MacroGenics Inc (MGNX) 2015 Q2 法說會逐字稿

-- second-quarter 2015 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 two hours after the call is completed.

I would 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' President and Chief Executive Officer.

Thank you, Jim.

As always, I welcome everyone participating via conference call and webcast today.

Thank you for joining us.

I'd like to touch on three themes during this call that we consider essential to MacroGenics in our efforts to direct the immune system to treat cancer and other diseases.

Those themes are -- MacroGenics' diversified pipeline of novel clinical development candidates, including margetuximab, a next-generation anti-HER2 antibody that has just commenced Phase III testing; MGA271, a first-in-class anti-B7-H3 antibody; and several novel bispecific DART molecules that have been strategically positioned to address unmet medical needs in patients with hemalogical malignancies and solid tumors as well as autoimmune disease.

Second, our research, including the antibody engineering expertise and target discovery efforts that are at the heart of our Company.

Our research and engineering efforts are constantly replenishing and strengthening our pipelines with additional development candidates and new data.

And third, advances in our operational infrastructure which underpins our growing portfolio of programs.

Following that, we'd be glad to have a discussion during the Q&A period.

But first, I'll ask Jim to conduct a review of our key financials.

Thank you, Scott.

This afternoon, we reported financial results in line with our expectations.

Briefly, as we described in our release, MacroGenics had research and development expenses of $22.7 million for the three-month period ended June 30, 2015 compared to $17.3 million for the three-month period ended June 30, 2014.

This increase was primarily due to the clinical study preparations for the margetuximab Phase III SOPHIA study, the commencement of a DART Phase I study, and the increased activity related to IND preparations for MGD009.

Some of these expenses were offset by a decrease in MGD011 spending after this program was transferred to Janssen following our submission of the IND in March.

We had general and administrative expenses of $5.3 million for the three-month period ended June 30, 2015 compared to $4.1 million for the three-month period ended June 30, 2014, primarily due to higher stock-based compensation expense and labor costs, as well as information technology-related expenses.

We recorded total revenues, consisting primarily of revenue from collaborative research, of $6.7 million for the three-month period ended June 30, 2015 compared to $9.2 million for the three-month period ended June 30, 2014.

Collaborative research revenue includes the recognition of deferred revenue from payments received in previous periods, as well as payments received during the year.

For the quarter ended June 30, 2015, we had a net loss of $21.4 million compared to a net loss of $12.3 million for the three-month period ended June 30, 2014.

As of June 30, 2015, our cash and cash equivalents were $235 million compared to $157.6 million as of December 31, 2014.

Subsequent to the close of the quarter, we completed an equity offering of 4,053,750 shares, including full exercise of the underwriter's overallotment option, generating net proceeds to MacroGenics of $141 million.

In addition, as we announced last week, our collaboration partner, Janssen Biotech, Inc., chose the first patients in the Phase I study of MGD011, which triggered the achievement of a $10 million milestone.

Based on the Company's current cash balance, we believe that we continue to be in a good position to advance our growing pipeline of product candidates, along with our recently announced efforts to accelerate the development of checkpoint inhibitor-based molecules, and the planned expansion of our manufacturing capacity for anticipated clinical and commercial needs.

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

Thanks, Jim.

Again, I will review our pipeline, our platform, and then touch on operational infrastructure before we open up the call to your questions.

Our pipeline, as I have often emphasized, is deep in terms of its number of product candidates as well as the very indications we are pursuing.

We are proud of the fact that each of these candidates was generated using MacroGenics' proprietary platforms, which includes our Fc optimization; Dual-Affinity Re-Targeting, or DART; and cancer stem-like cell technologies.

Starting off, I'm very pleased to announce that we recently enrolled the first patients in the pivotal Phase III SOPHIA study of margetuximab in patients with metastatic breast cancer.

As a brief review, SOPHIA is a pivotal study of margetuximab plus chemotherapy in patients with third-line metastatic breast cancer.

A total of 530 patients with higher levels of HER2 expression will be enrolled in this study.

For these purposes, we mean expression of HER2 at the 3-plus level by immunohistochemistry or 2-plus level by IHC with gene amplification.

Eligible patients will have progressed on earlier lines of HER2-directed therapy.

This is important to note when considering the potential position for margetuximab in the treatment landscape, as there is currently no consensus regarding the standard of care for treatment of HER2 positive patients who have progressed despite standard first and second-line treatment.

As many of you know, data from our Phase I study of margetuximab were presented at the ASCO annual meeting earlier in the quarter.

To summarize, monotherapy antitumor activity was observed across several tumor types, including patients with gastric, colorectal, and head and neck cancer, as well as patients with breast cancer who had received extensive prior therapy and progressed on prior HER2 directed therapy.

Tumor reductions were observed in 13 of 19 evaluable patients with breast cancer, including four of 19 patients with confirmed partial responses.

The most common adverse events were grade 1 to 2 constitutional symptoms and an infusion-related reaction.

