MacroGenics Inc (MGNX) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to MacroGenics's fourth-quarter and full-year 2014 financial results conference call. (Operator Instructions) As a reminder, this conference call may be recorded.

At this time, I would like to hand the conference over to Mr. Jim Karrels, Chief Financial Officer. Sir, you may begin.

Thank you, operator. Good afternoon and welcome to MacroGenics's conference call to discuss our fourth-quarter and full-year 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. It will be archived there for 30 days beginning approximately 2 hours after the call is completed.

I'd like to remind listeners that we will make forward-looking statements on today's call and therefore, I would like to also 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 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's President and Chief Executive Officer.

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

2014 was a year full of milestones for MacroGenics. We now have four oncology product candidates in clinical development. We signed three new strategic collaboration agreements. We made significant progress with our proprietary and partnered pipelines and extended our cash runway into 2018.

In a few moments, I'll review our fourth-quarter accomplishments in more detail and then provide some key highlights on our pipeline. After our prepared remarks, we will open up the call for a question-and-answer session.

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

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 $70.2 million for the year ended December 31, 2014, compared to $46.6 million for the year ended December 31, 2013. This increase was in line with our expectations as we continue to move into later stage clinical trials and add product candidates to our pipeline.

We had general and administrative expenses of $15.9 million for the year ended December 31, 2014, compared to $11.1 million for the year ended December 31, 2013. We recorded total revenues consisting primarily of revenue from collaborative research of $47.8 million for the year ended December 31, 2014, compared to $58 million for the year ended December 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 year ended December 31, 2014, we had a net loss of $38.3 million compared to a net loss of $0.3 million for the year ended December 31, 2013.

Our cash and cash equivalents as of December 31, 2014, were $157.6 million compared to $116.5 million as of December 31, 2013. I'll point out that we also closed a global collaboration and license agreement for MGD011 with Janssen Biotech, Inc. and JJDC made an equity investment in MacroGenics. But since the closing of these transactions happened after Hart-Scott-Rodino clearance in January, the $125 million we received from these transactions was not included in our 2014 financial statements.

Based on the Company's cash balance and our current operating plan, MacroGenics expects that its current cash and cash equivalents, combined with anticipated nonequity funding under its various strategic collaborations, should fund the Company's operations into 2018.

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

Thanks, Jim. In the fourth quarter, we continued to advance our portfolio of product candidates, both those fully owned by MacroGenics and those being developed in partnership with our collaboration partners.

Our proprietary protein engineering technologies have allowed us to develop a portfolio of product candidates designed for specific therapeutic application. The first technology, our Fc optimization platform, enhances the body's immune system to mediate the killing of cancer cells through antibody-dependent cellular cytotoxicity, or ADCC.

The second proprietary technology, our Dual-Affinity Re-Targeting, or DART, platform, enables the targeting of multiple antigens or cells by using a single molecule with two antibody specificities. We also utilized our proprietary cancer cancer-stem-like cell technology to identify cancer targets shared both by tumor initiating cells and the differentiated cancer cells derived from them.

Through the successful integration of these platforms into our product developed efforts, we now have four oncology programs in the clinic, including two DART molecules, and we remain on track to have six oncology product candidates that we created internally in the clinic by the end of 2015.

Our most advanced clinical candidate, margetuximab, is a monoclonal antibody engineered using our ST optimization technology and directed to HER2, which is an antigen expressed in some forms of breast, gastroesophageal, and other types of solid tumors. We previously announced that we plan to commence a pivotal Phase 3 clinical trial in the third quarter of 2015 that we are calling SOPHIA.

This study will evaluate margetuximab it in HER2 positive metastatic breast cancer. The decision to pursue breast cancer was based on several factors, including clinical data from our ongoing Phase 1 expansion cohorts testing once every three week dosing regimens.

We are encouraged by what we've seen in patients with breast cancer and we are planning to present the full Phase 1 data in the June time frame. Accordingly, the Company has submitted an abstract to the American Society of Clinical Oncology for presentation.

