MacroGenics Inc (MGNX) 2014 Q1 法說會逐字稿

Good afternoon. We will begin the MacroGenics first-quarter conference call in just a moment.

(Operator Instructions)

At this point, I will turn the call over to Jim Karrels, Chief Financial Officer of MacroGenics.

Thank you, operator. Good afternoon and welcome to MacroGenics conference call to discuss our first quarter 2014 financial and operational results. For anyone who is not had the chance to review our results, we issued a press release this afternoon, outlining today's announcement which is available under the investor tab at our website www.macrogenics.com. You can also listen to this conference call via webcast on our website and it will be archived there with 30 days beginning approximately 2 hours after the call is completed.

I would like to remind listeners that we will be making forward-looking statements on today's call. Therefore, I would like to remind you that today's discussion will include statements about the companies 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 Form 10-K filed with the SEC on March 20, 2014.

In addition, any forward-looking statements represents 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 the turn the call over to Dr. Scott Koening, MacroGenics President and Chief Executive Officer.

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

The momentum we achieved in 2013 including exceeding our R&D and operational goals has continued into 2014. We continue to make progress in the development of both our proprietary and partnered product pipelines and with the additional capital from our February [follow-on] offering we are much closer to realizing our vision of developing important new therapeutics the harnish the power of the immune system to fight cancer and attenuate autoimmune disorders.

In a few moments, I will review our first quarter accomplishments in more detail and then provide an update on plans for the remainder of 2014. After our prepared remarks, we will open up the call for questions and answer session.

But first, I would like to hand the call over to Jim, who will give a brief recap of our financial results.

Thanks, 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 $14.6 million for quarter ended March 31, 2014 compared to $10.1 million for the quarter ended March 31, 2013. While we are not providing specific guidance with regard to R&D, we expect this figure to increase in 2014 as we move into later stage clinical trials and add product candidates to our pipeline.

We had general and administrative expenses of $3.3 million for quarter ended March 31, 2014 compared to $3.8 million for quarter ended March 31, 2013. We recorded total revenue consisted primarily of revenue from collaborative research of $14.7 million for the quarter ended March 31, 2014 compared to $10.6 million for quarter ended March 31, 2013. 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 March 31, 2014, we had net operating loss of $3.1 million compared to a net operating loss of $3.4 million for the quarter ended March 31, 2013. Our cash and cash equivalents as of March 31, 2014 were $198.7 million compared to $116.5 million as of December 31, 2013. As a reminder, in February 2014, we completed a successful following offering issuing 2.25 million shares of our common stock for net proceeds to the Company of $76.7 million net of underwriting discounts and commissions and other estimating offering expenses and including the underwriters exercise of the over allotment option of full.

Based on these balances and the current operating plan we are pleased to report that MacroGenics expects that is current cash and cash equivalents combined with anticipated non-equity funding under its various strategic collaboration should fund the Company's operations into 2017.

With that, I will hand the call back to Scott.

Thank you, Jim. As Jim mentioned, in the first quarter we continued to strengthen our financial means to support our research and development efforts. And we are heavily focused on applying both our financial and human resources to advance that portfolio product candidates. Both those fully owned by MacroGenics, and those being developed in partnership with our collaboration partners.

Each product candidate in our portfolio was designed for a specific therapeutic application. By applying one of our priority antibody technologies. These technologies include our Fc optimization platform which enhances the body's immune system to mediate the killing of cancer cells through Antibody-Dependent Cell-mediated Cytotoxicity or ADCC.

Our dual affinity retargeting or DART platform which enables the targeting of multiple antigens or cells by using the single molecule with an antibody like structure. Our cancer stem like cell platform which provides the unique discovery tool to identify cancer target shared both by tumor initiating cells and differentiated cancer cells derived from them.

With the successful integration of these platforms into our product development efforts, we remain on track to initiate clinical development of six programs within our proprietary immuno-oncology portfolio by the end 2015. Our most advanced product candidate is MGATeplizumab a monoclonal antibody that we engineered through our Fc optimization technology to target a broader range of HER2 expressing tumors and current HER2 therapies. A phase 1 study presented at of 2013 Annual Meeting of the American Society of Clinical Oncology, MGATepizumab was well tolerated at all dosages.