These data reinforce both the safety profile of margetuximab as well as the rationale for the SEPHIA study.

Finally, we continue to advance our efforts to initiate a Phase I/II combination study in gastroesophageal cancer later this year.

MGA271 is our Fc engineered antibody that targets B7-H3, a member of the B7 family of molecules involved in immune regulation.

We are currently enrolling patients in multiple Phase I expansion cohorts across various tumor types, including the triple negative breast cancer, head and neck cancer, renal cell cancer, melanoma in patients who have progressed despite prior checkpoint inhibitor treatments, non-small cell lung cancer, and bladder cancer.

Further, we are leveraging the potential power of immunotherapy combinations via the investigation of MGA271 in combination with checkpoint inhibitors, including ipilimumab and pembrolizumab in patients with B7-H3 positive melanoma, non-small cell lung cancer, and head and neck cancers.

The study of MGA271 in combination with ipilimumab has begun already, and we anticipate the combination of pembrolizumab will begin this quarter.

Looking forward, we expect to present clinical data from the ongoing clinical study of MGA271 in the fourth quarter.

I'd like to next discuss our DART portfolio.

We believe that our DART platform offers significant benefits over competing bispecific technologies, and we are actively engineering DART molecules to exploit the therapeutic possibilities enabled by simultaneously accessing a combination of targets.

The versatility of our DART platform allows for the generation of antibody-based molecules with a variety of intended mechanisms of action, including redirecting T cells to cancer targets; cross-linking targets on the same cell to up or down regulate a signal, such as in autoimmune disorders; simultaneously targeting multiple checkpoint inhibitors, or targeting multiple infectious disease targets.

Our first few clinical candidates are in the redirected T-cell category.

We have one in the autoimmune category, and additional research efforts are underway in all four categories.

First off, MacroGenics is currently enrolling a study of MGD006, a DART molecule that recognizes both CD123 and CD3.

CD123 is expressed on leukemia and leukemic stem cells.

The primary mechanism of action of MGD006 is its ability to redirect T cells via their CD3 component to kill these CD123 expressing cells.

MacroGenics continues to enroll patients in the dose escalation portion of a Phase I study of MGD006 in the treatment of acute myeloid leukemia.

Second on this list is MGD007, our first clinical DART molecule designed to target solid tumors and to have prolonged circulating pharmacokinetics.

MGD007 recognizes both the glycoprotein A33 antigen or gpA33 and CD3.

GpA33 is a gastrointestinal antigen that is highly expressed in patients with colorectal cancer.

The primary mechanism of action of MGD007 is its ability to redirect T cells via their CD3 component to kill gpA33 expressing cells.

We continue to enroll patients in the dose escalation portion of a Phase I study of MGD007 for the treatment of patients with colorectal cancer.

Third on our list of DART molecules and clinical evaluation is MGD011, a DART that targets CD3 and CD19, a key targeted efforts to treat B-cell hematological malignancies through immune modulation.

MGD011 is designed to redirect T cells via their CD3 component to eliminate cells expressing CD19, a marker expressed in B-cell malignancies.

MGD011 is engineered to achieve favorable pharmacokinetic properties that enable convenient, intermittent dosing regimens in the clinical setting, something that is not possible with glembatumumab, the currently approved bispecific molecule for treating patients with ALL.

As you may recall, Janssen is developing MGD011, also known as JNJ-64052781, under a partnership we announced last December.

Importantly, the first patient was treated in an open label Phase I study in late July, which triggered a $10 million milestone payment to MacroGenics.

This Phase I study will evaluate the safety, tolerability, and preliminary clinical activity of MGD011 when administered to patients with relapsed or refractory B-cell malignancies, including diffuse large B cell lymphoma, follicular lymphoma, Mantle cell lymphoma, chronic lymphocytic leukemia, and acute lymphoblastic leukemia.

We are excited about the development of MGD011, and retain options to co-promote the product in the United States and Canada, as well as to invest in later-stage development in exchange for a share of potential profit.

Fourth, in the autoimmune category, MGD010 is a DART molecule that simultaneously targets CD32B and CD79B, two B-cell surface proteins.

MGD010 is engineered to enable extended pharmacokinetics without imparting other Fc affected functions.

MGD010 is being developed for the treatment of autoimmune disorders, and is designed to inhibit B-cell activation by exploiting the inhibitory function of CD32B, a checkpoint molecule expressed by B-cells.

We continue to enroll patients in a Phase Ia study of MGD010 in normal healthy volunteers, which we expect will be completed in 2016.

Finally, regarding the DART programs that we will discuss today, we expect that our fifth DART molecule, MGD009, a molecule that can target multiple tumor types, will be in the clinic by year-end.

And it's worth noting that MacroGenics retains 100% of worldwide development and commercialization rights to MGD009.

We look forward to sharing with you the molecular targets at MGD009 and the indications we intend to pursue with this molecule in the near future.

I'll conclude with a few words about the development of our operational infrastructure to parallel the growth of our expanding pipeline that I just described.