The SOPHIA study will evaluate margetuximab plus chemotherapy in third-line metastatic breast cancer patients with higher levels of HER2 expression, by which I mean at the 3 plus level by immunohistochemistry or 2 plus level by IHC with gene amplification in 530 patients. Eligible patients were progressed on earlier HER2-directed therapies, including trastuzumab, pertuzumab, and ado-trastuzumab emtansine, or Kadcyla. There is currently no consensus on standard of care therapy in this patient population, although it tends to be HER2-directed therapy in combination with chemotherapy.

Also we plan to use trastuzumab plus chemotherapy as the comparator arm, although the final design of SOPHIA is subject to completion of further regulatory review. We believe that it will take approximately three years to complete this study and we are planning to conduct an interim futility analysis to help derisk the program.

We also plan to initiate Phase 1/2 studies with margetuximab in patients with gastroesophageal cancer in combination with other therapeutic agents starting in the fourth quarter of 2015.

Our second Fc-optimized monoclonal antibody in the clinic is MGA271, which targets B7-H3, a member of the B7 family of molecules involved in immunoregulation. Given the high level of B7-H3 expression on many solid tumor types, we believe that MGA271 has broad potential and is currently positioned to be a first-in-class therapeutic agent against this target.

During the fourth quarter of 2014, we initiated multiple monotherapy expansion cohorts in patients with six tumor types, comprising triple negative breast cancer, head and neck cancer, renal cell cancer, and melanoma after failure of a prior check point inhibitor as well as a cohort consisting of non-small cell lung cancer and bladder cancer patients with the highest levels of B7-H3 expression.

In the second half of 2015, we plan to present clinical data, including the three previously defined dose expansion cohorts of patients with melanoma, prostate cancer, and a mixed tumor type group. Additionally, we plan to initiate studies of MGA271 in combination with other immuno-oncology agents in 2015, including a Phase 1 combination study with ipilimumab in patients with B7-H3 positive melanoma, lung, and head and neck cancers.

During the course of 2014, we also achieved several important milestones for our Dual-Affinity Re-Targeting, or DART technology, a platform designed to provide unique advantages over other approaches to create bi-specific molecules and one that gives us considerable flexibility in developing novel approaches for treating cancer as well as various autoimmune disorders and infectious diseases.

Our current DART molecules are manufactured using a conventional antibody platform without the complexity of having to genetically modify T-cells from individual patients as required by approaches such as chimeric antigen receptor T-cells or (CAR) T-cells, making DART molecules easier and more cost efficient to manufacture. Because of the potential and versatility of this technology, we have numerous collaborations with several biopharmaceutical companies that have recognized the potential of our DART platform and have partnered with us to utilize this technology.

Our first DART product candidate to enter the clinic, MGD006, is a bi-specific molecule that binds to both CD123 and CD3. CD123 is the interleukin-3 receptor alpha chain and 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 CD3 on 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.

We continue to dose patients in the dose escalation portion of our Phase 1 study of MGD006 in patients with acute myeloid leukemia. This program is partnered with Servier, which exercised its option in 2014 to take an exclusive license to develop and commercialize MGD006 in Europe and other international markets. We retain full development and commercialization rights in North America, Japan, South Korea, and India.

MGD007, our second DART molecule to enter the clinic, recognizes both a glycoprotein A33 antigen, or gpA33, and CD3. GpA33 is found on over 95% of primary and metastatic human colorectal cancers, including cancer stem cells, which are thought to be responsible for tumor recurrence and metastasis. The primary mechanism of action of MGD007 is its ability to redirect T-cells via their CD3 component to kill gpA33-expressing colon cancer cells.

We continue to enroll patients in the dose escalation portion of a Phase 1 study for the treatment of colorectal cancer. This compound is also partnered with Servier, which has the option to obtain an exclusive license to develop and commercialize this program in Europe and certain international territories. But even as it exercises that option, we still retain development and commercialization rights in North America, Japan, South Korea, and India.

