MacroGenics, Inc.
Q3 2015 Earnings Call Transcript

Published: 5 Nov 2015

[Operator:]

Good afternoon. We will begin the MacroGenics’ Third Quarter 2015 Conference Call in just a moment. All participants are in 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 announcement, which is available under the Investors tab on our website 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 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. Now, I would like to 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. As always, I thank you for joining us. I would like to use our time today to provide a review of our deep and expanding pipeline of antibody-based therapeutics, which have primarily been created in MacroGenics using our proprietary technologies, including the Fc-optimization platform, the cancer stem cell platform, and of course our multi-specific platforms for making bi-specific DART molecules and tri-specific Trident molecules. As many of you know, we held an R&D Day in October at which members of the MacroGenics team as well as some of our distinguished academic collaborators provided an in-depth look at these technologies and product candidates. Of course, we do not have the time to take such a detailed look today, but I will touch on some highlights and encourage anyone who is interested to view the archived replay and slides of our R&D Day presentations via our website. In short, we focused on several areas, where MacroGenics has made very substantial progress recently, the pivotal SOPHIA trial of margetuximab, the expanding leadership position that we have established in developing therapeutics around the B7-H3 immune regulator target, and the growth of our DART and Trident multi-specific antibody platforms. First, though Jim will provide a brief update on our financial position, which we believe is strong and should enable us to advance promising programs forward to important milestones over the coming quarters.

[Jim 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 $24.1 million for the thee-month period ended September 30, 2015 compared to $18.6 million for the three-month period ended September 30, 2014. This increase was primarily due to preparations for and launch of the margetuximab SOPHIA Phase 3 study, increased activity to prepare for the MGD009 IND submission and costs of other ongoing clinical studies. We had general and administrative expenses of $6 million for the three-month period ended September 30, 2015 compared to $3.7 million for the three-month period ended September 30, 2014 primarily due to higher labor related costs, including stock-based compensation expense and IT related expenses. We have recorded total revenues consisting primarily of revenue from collaborative research of $14.7 million for the three-month period ended September 30, 2015 compared to $18.4 million for the three-month period ended September 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 September 30, 2015, we had a net loss of $15.4 million compared to a net loss of $3.9 million for the three-month period ended September 30, 2014. As of September 30, 2015, our cash and cash equivalents were $365.8 million compared to $157.6 million as of December 31, 2014. This included $141 million in net proceeds from the successful public offering of our stock back in July and a $10 million payment from Janssen for dosing the first patient with MGD011. 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 immunoregulator based molecules, including the PD-1 by LAG-3 DART molecule we previewed at R&D Day a few weeks ago. We expect that our available cash should fund our operations into 2018. With that, I will hand the call back to Scott.

[Scott Koenig:]