And anti-tumor activity was observed across a wide range of dose levels even in patients who are heavily pretreated including those treated with one or more prior anti- HER2 agents. Based on these encouraging results, we are moving forward with the clinical development plan and expect to initiate a global phase 3 clinical trail in patients with advanced classically defined HER2 positive gastroschsis cancer who have progressed at their standard first line and second line therapy.

We expected to begin enrollment of this study which we are calling the MAGENTA study in the second half of 2014. This pivotal study will include approximately 425 patients across multiple countries and assess overall survival of patients on MGATeplizumab and a combination with chemotherapy versus chemotherapy alone. We anticipate that enrollment will take approximately three years.

The addition to developing MGATeplizumab and refractory patient population, we are also looking to expand the market for MGATeplizumab therapy to include subpopulations which currently did not receive anti HER2 therapies. We continue to enroll our phase 2A study in patients with breast cancer with tumors exhibit lower expression of the HER2 protein and lack evidence of HER2 gene application by [fish]. And we estimate that we will enroll first segment by the end of the year.

We view the Fc engineering of MGATeplizumab as a great example of the application of our technology to improve upon existing therapeutics directed against a validated target. Our second Fc optimized monoclonal antibody in the clinic is MGA271 which is specifically directed toward a more novel target, B7H3. A member of the B7 families of molecules involved in immune regulation. As many of you know, the B7 family and their receptive express on T cells are the subject of great interest because of their potential targets for cancer immunotherapy.

We feel that MGA271 has broad potential given the high level of B7H3 expression on many solid tumor types and we believe that MGA271 is currently positioned to be first in class therapeutic agent against this target. We have completed the dose escalation portion of the phase 1 clinical trial and expect to complete the first three dose expansion cohorts by the end of 2014.

We also plan to initiate additional expansion cohorts using MGA271 as monotherapy and other tumor types beginning in the second half of this year and we will initiate additional cohorts that investigate MGA271 in combination with other therapeutics with certain tumor types beginning of 2015.

Many of our earlier stage pipeline candidates were developed using our DART platform. We believe that our DART technology provides unique advantages over other approaches to create bi-specific or multi-specific molecules. Further we believe that this platform my afford considerable flexibility in developing combination immunotherapy approaches for cancer and autoimmune disease.

Several large pharmaceutical and biotech companies have recognizing the versatility and potential of our DART platform and have partnered with us to utilize this technology. Our most advanced DART based molecule is MGD006, a bi-specific molecule that binds 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.

MGD006 is specifically designed to engage these two targets by binding to CD123 and T cells and activating them to kill CD123 expressing leukemic cells which we believe is an ideal illustration of the utility of our DART platform. MGD006 is part of an option-based regional collaboration with Servier. They exercised their option in February 2014 to retain an exclusive licenses developing and commercialized MGD006 in certain territories.

In addition to a $5 million milestone for the clearance of the IND by the FDA, Servier paid us $15 million license option payment during the first quarter 2014. MacroGenics retains development and commercialization rights in North America, Japan, Korea, and India. We expect the dose of first patient of phase 1 clinical trial of MGD006 in patients with acute myeloid leukemia very soon. Making this the first DART based molecule to enter into the clinical. This is an important milestone for our DART platform as it represents the first of multiple DART that we expected to enter the clinic over the next few years.

In addition to making significant progress with MGD006, we continue to make progress with our earlier stage DART based product candidates. MGD007 is a DART that recognizes both GPA33 and CD3. The primary mechanism of action of MGD007 is its ability to redirect T cells via the CD3 components to kill GPA33 expressing cancer cells.

At the 2014 American Association for Cancer Research annual meeting, we presented preclinical data via poster which provides a rationale to enter the clinic. Based on these results, we expect to initiate clinical testing in the second half of 2014. We also intend to initiate clinical testing of two additional oncology DART based product candidates in 2015, greatly expanding our clinical pipeline of DART molecules.

In terms of our autoimmune pipeline, we presented preclinical data yesterday regarding MGD010 and IMMUNOLOGY 2014, the American Association of Immunologists Annual Meeting in Pittsburgh. There we showed that MGD010, a DART that simultaneity targets CD32B, a negative regulator of autoimmune response and CD79B, B cell respective component and hide its B cell activation without B cell depletion. MGD010 has a potential to be a novel treatment option for patients who autoimmune disorders.