Our third DART molecule, MGD010, simultaneously targets CD32B and CD79B, two B-cell surface proteins as being developed for the treatment of autoimmune disorders. We remain on track to initiate a Phase 1a study in normal healthy volunteers in the first half of 2015.

In May 2014, we entered into an option agreement with Takeda Pharmaceutical Company Limited for their development and commercialization of MGD010. And in September, we announced an expanded partnership with Takeda on the development of additional product candidates against jointly selected pairs of molecular targets that incorporate the DART platform.

Takeda brings expertise in the autoimmune area with significant capabilities in developing and delivering novel medicine to patients. This collaboration will enable us to further broaden and accelerate our pipeline of innovative DART product candidates.

In addition to the two DART collaborations we signed with Takeda in 2014, in December, we announced a global collaboration and license agreement with Janssen Biotech, Inc. for MGD011, a humanized DART molecule that recognizes both CD19 and CD3 as being developed for the treatment of B-cell hematological malignancies. MGD011 is designed to redirect T-cells to eliminate CD19-expressing cells and has been engineered to address half-life challenges posed by other programs targeting CD19 and CD3, allowing for more patient-convenient schedules of administration.

Under the terms of the agreement, we received a total of $125 million, including an equity investment made by Johnson & Johnson Innovation -- JJDC, Inc. Janssen will be fully responsible for the developing MGD011 following submission of the IND, which is planned for 2015. And we may elect to either receive milestone and royalty payments or fund a portion of the late-stage clinical development in exchange for a profit share in the United States and Canada.

Janssen is the ideal partner for this candidate, given their track record of successfully developing and commercializing transformative oncology therapies and their experience in the B-cell malignancy area. We believe that MGD011 has the potential to be a best-in-class therapeutic and we look forward to working closely with Janssen to advance this program into the clinic.

Finally, in our press release this afternoon, we referenced a new product candidate, MGD009, which targets both CD3 and an undisclosed antigen expressed on many solid tumor types. We are very excited about this product candidate and we anticipate initiating a Phase 1 clinical study of this DART molecule in late 2015. Beyond MGD009, we have several additional research and preclinical programs ongoing as we plan for the next wave of INDs.

I hope that this overview provides everyone with an understanding of the clinical, preclinical, and business development achievements in 2014 and the opportunities for continued success moving forward.

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

(Operator Instructions) Michael Schmidt, Leerink Partners.

Thanks for taking my questions. On margetuximab, what exactly -- I guess what -- how many patients' worth of data are you planning to present at ASCO from this Phase 1b study?

Thank you very much, Michael. So we are going to present the -- obviously the original dose escalation studies and the additional expansion cohorts, which were -- the patients were dosed at 10 milligrams, 15 milligrams, and 18 milligrams per kilogram every three weeks.

There were 6 patients in each one of those cohorts. That's a total of 18 additional patients. We have previously shown results from 3 of these patients at a chemotherapy meeting in November 2013. So it will be an additional 15 patients.

We do have some ongoing additional patients being dosed. And depending how far along those patients are on a Q3 weekly basis, we may choose to include that data. But at this point, what I can guarantee is the additional 15 patients, of which half of those were patients with breast cancer.

Got it, great. Thanks. And then on MGA271, you mentioned you are launching a combination study with ipilimumab among others. I guess what drove that decision? Why wouldn't you look at a PD-1 antibody?

There's been some data published recently showing that non-small cell lung cancer tumors that overexpress B7-H3 respond particularly well to PD-1 inhibition, for instance. What are your thoughts there?

Thanks very much for that question, Michael. Clearly, we are looking at looking at a broad landscape of combining MGA271 with other immune check point inhibitors.

We are starting out with ipilimumab. Obviously, the data that has been seen in some cancers, which has been quite favorable in the combination, hasn't necessarily translated globally to other cancer types. And in certain cases, this has been compounded by problems with toxicity.