Thanks, Jim. Beginning with margetuximab, our Fc-optimized anti-HER2 antibody, we continue to enroll SOPHIA, the pivotal Phase 3 study evaluating margetuximab plus chemotherapy against trastuzumab or Herceptin plus chemotherapy in third line HER-2 positive metastatic breast cancer patients. Recently, in a separate indication, we announced an exciting collaboration with Merck to study margetuximab in combination with Merck’s anti-PD-1 therapy, pembrolizumab, also known as KEYTRUDA in a Phase 1b/2 clinical trial in patients with advanced gastric and gastroesophageal cancer. Pembrolizumab blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2 as the member of the burgeoning class of immunomodulatory antibodies that is demonstrating so much potential in oncology. The Phase 1b/2 multi-center open-label clinical trial will be conducted in two parts. Phase 1b is designed to determine the safety and tolerability in margetuximab in combination with KEYTRUDA in patients with advanced HER-2 positive gastric cancer, while the Phase 2 portion will evaluate the anti-tumor activity of this combination. The recently announced failure of PD-L1 or Kadcyla in patients with second line HER-2 positive advanced gastric cancer provides an excellent opportunity for positioning the combination of margetuximab and pembrolizumab as the potential chemotherapy-free regimen for this indication. We feel that this combination has great potential and look forward to the results of margetuximab together with this immunooncology agent. An area where we spent a great deal of time during our R&D Day was our growing commitment to our B7-H3 franchise. We are extremely enthusiastic about the role of B7-H3 as the potential immune regulator in the treatment of cancer and have therefore provided our technologies across this target to develop multiple molecules with complementary mechanisms of action to create the industry’s leading B7-H3 portfolio. Our B7-H3 franchise includes two clinical molecules, enoblituzumab formerly MGA271 and MGD009, a Dual-Affinity Re-Targeting, or DART molecule targeted at B7-H3 by CD3 as well as earlier preclinical efforts exploring the potential for a B7-H3 directed ADC, or antibody drug conjugate. Enoblituzumab is an Fc-optimized antibody and is our lead clinical B7-H3 directed product candidate. At our R&D Day, we presented data from a Phase 1 study demonstrating that enoblituzumab was well-tolerated overall and is shown encouraging initial single-agent activity, including tumor regression in multiple heavily pretreated patients. In addition, evidence of T-cell immunomodulatory function has been observed in patients treated with enoblituzumab. We are continuing to enroll patients in additional Phase 1 monotherapy expansion cohorts as well as in two combination studies with ipilimumab and pembrolizumab respectively. As we have discussed, data from the ongoing monotherapy study will be presented at a late-breaking abstract presented at SITC on Saturday. Importantly, for MacroGenics we recently regained full development and commercialization rights to enoblituzumab from Servier. As you may recall in late 2011, we had entered into an option agreement with them to take the regional license in Europe and other countries. Last week, Servier provided notification that they would not be exercising that option. So, we now control the worldwide rights to this program. Given the encouraging enoblituzumab single agent data that we have seen thus far, we are very pleased to have regained worldwide rights for this important component of our B7-H3 portfolio. An important disclosure at R&D Day was that MGD009, the second number of this franchise a bi-specific DART molecule targeting B7-H3 and CD3 is now being evaluated in a Phase 1 clinical study across multiple solid tumor types. This DRAT molecule has been designed with the goal of eradicating B7-H3 expressing cancer cells through T-cell engagement and activation with a CD3 component. This product candidate adds another dimension to our broader and promising B7-H3 targeting program. Moving on from our B7-H3 franchise, I would like to speak for a moment about our technologies and particularly the Trident platform that we unveiled in October. We have long belief that the DART platform is the most powerful and flexible bi-specific antibody engineering platform. And again I would encourage anyone who is interested and to find the details in this area to listen to my colleague Ezio Bonvini’s talk during our R&D Day to learn more. Within the industry leading five bi-specific molecules in the clinic, we clearly have a terrific leadership position in this area. It has however always been our goal to extend the utility and promise of our protein engineering capabilities and we are thus expanding from bi-specifics now to tri-specifics. We presented early, but compelling data on two temporary applications of this technology focused on enhancing the specificity and anti-tumor activity of redirected killing and we are excited to continue this new work. I believe that the versatility afforded by multi-specific molecules will allow us to leverage multiple mechanisms that we see are required to be successful in treating cancer and other difficult diseases. While our time is limited, I do want to summarize our efforts in the multi-specific area. Emerging pipeline now has as I mentioned a total five DART molecules in the clinic including of course MGD009. Additionally, we have MGD006 which is CD123/CD3 DART, MGD007 GPA33/CD3, MGD011 CD19/CD3 being developed by Janssen as J&J 6405 2781 and MGD010 CD32B/CD79B. These round-out a significant portfolio of clinical stage bi-specific molecules. This portfolio will further grow as we have recently disclosed two additional preclinical molecules MGD013 and MGD014. Our goal with MGD013 is to extend our reach in the immuno-oncology space by the co-blockade of two immune checkpoint molecules co-expressed on T-cells PD1 and LAG-3 for treatment of diseases spending a wide range of solid tumors and hematological malignancies. Our preclinical data here is very exciting and I look forward to sharing more details as we get closer to IND which we plan for 2017. We look forward to telling you about additional immune regulator product candidates we plan to take into the clinic in coming years. Again, I refer you to our R&D Day presentation for a more detailed look at how we are applying our technology platform in immunooncology. Finally, MGD014 is expected to be our first DART molecule in infectious diseases to enter the clinic and leverages the ability to utilize two separate but complementary targeting mechanisms. MGD014 will be an Fc-bearing DART molecule that targets HIV infected cells and CD3 and is being developed to eliminate latent HIV infection in patients treated with continuous anti- retroviral therapy or cART alone or in combination with latency-reversing agent. MGD014 will be developed under a contract recently awarded by the National Institute of Allergy and Infectious Diseases for up to $24.5 million. I hope this overview has been helpful in understanding the depth and breadth of MacroGenics’ portfolio of antibody based product candidates in oncology and beyond. We are extremely excited about our progress and would now be glad to answer your questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question is from Chris Marai of Oppenheimer. Your line is open sir.