I hope this overview provides everyone with an understanding of the clinical, preclinical and business development opportunities that MacroGenics antibody technology platforms have generated. As I indicated, we have made significant advances in recent months to build upon the success of 2013. Not only with our pipeline of product candidates and our recent following on offering of common stock, but also by strengthening our Board of Directors and management team.

We previously announced back in March that Matt Fust had join our Board of Directors and chairs our audit committee. As a former Executive Vice President and Chief Financial Officer of Onyx Pharmaceutical Incorporated, Matt is an important addition to our Board.

We also recently announced the appointment of Atul Saran as Senior Vice President, General Counsel in April 2014. Mr. Saran most recently held the leadership role at AstraZeneca as Vice President Corporate Development and Ventures and also chaired Medlmmune Ventures Investment Committee. He's blend of legal, strategic, and industry business expertise represents a terrific addition to MacroGenics team and we're very pleased to have him join us.

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

(Operator Instructions)

Michael Schmidt, Leerink Partners.

Good afternoon. Could you provide some more details on the powering assumptions for the MAGENTA trial?

The powering of the study of the MAGENTA trial? I don't have the actual number right in front of me, but I believe it is approximately 90% power on that study.

And in terms of effect size?

We are looking at, again, I'm not absolute at this point. I think it has a ratio was approximately 0.67.

I have to come back to you on that. I'm not absolutely sure at this point.

Okay, sure.

And then, I had a question on MGD007. You recently presented this data at ACR including nonhuman primate data. I was wondering, historically, how well nonhuman primate data has transfers to humans with respect by to bi-specific antibodies, especially around safety.

Obviously, our platform has now been tested in a lot of different nonhuman primate studies, as well as mouse studies. I can't address the predictability of our particular platform in this context. Obviously, it is a function of both of the homology of the specific sequence that is expressed in the primate and in humans.

We took a lot of care in terms of selecting both our CD3 specificity here and GPA33 specificity in terms of the binding and we found that, in fact, both in terms of the affinity of the specific individual receptors, the combined molecules, they seem to be quite the same.

Furthermore, in terms of MGD007, the effect with regard to tissue localization was virtually identical for the synamologous monkey, as well as the human. So we feel pretty good about this as a very good model for predictor of toxicology.

But as you know, in other molecules that have been involved in immune stimulation, you can get unpredictable effects that occur in humans that are not seen in primates and vice versa. I just think at this point, until we have the clinical data, I can't be certain about predictability, but I think we have selected both the molecules in the model systems appropriately.

Sure. One more--

Michael, can I interrupt you? I just checked. And what I said to you was correct that it was a 90% power, has a ratio of 0.67

Great. Thanks.

And then last question, 271, I was wondering how many patients or cohorts or two more types were you planning to enroll later this year, in addition to the existing cohorts?

We have not given any guidance. We have had internal discussion.

It is fair to say it will be several and we are going to be quite ambitious about looking at both the individuals that have different tumor types, obviously beyond the ones were incorporated in the three cohorts there as monotherapy and we are also are looking at doing several combination studies starting in 2015.

As you know, Michael, one of the things that have been hampering us from moving this forward staff for this additional cohort was production. I'm happy to say that our manufacturing team has made additional material and we are now in very good shape now to start those studies in the second half of this year.

Steve Byrne, Bank of America.

So what is the dosage you are going to go ahead with margetuximab in that gastroesophageal study? And how many patients in your phase I study did you have in that indication at that dose?

Steve, thanks for the question.

The dose will be six mg/kg on a weekly basis. With regards to the actual total number at six mg/kg, I don't have that number off the top of my head. As you know, we did expansion cohort of 15 patients at six mg/kg and we had some additional studies. Right now, I think it is approximately 15 to16 that we are at that dose.

As you've also known, Steve, we have also look at some alternating dosing schedules at 10 mgs/kg every three weeks, 15 mgs/kg every three weeks. Those cohorts have been enrolling and completed and now we are starting enrolling the last of this intermittent dosing at 18 mgs/kg. However, those dosing regimens will potentially be used later on once we have the read on the outcome of our six mgs/kg weekly dosing.

Do you intend to provide an update on the tumor volume or progression free survival or any of those types of metrics for that phase I study?

We've had discussions recently and I'm trying to find the right forum to present the whole data set. We certainly will be writing this up for publication in a leading journal.

With regard to a meeting, we're actually now deciding whether to present this data before we finish the 18 mgs/kg every three week cohort or early depending on the time of meeting we have not come to a decision yet.