And given the very good safety profile of MGA271, we like to explore the opportunity of combining with ipilimumab to see if in fact we can get both a good clinical outcome and a good safety profile. That does not preclude in any way the opportunity for us to look at the combination of MGA271 with anti-PD-1 and other immune check points. So stay tuned; later this year, we'll have some more updates in that regard.

Got it, okay. And then a bigger picture question. You know, how are you thinking about growing the DART pipeline? Are you planning to remain focused on T-cell recruiters or are you also looking into different modes of therapy? You know, I'm thinking about dual check point inhibition and other types of antibodies that could be developed.

Again, Michael, as you know, one of the attractive features for our DART platform is its versatility and its applications, quite broadly, both therapeutically as well as mechanistically.

We are continuing to look at opportunities, both at the redirected killing mechanism, targeting both T-cells and other cell types as well as one mode of therapy. And as you know, we've now exploited the ability to cosignal two molecules on B-cells for MGD010 in the autoimmune setting.

We are clearly working on looking at combinations of various checkpoints and we can think about this quite broadly, both in terms of ones that have been approved for therapy, ones that look promising for therapy. We can look at combinations, either on the lignin side or on the immune T-cell side or cross-functionally between an immune cell T-cell and tumor cells, which may express when the lignin ends.

What I can say is that we have a broad activity in these initiatives internally, preclinically. And again, stay tuned later in the year as we advance some of these programs forward.

Got it. And one more, if I may. Any progress on any of your more dated partnerships? I'm asking because I noticed an abstract accepted at the AACR conference that named some Pfizer employees on there. Any progress in any of the other partnerships?

So yes, thank you for that. Obviously, we are somewhat limited in speaking publicly about those specific collaborations, both in terms of the state of the development of those molecules and the identification of the specific molecules that have been incorporated into our platform.

Having said that, we are very pleased that Pfizer has submitted a abstract for the upcoming AACR session, where they have identified a specific solid tumor target using the DART technology in which T-cells will be recruited through CD3. So this is the beginning, hopefully, of some public disclosure from some of these collaborators.

Got it. Great. Thank you and congrats on all the progress.

Christopher Marai, Oppenheimer.

This is actually Michelle Gilson in for Chris. We were wondering if you could potentially expand on your development path for the CD3-targeted antibody for Type I diabetes. And what you guys were thinking in terms of the next data readout?

Thank you very much for that question, Michelle. As we've indicated previously, we have an ongoing study that's largely funded by NIDDK, looking at the application of teplizumab in patients who are at high risks for developing Type I diabetes by having detectable autoantibodies as well as a family history of Type I diabetes.

This study is recruiting slowly, because there is a long period of readout from a time a patient has the first detection of these antibodies until they have a diagnosis of diabetes. This study will go on for a number of years.

What we have indicated more recently is that we'd like to see this program advance further in patients with new onset Type I diabetes, sort of a redo of the Protege study we did a number of years ago, now using a different set of entry criteria as well as different endpoints. As we have indicated and have published, we saw some very nice activity of teplizumab in these new onset diabetics in terms of retaining the ability to produce insulin and retaining levels of C-peptide compared to control populations.

Given that a lot of the focus of the Company has shifted, particularly focusing on oncology but not abandoning autoimmune diseases, we still think -- we think that there is merit for patients to have this molecule available for treatment of patients with new onset Type I diabetes. But given our change in focus, we are now in discussions with other companies for the possibility of outlicensing this technology so that a new Phase 3 clinical study can start. And we'll give you some more updates as we make progress in these outlicensing efforts.

All right, great. Thank you.

Steve Byrne, Bank of America.

What do you expect the cost of that SOFIA study to be? And is your conviction on that one going essentially head-to-head against trastuzumab, is that based on the data from these additional patients that you have in that Phase 1 program?

And do you see those patients being enriched in that genotype that kind of favors margetuximab, that low binding affinity for the macrophages, is that enriched in this patient population?

