

[Scott Koenig:]

We cannot hear anything on this side.

[James Karrels:]

He says, he is speaking on another line. We can hear him.

[Operator:]

Hello there, sir.

[James Karrels:]

Yes, we haven’t heard anything.

[Operator:]

Yes sir, I think we had a technical difficulty in my computer. I apologize for the delay there. [Operator Instructions] Our first question comes from Michael Schmidt of Leerink. Your line is open.

[Michael Schmidt:]

Hey, good afternoon and thanks for taking my questions. Scott, I just had one MGA271. I guess, could you provide some more color the breadth and depth of data that you’ve planned to present later this year?

[Scott Koenig:]

Yes, Michael, thanks very much for the question. As we’ve indicated in the fourth quarter, we’ve planned to present the original monotherapy cohort, as you recall, we had a dose escalation up to 15 mgs per kg of MGA271. We then did three expansion cohorts of approximately 15 patients each which included patients with melanoma prostate cancer and then a mixed basket of other tumors of which no more than five patients about any given tumor type were represented. We will present all that data, plus, as you recall, we started five additional monotherapy cohorts which I’ve outlined including the triple negative breast, head and neck, renal cell cancer, the melanoma group that had progressed on other checkpoints and then the higher expressers in the lung cancer and bladder cancer group. We are still recruiting that monotherapy cohort, I would say, we have just under half of that cohort enrolled. And so patients will still be continue on treatment. So we will present a subset of that data as well. And it will be too early to present any of the data on the combination studies because those are just been initiated.

[Michael Schmidt:]

Great, thanks. And then, I had one on MGD010, the autoimmune DART. How is that being positioned? Is that being positioned as for broad indication or more towards niche autoimmune diseases?

[Scott Koenig:]

The opportunity here is quite a unique one via the mechanism of action of this molecule. By colligating the two receptors on the B-cells and down regulating B-cell activation, which includes the production of auto-antibodies, we think that this can be used potentially quite broadly in both large and this indication. As you recall, Michael, we also had some pre-clinical data in reconstituted immunodeficient mouse models where we showed that we could also impair a T-cell mediate effect preventing a graft-versus-host disease in animals that received MGD010 at the time of reconstitution of those animals. And so there maybe also an ancillary effect on sensitizing T-cells which may also help us to broadly – this molecule to many different autoimmune indications.

[Michael Schmidt:]

Great, terrific. And one more if I may. I recall Pfizer had a pester at ASCO on a DART molecule that they is working on with you and my question is, are there any updates from any of the other partnered programs and what are your expectations for potential milestone or license payments going forward?

[Scott Koenig:]

At this point, though we have ongoing collaborations with a number of different partners, but we are right now at not at liberty to bring new up-to-date on where they are in the development process. These are primarily research relationships and it is incumbent on them to announce their plans for further development. I think the Pfizer opportunity is a great one. They’ve obviously now publicized the fact that they are moving into development with a CD3 and PCAT here in DART like molecule. But at this time, we are not at liberty to discuss any of the other collaborations.

[Michael Schmidt:]

Okay. Great. Thanks so much and congrats on the progress.

[Scott Koenig:]

Thank you so much.

[Operator:]

Thank you. Our next question comes from Christopher Marai of Oppenheimer. Your line is open.

[Christopher Marai:]

Hi, good afternoon. Thanks for taking the question. Just really curious about MGD006, that’s a CD123 CD3 by specific. I guess, that’s enrolling right now in a Phase 1 patients with AML. I was wondering if you could comment on how enrollment in that trial is going if you are encountering any issues, or difficulties. If I recall correctly, this is a continuous infusion molecule. And then, finally any feedback I guess from the physicians with respect to that, any tweaks that you might want to make to that trial? Thanks.

[Scott Koenig:]

Thanks, Chris, I appreciate the comment. As you’ve characterized quite correctly, this is the only DART molecule in which we do not have an FC component to it and so that this molecule has a very short half life and we are administering this as of constant infusion over four days, which time the patients then stop treatment and then we restart the following week four days on three days off, four days on, three days off. As you call when we started this trial, we had one single site at – and currently right now, we have approximately five sites in the US that are recruiting patients. So, while we recognize this is that obviously we had to expand the number of sites to recruit a population that is obviously a difficult one because these patients are acute and often when you are in a screening process, when they are ready to go, they may have a complication even before they enter in the trial. And so, while we started this trial last year, it’s been slower than – obviously I liked it, but, at this point, we continue to do the dose escalation. What I can say is, is that, we are - obviously this is a molecule that we have a partnership with a survey on and we are in plans with them to even expand this program even further to hopefully next year include sites in Europe. And also broadly indications beyond the AML and to other targets which over express CD123. So we expect in 2016 to be able to update you on the clinical progress of this program.