Okay. One question on the DART program. It seems that the 007 and the 010 both have an Fc region balance to the DART. Do you think that is necessary going forward just to the extend the PK profile of these DARTs?

I think this will be a huge advantage particularly in comparison to a lot of other platforms that do not have these attributes. Based on our primate studies that I have sort of described before, both for 007 and the recent presentation yesterday at the immunology meetings where we presented some of the PK in those primate studies.

We found that this would be a huge advantage because we can delivered the drug much less frequently, and obviously this is both of value to the convenience of the medical caregivers, as well as the patient.

And do you have any modulation up or down, of the binding affinity to macrophages with the Fc region?

These actually have been designed specifically with that in mind with regard to both molecules. So, as you recall, for MGD007, there is a killing component which is mediated by the attraction of the CD3 positive T cells to kill the GPA33 colorectal cancer tumor cells and we decided not to incorporate an additional effective function by keeping the Fc region intact.

The Fc has been modified so it has dramatically reduced binding to the activating and inhibitory Fc receptors. What it does retain though its ability to bind to FCRM the neonatal Fc receptor. So it's ability to maintain a longer half-life is preserved. The same thing true in the case of MGD010.

There we are not looking at imposing any effect or function in that system. In fact what we have incorporated is two specificity that targets B cells receptors, CD32B and CD79B, express on B cells cross swing, and shut down activation of those B cells without depleting circulating B cells.

If we hadn't to maintained the normal Fc receptor engagement function, those B cells would be destroyed. It was important for us to actually alter the binding properties of that Fc to the Fc receptor.

And adding that on, Scott, does that contemplate the manufacturing of these DARTs?

Not at all. We have very robust manufacturing. Obviously at smaller scales now for getting ready for clinical studies for both molecules, but having those alterations in the Fc domain has had no effect on the levels of production.

Greg Wade, Wedbush

Scott, what will be the policy around the disclosure of data from 006 and 007. Obviously the industry is very focused on the initial safety results ahead of any potential efficacy data we see later in the year.

Then secondly, for the DARTs that are competing to be nominated in 2015, is 010 in that group? Maybe you can lets us know who is in the group in terms of competition for those slots and what pivot points you are looking at in order to pick the candidates as you go into the 2015? Thanks.

So, with regard of the disclosure of the data of 006 and 007, as you know for all the immunomodulatory, and particularly molecules that have the ability to activate the immune system, first in man studies, its irrespective of how extensive your preclinical studies are, the FDA wants us to proceed very cautiously, like we do, to preserve the safety of other patients.

Having said that, the FDA has given us for MGD006, the opportunity to start at a dose in the first patient that we are going to test at a level that we had seen pharmacogenetics affects in our pre-model systems. Because as you know, AML is a very severe disease, life-threatening, and even in the first patient who gets treated should have the opportunity here to receive some benefit of this.

But having said that, we are going to start very slowly, single patients, obviously, several weeks and allow for the half-life of that molecule to dissipate, as well as looking for any toxic effects before we then treat the second patient, third patient, and such. I would say, for 006 which would also be the case for 007, this is going to be a slow process.

So it will be very improper for me now to give you any guidance specifically on revealing any of the outcomes until we have a fairly sizable data set. My sense is, by the end of the year, I should be able to give you a little bit of sense of where the proper medical forum would be to begin to present this study. I anticipate a fuller data set not earlier than the latter part of 2015 for 006 and 007 in that regard.

What was the second question again?

Which DARTs are competing for --

As I indicated previously, our plan is to put two immunoncology DARTs in the clinic in 2015. We are on target for that. In fact, we are in preclinical development of more than two immunoncology programs and we still have, they are all running neck and neck.

We'll have them -- very shortly, we will decide which two we decide to prioritize for entry into the clinic in 2015. We have, obviously, certain things we have to complete for these programs, which would include making the production lot for the clinic and completing the toxicology study. Right now, it would be improper for me to say -- select which specific two that we're going to be putting into the clinic.

With regard to MGD010, that's completely separate opportunity as I indicated before. We have conducted a significant portion of the preclinical studies, which we think would be sufficient to move forward into and IND filing. We are engaging the FDA with regards to our clinical plans on this molecule.

We would like feedback from them in both guiding any additional preclinical studies we might require before we initiate that IND. It is a very good chance that in addition to the two immunoncology DARTs starting a clinic, we may start clinical studies with MGD010 as well in 2015.