Thanks for those questions, Steve. With regard to cost, we're not going to give any guidance specifically on the study. You can imagine a study of over 500 patients is considerable for the Company. We feel that the pricing and what we have outlined is reasonable for the size of this trial.

With regard to the specific data, the -- what we were very encouraged by, as I've indicated before -- and again, we will be presenting this data in the middle of the year -- is that the breast cancer patients -- these are patients with gene amplification -- had been on multiple therapies. The average number of previous therapies were 4.5. Many of these patients had seen multiple HER2 therapies. All the patients had seen at least one HER2-based therapy.

What we had seen in these additional patients is both evidence of objective responses as well as indication that these patients were being maintained on drug margetuximab much longer than historically seen in patients who had been treated with trastuzumab. So we are very encouraged by this data set and that, in a large way, had encouraged us to move forward.

And clearly we had also presented this data to a large number of KOLs, who have reviewed this data and have agreed with our conclusions. So again, the data, the validation by these KOLs and obviously the need for patients there is what propelled us moving forward.

With regard to the specific genotype question, what I can say is that if I recall correctly, if not all, almost all the patients were either heterozygous or homozygous with a low binding allele. Again, consistent with our observation that patients in those two genotype groups tended to have a better increased antitumor activity compared to those with a higher binding allele.

Okay. And then shifting over to the MGA271 antibody, if you see a meaningful signal in this kind of broadening study that you have, does it make sense to consider a DART that binds to that lignin, with maybe a CD3 on the other side?

So as you have noted quite correctly, we are very encouraged by the profile of B7-H3 expression. As we've indicated previously with the particular epitope that we are targeting for B7-H3 and MGA271, we see high overexpression in most solid tumors with very little expression in their normal tissues.

And as you must recall, Steve, as I often present at meetings, I've indicated that when we identify a target of interest, we are fairly agnostic on the mechanism or the platform that may be applied. So creating a DART-like molecule would in fact potentially make sense targeting CD3. It could be quite complementary to the ability to recruit macrophages, NK cells, and other cells here. And so we will keep that in mind and stay tuned.

And then on that new DART that you have that's wholly owned in MGD009 that targets a solid tumor antigen, can you comment on whether or not that's a surface antigen or an MHC-bound antigen?

That is a surface-associated antigen, highly overexpressed on solid tumors.

Okay. Thank you.

Debjit Chattopadhyay, ROTH Capital.

Thanks for taking the questions and congrats on the progress here. Just quickly -- should we just assume the SOFIA study to have very similar kind of powering as the original MAGENTA study that's in gastroesophageal cancers?

Debjit, I think that would be a correct assumption.

And from the combination with Yervoy, are you thinking about, given the toxicity profile of the drug by -- of Yervoy, are you thinking of the [treatment pekaygah]approve those or do you think you can go lower with your -- lower dosing with Yervoy?

That's an excellent question. And I think we will be exploring various doses of Yervoy and [tiring] up. So it would be interesting if we can actually achieve better clinical responses with lower doses and obviously a better safety profile.

And the choice of Yervoy -- and going back to one of Michael's questions then -- how are you thinking in terms of the tumor stromal environment than the down regulation of T-cells? And then the choice between Yervoy versus the other PD-1 or PDL-1 antibodies?

With regard to the stromal environment, as you recall for MGA271, this is one of the attributes of this particular molecule. As I've indicated before, B7-H3 is upregulated on much of the vasculature in many of these tumor types. And so we actually have some ability to hit the vasculature and potentially some stromal tissue as well just from the MGA271 molecule.

You know, we are not excluding the opportunity now of combining MGA271 with Yervoy and potentially other molecules. Again, we want to look at the ability to build the best therapeutic profile here. And as other molecules get defined for their improvement of targeting stromal tissues, we will also consider those.

Thank you and good luck.

Stephen Willey, Stifel.

