MacroGenics Inc (MGNX) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to MacroGenics’ third quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference call may be recorded. I would now like to hand the conference over to Mr. Jim Karrels, Chief Financial Officer of MacroGenics. Sir, you may begin.

Good afternoon and welcome to MacroGenics’ conference call to discuss our recent 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 and it will be archived there beginning approximately two hours after the call is completed.

I would like to remind listeners that we will make forward-looking statements on today's call. Therefore, I would like to remind you 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 these indicated by these forward-looking statements as a result of various important factors including those discussed in the risk factors section of our prospectus filed with the SEC on October 11, 2013. 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.

Thank you, Jim. I'd like to welcome everyone participating via conference call and webcast today. Thank you all for joining us.

I'm glad to have this opportunity to provide you with a brief update on MacroGenics’ recent operational and clinical results. It has been a great year for us with significant progress made in our portfolio of both proprietary and partnered product candidates. I'll review some of our accomplishments and also look ahead to the remainder of 2013 and into 2014.

After our prepared remarks, we'll open up the call for a question-and-answer session. First though, I'd like to have Jim give a brief recap of our financial results.

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 $11.1 million for the quarter ended September 30, 2013 and $32.2 million for the nine months ended September 30, compared with $12 million and $36.9 million for the same periods in 2012.

We had general and administrative expenses of $2 million for the third quarter and $7.3 million for the nine-month period compared with $1.5 million and $6.6 million for the comparable periods in 2012. We recorded total revenues, which as most of you know, are substantially due to partnered research of $20.2 million for the third quarter and $43.1 million for the nine-month period compared with $16.1 million and $54 million for the same periods in 2012.

We reported cash and cash equivalents at September 30, 2013 of $33.6 million compared to $47.7 million as of December 31, 2012. However, these figures do not take into account net proceeds from our October 9 initial public offering of approximately $83.8 million including exercise of the underwriters over allotment option and after issuance expenses.

Therefore, on a pro forma basis, MacroGenics cash and cash equivalents as of September 30, 2013 would be $117.4 million if such IPO net proceeds are included. As many of you may also be aware, in our IPO prospectus we provided guidance that MacroGenics expects to receive approximately $100 million in non-dilutive capital from our collaborators through the end of 2015.

I'm pleased to report today that we have already received or invoiced $19 million of this amount based on payments from Boehringer Ingelheim and Servier since June 30, 2013, excluding any reimbursement for research activities we have performed on behalf of these and our other partners. We intend to continue to provide updates as milestones are reached in our various collaborations.

Overall, MacroGenics is in a strong financial position based on our cash as of September 30, the cash subsequently raised in our IPO and the non-dilutive capital we expect to receive from collaborators through 2015. Based on our current operating plan, we expect that these funds will allow us to execute against our strategy into 2016.

With that, let me hand the call back to Scott.

Thanks, Jim. As Jim mentioned, we have put in place the financial means to continue executing on our strategic plans. Of course, we are heavily focused on applying our financial and human resources to advance our portfolio of product candidates, both those fully owned by MacroGenics and those being developed in partnership with our corporate collaborators.

I'll now review some recent accomplishments as well as expected future progress on product candidates in our pipeline. As many of you know, each product candidate in our portfolio was designed for a specific therapeutic application by applying one of our three antibody technology platforms. These technologies include our dual affinity retargeting or DART platform which enables the targeting of multiple antigens or cells by using a single molecule with an antibody like structure.

Our Fc-optimization platform which enhances the body's immune system to mediate the killing of cancer cells through antibody dependent cellular cytotoxicity or ADCC. And our cancer stem-like cell platform which provides a unique discovery tool to identify cancer targets shared both by tumor initiating cells and the differentiated cancer cells derived from them. We approach each therapeutic challenge by applying our understanding of disease biology to choose an appropriate target and then create an antibody that is customized for that target.

One of our lead development candidates is an MGATeplizumab, a monochromal antibody that we engineered through our Fc-optimization technology to target a broader range of HER-2 expressing tumors than current HER-2 therapies. We expect to initiate the first Phase III of MGATeplizumab in advanced gastro-esophageal cancer in the second half of next year and we'll provide more detail on that study as the time approaches. In addition, we expect that data from our Phase II-A study of MGATeplizumab in metastatic breast cancer that is currently underway will be available in 2014.

Our second Fc-optimized monochromal antibodies in the clinic is MGA271. We specifically designed MGA271 to target B7H3, a member of the B7 family of molecules which are involved in immune regulation. This family is an area of very high interest in cancer immunotherapy research and development.

We feel that MGA271 has significant commercial potential given the high level of B7H3 expression on many solid tumor types and believe that MGA271 is currently positioned to be a first in class therapeutic agent against this target. Importantly, we received a $10 million milestone payment from our partner Servier in the third quarter of 2013 for the first dosing of a patient in an expansion cohort in the Phase I study of MGA271 which continues to enroll.