[Michelle Gilson:]

Hi guys. This is actually Michelle on for Chris. We are just wondering for your DART program, how much screening have you done of epitopes or formats to identify your clinical compounds is the most active for each of their respective targets?

[Scott Koenig:]

Thank you, Michelle. Are you asking about any specific DART molecule or just that question in general?

[Michelle Gilson:]

Just in general for the entire platform what kind of screening are you doing?

[Scott Koenig:]

Well, we take a lot of pride in the large inventory of antibodies we have in our portfolio, the variable domains which are derived to create our DART molecule. For example, in the context of the MGD009 that you just recently heard about we are targeting B7-H3. We had over 50 antibodies to B7-H3 that we screen and identified five or more different epitopes. And from that we selected a specific specificity that we incorporated in our DART molecule that produced both the activity we wanted in future or in vivo studies, but also with a very good safety profile as tested in our toxicology studies in primates as well as studies that we can conduct in small animal cells. We do a lot of work with regards to select the right specificity.

[Michelle Gilson:]

Okay, great. And if I can get one more also with respect to your B7-H3 program, we are just wondering what data in the Citi presentation suggest that there is an IO or an immune mediated mechanism beyond just ADCC, I asked because there doesn’t appear to be any immune related toxicities?

[Scott Koenig:]

Again, thank you very much for that question. So let me address the immune-related activity here. First, from the original observation in mice where knockout for the B7-H3 receptor had a very modest effect in reducing autoimmunity much less than it has been observed say with the knockouts of PD-1. And so while we cannot necessarily anticipate the results in humans by targeting this agent, we did suspect that this would be well tolerated and to-date in fact we have seen that to be the case. So no evidence to-date of any autoimmune toxicity associated with the molecule. Getting towards your specific question with regards to immune regulation, well we had announced at our R&D Day is that number one is we have observed an expression of B7-H3 on T-red cells which as you know are important element in inhibiting immune responses. Second, is that in looking at patients treated with enoblituzumab, we have been monitoring particular biomarkers for evidence of immune activation. And in one case we saw for example, looking at serum markers is a signature of increase of gamma interferon induced protein which has been observed in the case of activation of T-cell and in some cases also activation of NK cells. So we had the first evidence that an Fc-optimized antibody could induce responses that was indicative of a cellular response. The second major finding which is quite extraordinary which we are certainly following up on was the observation that when we look at patient’s cells – T-cells in the perforate after treatment with enoblituzumab, we had expansion of particular clones these included both novel clones with particular sequences as well as clones that has been there previously. And this we detected in the periphery of these patients which throughout now that has not been observed with other immune-oncology directed molecules. So we are very excited about the prospects here of actually inducing focused clonal activation of T-cells, which we suspect is due to the generation of responses or expansion of responses to tumor-specific antigens. So, obviously, we are following up with this as we continue to treat more patients both as monotherapy and then – and our recently started studies of looking at the combination of enoblituzumab in patients concomitantly treated either with ipilimumab or pembrolizumab.

[Michelle Gilson:]

Okay, great. Thanks, guys. Congratulations on your abstract and I am sure Chris will see you at SITC.

[Scott Koenig:]

Thank you so much.