Thanks for taking my questions. With respect to the MGA271 data that we, I guess, will be getting in the second half of this year, can you maybe just characterize what, if any, data we might be getting from these additional expansion cohorts that have been recently enrolled?

Yes, thanks, Steve. So just for clarification, what we will do in the second half of this year, we will go through the dose escalation part of the study, which had 26 original patients. We then had 3 cohorts of approximately 15 patients each of melanoma, prostate, and then sort of a mixed basket of several other tumor types.

As I'd indicated, we finished enrollment now of the mixed basket group. We finished enrollment of the melanoma group. A number of those patients are still on therapy. And we have a couple of patients yet to recruit on the prostate side and several patients are still on therapy on the prostate side.

So my expectation is we will include all that data in the second half of this year. And then if there is some additional data from some of the five new cohorts that we've previously defined and I mentioned earlier today, we will try to include that as well.

Okay. And then I guess a big question around MGA271 and B7-H3 targeting is how dominant the immune check point component mechanism is versus, I guess, that which is directly antitumor-genic? And I'm just wondering if there is any ancillary data that you may or may not be able to provide in conjunction with just, I guess, basic response data that maybe helps to provide some insight into that question?

Unfortunately, I don't have anything new on that vantage point. As I've pointed out in previous sessions, the attractiveness of this particular molecule is the multiple mechanisms by which it may act.

And given that in our preclinical data, in the absence of any immune check point examination, just by enhancing the Fc binding, we got dramatic increase in the killing profile of the MGA271 molecule. And we felt that this alone, even if there was no additional immune check point component to it, could serve patients very well.

But now if you can add on both the immune check point component and the two other features, one which I've already mentioned, that it can target the vasculature in some of these tumors as well as cancer stem cells, which we were not testing in our in vivo models, we feel that this profile, coupled with very a good safety profile that we've seen to date, could serve the patients well.

And so we are really trying to get a suitable data set, looking at a large number of tumor types and also looking at combinations with other therapies to see which would be the best way to develop this molecule. But I don't have anything specific that hones in on the immune check point mechanism per se.

Okay. And is it safe to say then, just because of the second-half timing, that we should hear something about the Servier opt-in decision prior to the presentation of the data?

So I can't answer that, because it -- the timing of that may -- of the presentation may occur before their requirement for making their decision. So having not set the particular venue yet for the presentation, I can't say it will be before or after when they have to make their decision. So stay tuned and again, I'll provide some more clarity around this later this year.

Okay. And then just lastly, maybe for Jim, how should we be thinking about the accounting treatment of the upfront payment from J&J?

Yes, great question, Steve. And we are working through that. Obviously, that will be a Q1 event, because the deal was closed in the first quarter. Certainly, the $50 million upfront payment will likely -- and I would caveat that greatly -- will likely be mostly recognized in Q1.

And then the portion of the equity investment representing the premium, which is in excess of $10 million, will also likely be recognized as revenue in the first quarter. However, I would asterisk that and say that that is subject to continued discussions with our auditor.

Okay. Thanks and our congrats on the progress.

(Operator Instructions) David Nierengarten, Wedbush Securities.

This is Dilip sitting in for David. I was just wondering when Phase 1 data for the MGD006 and MGD007 DARTs were expected. And also whether the strategy for the MGD009 DART is to wait until after it enters the clinic before you seek a possible partnership?

With regard to our MGD007, I had previously indicated we are going to complete those -- we are going to try to complete dose escalation during 2015. Again, it may spill over to 2016.

So we're not going to provide at this time any clinical updates on that -- on those two molecules until we complete the dose escalation phase. With regard to MGD009, we have no intention at this time to partner MGD009, but obviously, we will assess opportunities as they present to us.

Okay, thanks.

I'm showing no further questions at this time, gentlemen.

So thank you, everyone, for joining us today. And I'd like to let you know that we will look forward to updating you on each of these programs that we discussed today as we continue to make progress throughout the rest of 2015. Have a good day.

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