Beyond MGATeplizumab and MGA271, MacroGenics has a deep pipeline of product candidates and I cannot cover all of them on today's call. I would, however, like to highlight MGD006.

This product candidate is particularly exciting and is the most advanced of our DART-based molecules. MGD006 is a bi-specific molecule that bonds to both CD123 and CD3. CD123 is expressed on leukemia and leukemic stem cells, but not on normal hematopoietic stem cells and CD3 is expressed on T-cells.

We believe that MGD006 is an ideal illustration of the utility of our DART platform based on its ability to engage two targets by binding to CD3 on T-cells and activating them to kill CD123 expressing leukemic cells. Pre-clinical data from the MGD006 program will be presented by a collaborator from Washington University in St. Louis at the annual ASH conference coming up in December in New Orleans. In the first half of 2014, MGD006 will become the first hermaphrogenics DARTs to enter clinical testing.

Finally, I'll make a brief note on our robust pipeline of earlier stage programs. Many of these product candidates are configured as DARTs being developed for the treatment of either cancer or autoimmune disease. Our collaborators have also recognized the versatility and potential of our DART platform and have incorporated this technology to enhance their drug candidates.

For example, one of our collaboration partners, Boehringer Ingelheim, recently nominated a bi-specific antibody candidate generated by our DART technology for pre-clinical development which triggers a $5 million milestone payment to MacroGenics. I hope that this overview provides everyone with an understanding of the clinical, pre-clinical and business development opportunities that MacroGenics’ antibody technology platform has generated.

As I've indicated, MacroGenics has made some significant advances in recent months not only with our pipeline of product candidates at our recent IPO, but also by strengthening our management team with the addition of Dr. John Wigginton as Senior Vice President of Clinical Development. John joined us in August from Bristol-Myers Squibb where he was most recently the Therapeutic Area Head, immuno-oncology, early clinical research. And before that, Executive Director, discovery medicine clinical oncology where he led the early clinical development of Bristol's immuno-oncology portfolio including anti-PD1 and anti-PDL1.

We believe that based on his experience, John will provide valuable leadership and insight into our development efforts and obviously brings a unique and valuable understanding to the development pathway for a cancer immune regulator such as MGA271. We are thrilled have John at the company.

In addition, during the third quarter we augmented our Board of Directors with the appointment of Paulo Costa as our Chairman and Dr. David Stump as the Director. Paolo was a former Chairman of Amylin Pharmaceuticals and the former President and CEO of Novartis US Corporation. Prior to joining Novartis, Paolo worked at Johnson & Johnson for 30 years where he served as President of Johnson pharmaceutical and was a member of Johnson and Johnson's pharmaceutical group operating committee.

David Stump was most recently Executive Vice President of research and development at Human Genome Sciences where he joined the company in 1999 from Genentech. We're delighted to have both Paolo and Dave as Board members.

With that, I'd like to conclude my formal remarks and open up the call for questions. Operator?

Thank you.

(Operator Instructions).

Michael Schmidt, Leerink Swann.

I had a question on MGD006. You said you were entering the clinic next year with this molecule. I was wondering, based on the PK work that you've done so far, whether that product would be dosed intermittently or continuously?

Michael, thank you very much for the question. We have conducted studies in monkeys for our formal GMP studies. As you recall, MGD006 is a bi-specific without an Fc domain, so it has a fairly short half-life.

We have looked at two different dosing strategies where we give a drug continuously over a week's period of time or over several days period of time. We have not made a formal decision yet with regard to the specific clinical trial design, but we will do so very shortly.

Sure. I understand there are different triggers for Servier to opt in on these programs. What's the trigger for 006 and 007?

So on the triggers for 006, as you recall, we will get an initial payment of $5 million at the time of filing an IND. And then, we also are submitting to them a full document of the pre-clinical studies which they will have a time to review over several months.

At that time, they would make a decision about formally triggering their opt-in. So that, as you recall for MGD006, that was a $15 million payment. The presumption is, if everything is satisfactory to them, between the IND filing and the review of the data that would allow us to receive an additional $20 million from that option.

With regard to MGD007, the same $5 million payment occurs with the filing of the IND of MGD007. But in this case, they would have the ability to review the data from the Phase I clinical study before triggering the opt-in decision.

Great. Thanks. On 271, I was just wondering if you could walk us through the upcoming events next year in particular, on data disclosure and the Servier opt-in as well.

Again, as we've mentioned previously, for MGA271, we are in the Phase I-B expansion cohort of that study in which we are treating, at this point, three different cohort groups. Patients with melanoma, patients with prostate cancer and a third group containing combinations of several different cancers in which no more than five patients are represented by a given cancer type.

That part of the study is continuing to enroll. We will obviously continue to dose those patients during the course and after all that data is complete, we will submit that to Servier for their review. Again, they have a time period for which they can review the data.