[Operator:]

Thank you. Our next question is from Michael Schmidt of Leerink Partners. Your line is open, sir.

[Michael Schmidt:]

Hi, good afternoon and thanks for taking my questions. I had one, Scott, obviously you can’t speak for Servier, but could you give us a sense of what might have been the driver behind the decision not to opt in the enoblituzumab program and also how do you think about this asset strategically now that you own full rights again?

[Scott Koenig:]

Michael, thank you very much for the question. I actually do not know any reason why Servier made that decision as we entered into this collaboration back in 2011 is the partnership of an option-based deal started when the molecule was just entering the clinic. In fact, we negotiated the terms of this even before the first patient was treated. Over the course of the last few years, the entire management within Servier has changed. From the top-down obviously, Dr. Servier has passed on the Head of Oncology on the preclinical research side, the Head of Oncology on the clinical side has changed, the Head of Business Development has changed. So, there is always a complete management switch over there. And so, while there may have been opportunities for them to continue with this program and at the end their priorities may have changed and we really don’t have any specific understanding why they made that decision. With that, given that we have now disclosed beyond enoblituzumab, the study that we initiated with MGD009 targeted B7-H3 and preclinical work that we are conducting using antibodies, conjugated with antibody drug conjugates, we feel we are in a wonderful position obviously to totally control the franchise worldwide. What we ultimately decide to do whether to develop these programs independently or ultimately find another partner to work with us on the franchise will be dictated based on the data and interest of the various parties and opportunities that might be afforded us by having a partner that’s committed to particular development of cancer products of the particular indication. So, we will certainly be updating this with you next year.

[Michael Schmidt:]

Yes, it makes sense. Thanks. And then one on margetuximab regarding the ongoing breast cancer Phase 3 trial, can you remind me if you have an interim analysis planned for that trial?

[Scott Koenig:]

Yes, thank you, Michael. As you know, SOPHIA has started enrolling patients. What we have indicated is that we will do a futility analysis in the middle of the study and we will be giving updates to next year as we begin to understand the trajectory of enrollments and understand when the time for the futility will occur, but sometime in the middle of the study, we will be conducting that and obviously we will describe the results of that when it’s available.

[Michael Schmidt:]

Okay, great. Thank you and congrats on the progress.

[Scott Koenig:]

Thank you.

[Operator:]

Thank you. Our next question is from Stephen Willey of Stifel. Your line is open.

[Philomena Kamya:]

Hi. This is Philomena Kamya in for Stephen Willey. Congratulations on the progress made thus far and thanks for taking my questions. They will specifically revolve around the new molecules that were revealed to the MGD013 and MGD014. So, with respect to MGD013 targeting, it’s my understanding that you will be going after LAG-3, PD-1 and using it by specific platform at DART. And I was wondering if you expected the LAG-3 and PD-1 to be co-expressed on a single T-cell or whether you were hoping to sort of target functionally distinct T-cell populations as a way to sort of increase breath as a way of a response?

[Scott Koenig:]

So, thanks Philomena for the question. With regard to MGD013, our intention is clearly to engage and blockade those receptors that will be co-expressed on the stem cell, but that doesn’t exclude the possibility that still that independently expressed one or the other molecules may also be engaged with the DART. So, I think we will have a very nice opportunity to fully occupy those sites, which should expand the activity of the combined molecule in inducing T-cell responses. As we have shown at R&D Day, we clearly at least in vitro have evidenced that the targeting of LAG-3 and PD-1 in the DART molecule is superior to using two-way independent antibodies to those same two targets. So, we do think that the way the DART molecule is constructed in three dimensions affords a benefit in targeting these two molecules simultaneously.

[Philomena Kamya:]

Okay, that’s great. And then the second question I have is with respect to MGD014, do you have – could you just give us a little bit of color with respect to which kind of that latency eliminating molecules you are using in combination with the DART?