Just to put a fine point on it. Should we expect that if you don't see any serious adverse events in terms of safety with 006 in people that no news is good news, is that reasonable?

Obviously, we want to be respectful of both the patient and obviously the investors in this and we will obviously put out information that we think is appropriate for the level of any major unexpected side effects that we see in that regard.

As you know, all these patients will have serious adverse effects because of the seriousness of the disease. There expected potential side effects with all these types of agents. But if this is out of the norm that we expect, obviously, it is important for us to report that.

Stephen Willey, Stifel.

Let me follow up on a prior question, I know you talked about the dosing regimen for margetuximab that you have been evaluating and are looking to evaluate in the MAGENTA study, but could you just remind us what is the dosing regimen that is currently being evaluated in the 2A metastatic breast study?

It's the same one, its six mgs/kg weekly.

And then with respect to 271 another disclosure question which may not or be able to answer. Obviously, that's kind of a data point that a lot of people are going to be looking for. Just wondering, have you, should we expect those results to be topline at all in the press release or more likely they are probably presented in conjunction with something like and [ACR] or an ASCO in the first half of 2015.

I think with regards to a specific meeting which we will present it in we've not made a decision. Obviously again, we want to have a nice body of data from the phase I study, and with these additional cohorts we may consider waiting to put it all together. In that vein, it is most likely we would do this in the setting of a major meeting as opposed to putting out a press release or something separately.

And do you have flexibility just in terms of disclosure policy, given the fact that Servier has also partnered on this component?

We do. Obviously, we try to keep our partners informed, but with respect to disclosure around this specific molecule, we have total latitude to present when and where.

And then lastly, on 007, the standard operating procedure in a lot of these oncology studies is to start in more refractory lines of therapy and try to come and move your way upwards. But given the fact that you're targeting the stem cell compartment here theoretically, I'm just wondering if you might be more inclined to maybe start from the top down as you think about clinical development?

Let me again address that and refresh your memory. 007 recognizes a molecule that is expressed on cancer stem cells as we show very nicely. All of the colorectal cancer stem cell lines that we generated have high expression of this.

But I want to re-emphasize that virtually all patients, approximately 95% of patients with colorectal cancer, looking at their tissues, have high expression of GPA33 as well. So we are targeting both the different to tumor cells, as well as the colorectal cancer stem cells.

While it may make sense in certain situations to get earlier in the course of disease, we are going to have to follow a more traditional role here in terms of the particular patient populations who have been refractory to other approved therapies before we are able to look earlier in the course of treatment.

Roth Capital Partners.

Regarding the MAGENTA trial, since it's going to take about three years to enroll, do you have interim analysis plan built-in and if so what is the [alpha spend] for that and the other, are you stratifying the patient or will the patient be stratified based how to expression [bi fish].

Let's start with the second part, which is all patients will be the classically defined HER2 positive gene amplified positive population. They can also have in the rare cases, three-part expression without amplification, but these are very few patients that fit into that bucket.

With regard to the interim analysis, we haven't disclosed anything with regard to that specific plan. Obviously, there will be a date (inaudible), that will be following them, but with regards to the (inaudible) analysis, we have not describe what we are going to do yet.

(Operator Instructions)

Michael Schmidt, Leerink Partners

One more on MGD010. You're using CD79B as the B cell marker. I was wondering, what drove your choice for that particular marker versus other B cell markers that might be considered?

It's an opportunity to actually jump a little bit deeper into the science here. For those of you who are interested.

In fact, CD79B is not just a marker it's part of the whole B cell receptor complex. In order for what we are trying to achieve here, you actually have to have a cross linking between the B cell receptor and CD32B because CD32B in order to function, in a way we like to do it, needs to seal the kinase associated with the B cell receptor, to phosphorylate a portion of the CD32B molecule, which then allows for the recruitment of a phosphatase, which ultimately leads to the inhibition of signaling the B cell.

The idea was to actually select a portion of that B cell receptor complex and this is actually the signaling entity around the complex to get the therapeutic benefit here. It's a very novel way to approach the treatment of autoimmune diseases.

Thank you. This concludes the question and answer session. I will now hand the call back to Dr. Koening for any closing comments.

I would just like to thank everyone again for joining us and let you all know that we look forward to updating you on each of the programs that we discussed today as we continue to make progress into 2014. Thanks again.

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