And as I've also indicated, previously, they are also conducting their own clinical studies which are anticipated to start by the end of this year in Europe and will enroll patients in other cancers than ones we are treating in the US. That combination of analysis of the data we provide, the data that they generate from their study, will be the determination of their trigger.

As I've indicated, we will reveal in the second part of 2014, the results of our data set. Obviously we have no control over Servier's announcement of their data, but that's the timeframe and still consistent.

Thanks and congrats again on becoming a public company.

Thank you very much, Michael.

Steve Martin, Bank of America.

On MGATeplizumab, your choice to move into a Phase III program in gastric, can you just talk a little bit about why you would view the probability of success better in that one than say bladder, where there is HER2 expression, but there has not been successful HER2 therapies in that category -- or in that indication? Can you just compare those two even though there is HER2 expression both?

Thank you very much for the question. We are very interested in looking at the opportunity quite broadly for this molecule. So we look at both the bladder and the gastro-esophageal as great opportunities for us.

Given that there's already a front-line anti-HER2 therapy that has been proved in gastro-esophageal cancer and the fact that we have shown very robust activity in our Phase I study in patients who have been previously treated with anti-HER2 therapies, we thought that it was most reasonable to prioritize the development of the Phase III study for gastro-esophageal. That doesn't take away any interest in bladder cancer studies.

The fact that the HER2 has already been target validated for anti-HER2 therapies just gave us a higher prioritization. But we are clearly interested, given that HER2 is expressed in bladder cancer and in fact, could be an opportunity to use MGATeplizumab as front line in combination with chemotherapy. We are as I've discussed before, in discussions with some of the major KOLs, who have been working in the area of bladder cancer.

Is it possible that the HER2 signaling pathway is not as important in the bladder cancer, but perhaps ADCC could be effective there?

That's a terrific question. As you know, the expression of HER2 in bladder is variable so you have both bladder cancers that have high over-expression as well as more moderate expression. So this will give us an opportunity to explore the utility of this in terms of both the ADCC killing activity, the signaling activity, in both the low expressers and higher expressers. These are very good questions that we intend to test in the future.

If I may, just one on 271. You've moved into an extension Phase. Do you have some data from dose selection that you can share with us as to what dose you selected in the basis for that?

So again, thank you for that question. What we have done is, as you know, a dose escalation study. We got to 15 mgs per kg which was the highest dose we anticipated.

As you know from our pre-clinical data, you saw very robust activity at very low levels of drug administered in small animal models. With regard to the ultimate selection of the dose, we will be presenting a lot of these details later next year. As I said, we did not have any dopamine toxicity at the 15 mgs per kg dose.

Okay. Thank you.

(Operator Instructions)

Stephen Willey, Stifel.

With respect to MGATeplizumab, I know the Phase III regard data was just recently published and just wondering if any of the details that came of that manuscript have now changed the way you're thinking about design specifics around the [GE] (inaudible).

I'm sorry. Can you repeat, which data came out? I didn't hear what you said.

The publication of the regard data? I think it was in the Lancet, maybe about a month or so ago.

We're still evaluating, but at this point this hasn't changed what we see the opportunity here for the gastro-esophageal application for MGATeplizumab.

Okay. With respect to 271, I know this is an Fc-optimized MAB. I think if you look at some of the other work around the B7 family members, specifically TD1, you've seen a lot of those companies try to actually dial down the ADCC activities. Maybe if you could remind us as to the benefit of having an Fc-optimized MAB with respect to immune (inaudible) [inhibition].

Absolutely. That's an excellent question. Remember, we had designed this molecule with that particular notion in mind. Because it turns out that B7H3 is broadly expressed on most solid tumors.

Yet the specific epitope we selected for MGA271 has virtually no expression in normal tissues. This contrast, as you know, with the current therapies for anti-PDL1 and anti-PD1 will be expressed both PDL1, obviously on some tumors, but also on normal tissues. And certainly for PD1 it's widely expressed on normal T-cells.

Also, the fact is that beyond the expression on the tumor cell itself, this particular target is up-regulated in its expression on the tumor vasculature for many tumor types as well as our observation that we have found it expressed on cancer stem cells. The ability now, to incorporate this enhanced killing activity through ADCCs, gives us an opportunity to take advantage of potentially the immune regulatory properties by binding to the target. But in addition to actually direct killing against a wide number of tumor types as well as supporting tumor tissue. So we think this could provide a particular advantage for this therapeutic.

That's helpful. Thanks a lot and congratulations.

Thank you very much.

I'm showing no further questions at this time. I would like to hand the conference back over to Mr. Scott Koenig for any closing remarks.

Thank you very much. I'd just like to thank everyone for joining us and let you know that we look forward to updating you on each of the programs that we discussed today as we make progress through the end of the year and into 2014. Thank you very much for your participation today.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect and have a wonderful day.