[Christopher Marai:]

Okay, great. And then just on the – I guess, the short half life, I know, you know there maybe some advantage to that in some sense and in some indications, could you maybe elaborate on that? I guess, the question is, where does this fall relative to some potential competition in this space that’s got the longer short acting half life and how do you look to sort of have an advantage there? Thanks.

[Scott Koenig:]

So we are well poised to answer that in the sense that, given that the broad number of different indications in which this molecule can be used, there maybe certain settings where you want that – have the shorter half life. In other cases, you want to have a longer half life. We have right here at the belt and that’s the bearing version of this molecule as an alternative in cases where we want to have an extended half life. But, as this was the first DART molecule we moved to the clinic, we felt that it was most prudent to have the short acting half life where we had the total control both on the safety and an efficacy standpoint. So we had the great latitudes, now that we not only have the experience with the short half life having this year we will have four different other molecules with a long half life to be able to then make a decision whether it is necessary to introduce a longer half life in CD123 molecule. So, we have that latitude.

[Christopher Marai:]

Okay, great. Thanks for the color. Congratulations on the quarter.

[Scott Koenig:]

Thanks so much.

[Operator:]

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

[Unidentified Analyst:]

Hi, this is [Indiscernible] calling in for Stephen Willey. Congratulations on the progress made thus far and a wonderful quarter. I just have a couple of questions with respect to the mechanism of action for the MGA271, B7-H3 molecule. I was wondering if you could just give us some sort of indication as to what you think the mechanism of action is and what the rationale is for the combination with other checkpoint inhibitors please.

[Scott Koenig:]

Well, thank you very much for that question. We are very excited about the prospects of MGA271. It targets a very interesting molecule B7-H3 as you know quite well, there was a very large literature that shows that over expression on almost every solid tumor is associated with a worst clinical outcome when patients tumors bear high levels of this antigen. Mechanistically, we’ve taken advantage of the fact that tumors have high levels of expression but normal tissues have very low levels of expression and so that’s why we were able to design a molecule that incorporated our enhanced FC-receptor engagement. As a consequence, we had shown quite nicely in published data that we can get dramatic increase killing of not only tumor cells that express this antigen, but also cancer stem cells and we have very good evidence that we can control the growth of blood vessels which are associated in the growth of tumors. So mechanistically, we know that the direct killing of that can have a dramatic effect on tumor growth. But in addition, because this molecule has been shown quite nicely to inhibit T-cell activation and the activation of other immune cells, here is the additional possibility that by downgrading reducing of the density of the expression on tumor cells, we may allow some of the adapted immune T-cells to engage in an active immune response. At this point, in the context of a clinical studies, we don’t know right now which mechanism bears the greatest impact on the growth of tumors. There are also other ancillary mechanisms which maybe employed here, the fact is, is that there is a strong literature that shows that B7-H3 maybe involved in tumor cell migration, which may lead to greater metastases and in fact that may also impart a biological function on tumor cells as well. So, we hope as we continue to advance forward with these clinical studies and we begin to acquire tissues from the patients themselves, we’ll be getting a better insight in terms of the impact on the mechanism. Ultimately, the generation of antigen-specific T-cell responses which has been showed to be very important may in fact obviously be favored by combining this and one of these many mechanisms by which MGA271 maybe acting with the reenergizing the T-cells that are found in a tumor compartment.

[Unidentified Analyst:]

Brilliant. That was – thank you so much for answering that. Can I just ask one more question, which is pertaining to D700 or D007, could you just let us know, because you are exploring this particular molecule in a number of indications and do all these indications have evidence of over expression of GPA33? And if so, how would you standardize for that?

[Scott Koenig:]

So let me clarify this and correct it. Currently, the only indication we are pursuing at this time are patients with advanced colorectal cancer.

[Unidentified Analyst:]

Okay.

[Scott Koenig:]

Over 95% of these patients, of cancer cells both primary metastatic cells expressed GPA33. There also is a minority of other GI tumors which also express GPA33 including gastric cancer and pancreatic cancer. So, right now, we are just focusing on the colorectal population. Obviously, this is a somewhat a heterogeneous population, but at this point, we are not distinguishing between different colorectal cancer types.

[Unidentified Analyst:]

Brilliant. Thank you very much and again fantastic quarter.

[Scott Koenig:]

Thank you so much.

[Operator:]

Thank you. Again we apologize for the technical difficulty in queuing participants’ questions. [Operator Instructions] At this time, there is no other questions in queue. I’d like to turn it back to Dr. Koenig for any closing remarks.

[Scott Koenig:]

Thank you operator and thank you all for joining us. I hope to see many of you at our R&D Conference in October. Have a great day.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes your program. You may now disconnect.