[Scott Koenig:]

Yes. So, thanks for that question. Just to remind folks, the MGD014 is the DART molecule targeting HIV envelope and CD3. In the studies that we have previously published, that was online and actually has been published this week in the General Clinical Investigation, we used an HDAC inhibitor to stimulate the cells from patients who were on anti-retroviral therapy and we show that we could reduce the production of p24 in those cells. In a paper that’s soon to be published, we will also have shown that a PKC activator agonist can also do the same thing and provides an opportunity for using the DART to eliminate that activated population with these LRAs.

[Philomena Kamya:]

Okay, brilliant. Thank you so much. Looking forward to ‘16.

[Scott Koenig:]

Thank you.

[Operator:]

Thank you. Our next question is from Yigal Nochomovitz of Citi. Your line is open.

[Yigal Nochomovitz:]

Yes, hi guys. Thanks for taking the questions. So, you are studying margetuximab and pembro in HER-2 positive gastric. So, assuming that study works, does that mean that you would be looking potentially at margetuximab and pembro in HER-2 positive metastatic breast cancer, it would seem like the natural segue?

[Scott Koenig:]

So, Yugal, we haven’t made any discussion – we haven’t discussed that opportunity, but clearly, if we see a signal with the gastric setting that would certainly be a natural study to follow-up with and could even be entertained even before we have got the data from the gastric study, but wait and see.

[Yigal Nochomovitz:]

Okay. And then so you have the SITC presentation coming up for enoblituzumab, so can you just go into maybe a little more detail on what additional types of data we are going to see there? And more specifically, are we going to find out what these checkpoints were that the various melanoma patients failed both for the responders and the non-responders, what you showed at R&D Day?

[Scott Koenig:]

Yes, thanks for that question, Yigal. So, as we had described, we did a data cut at the end of September on the monotherapy cohort and there was insufficient time between that data cut and the SITC presentation to do the proper quality control for the data before presenting it. And so rather than presenting the continued progress on that trial, we will provide some more details on that same patient set. So one thing that we do not present at R&D Day was obviously a detailed safety data profile which we will provide and you will get a view of some of the clonal expansion data presented in a different context at this meeting. And getting to your second question we will have the specific agents that the particularly the melanoma patients who had progressed on a checkpoint identify the ones that they had received prior to receiving enoblituzumab. So I think there will be a lot more details that which should be able to help you understand the data.

[Yigal Nochomovitz:]

Okay. And then also at the R&D Day you showed some nice data from Hopkins on the prostate cancer qualitative studies with the expression of B7-H3 and I will add that Hopkins is going to do a study in neoadjuvant, what are your thoughts about your own study in prostate?

[Scott Koenig:]

So, as we showed at R&D Day we were extremely encouraged by responses we have been seeing in patients with various urological cancers, including a patient who is doing quite nicely with prostate cancer being treated with enoblituzumab. It is very likely that we will treat additional patients going forward either as monotherapy or in combination with other agents. But the specific trials at this point have not been designed. We also as you know with the start of the MGD009 trial there is the opportunity for patients with prostate cancer also to participate in that trial clearly different mechanisms targeting that molecule. But we think that prostate indication both in the metastatic setting and as you alluded with the beautiful data that Chuck Drake shared with us of unpublished data showing a high predicted value for B7-H3 expression and the tendency to develop metastasis post prostatectomy is very encouraging for us to find usage of our B7-H3 targeting agents in prostate cancer. And so as you pointed out, we will start a small investigational study with Dr. Drape next year looking at patients who have newly diagnosed with prostate cancer, but prior to prostatectomy they will receive multiple doses of enoblituzumab with a hope that this will be way to control or prevent the dissemination of prostate cells that are cancerous. And we will be looking at the actual prostate specimens for changes in immune parameters and other functions. So we are very excited about this. I should also point out that the – on Saturday at noon at SITC, Dr. [indiscernible] will be giving the late breaking presentation at the meetings.

[Yigal Nochomovitz:]

Okay, great. Thank you.

[Operator:]

Thank you. At this time there are no other questions in queue. I would like to it back to Dr. Scott Koenig for any closing remarks.

[Scott Koenig:]

Well, thank you very much operator and thank you all for joining us today. 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. Everyone have a great day.