As I mentioned at the outset, our operations play a key role in supporting the promising R&D efforts that I described.

We've made important accomplishments across several operational areas recently, and I want to outline them here.

As Jim described in July, we completed a follow-on offering raising $141 million in net proceeds, which includes the full exercise of the underwriter's overallotment options.

These additional financial resources considerably bolster our already strong balance sheet.

We intend to use a portion of the proceeds of this offering to expand our manufacturing capacity to accelerate the development of as-yet undisclosed immune check point-based product candidates, and to advance other research and development programs.

Pursuant to my comments about manufacturing, I want to highlight that we recently signed a lease for additional space with a focus on expanding our manufacturing capability.

With this initiative, we are taking steps to ensure that we can meet the material needs of our development plans as we advance our product candidates through clinical studies, with an eye towards potential future commercialization of material produced in this facility.

We intend to complete the initial design for this new manufacturing space this year, and will subsequently initiate the buildout.

Finally, to provide additional insights around our technology platform as well as our various clinical programs, we plan to host an R&D Day in New York on Tuesday, October 13, 2015.

I am extremely enthusiastic about this event, and will provide additional detail soon.

We hope to see you there.

With that, I'll ask the operator to open the call to questions.

Operator?

Michael Schmidt, Leerink.

Thanks for taking my questions.

Scott, I just had one on MGA271.

I guess could you provide some more color on the breadth and depth of data that you plan to present later this year?

Yes, Michael, thanks very much for the question.

As we've indicated, in the fourth quarter, we plan to present the original monotherapy cohorts.

As you recall, we had a dose escalation, and it's up to 15 milligrams per kilogram of MGA271.

We then did three expansion cohorts of approximately 15 patients each, which included patients with melanoma, prostate cancer, and then a mixed basket of other tumors of which no more than five patients of any given tumor type were represented.

We will present all that data.

Plus, as you recall, we started five additional monotherapy cohorts, which I've outlined, including the triple negative breast, head and neck, renal cell cancer, the melanoma group that had progressive -- the checkpoints, and then the higher expressors in the lung cancer and bladder cancer group.

We're still recruiting that monotherapy cohort.

I would say we have just under half of that cohort enrolled.

And so, patients will still be -- continue on treatment.

So we will present a subset of that data as well.

And it will be too early to present any of the data on the combination studies, because those have just been initiated.

Great.

Thanks.

And then I had one on MGD010, the autoimmune DART.

How is that being positioned?

Is that being positioned as for broad indication?

Or more towards niche autoimmune diseases?

The opportunity here is quite a unique one about -- via the mechanism of action of this molecule.

By colligating the two receptors on the B-cells and down-regulating B-cell activation, which includes the production of auto antibodies, we think that this can be used potentially quite broadly in both large and niche indications.

As you recall, Michael, we also had some preclinical data in reconstituted immunodeficient mouse models, where we showed that we can also impair a T-cell mediated effect preventing a graft versus host disease in animals that received MGD010 at the time of reconstitution of those animals.

And so there may be also an ancillary effect on sensitizing T cells, which may also help us to broadly apply this molecule to many different autoimmune indications.

Oh, great, great.

Terrific.

And one more if I may.

I recall Pfizer had a poster at ASCO on a DART molecule that they've been working on with you.

And my question is, are there any updates from any of the other partner programs?

And what are your expectations for potential milestone or license payments going forward?

At this point, we have ongoing collaborations, as you know, with a number of different partners, but we are right now not at liberty to bring you up-to-date on where they are in the development process.

These are primarily research relationships, and it is incumbent on them to announce their plans for further development.

I think the Pfizer opportunity was -- is a great one.

They've obviously now publicized the fact that they are moving into development with a CD3 at a PCAT hearing, DART-like molecule.

But at this time, we are not at liberty to discuss any of the other collaborations.

Okay.

Great.

Thanks so much, and congrats on the progress.

Thank you so much.

Christopher Marai, Oppenheimer.

Thanks for taking the question.

Just really curious about MGD006.

That's a CD123 CD3 bispecific.

I guess that's enrolling right now in Phase I patients with AML.

And I was wondering if you could comment on how enrollment in that trial is going, if you are encountering any issues or difficulties?

If I recall correctly, this is a continuous infusion molecule.

And then, finally, do have any feedback, I guess, from the physicians with respect to that?

Any tweaks that you might want to make to that trial?

Thanks.

Thanks, Chris.

Appreciate the comment.

As you characterized quite correctly, this is the only DART molecule in which we do not have an Fc component to it.

And so that this molecule has a very short half-life.

And we are administering this as a constant infusion over four days, at which time the patients are to stop treatment, and then we restart the following week four days on, three days off, four days on, three days off.

They're -- the -- as you recall, when we started this trial, we had one single site at Wash.

U. And currently right now we have approximately five sites in the US that are recruiting patients.

So, what we recognize is, is that obviously we had to expand the number of sites to recruit a population that is obviously a difficult one, because these patients are acutely ill.

And often when you are in a screening process, when they are ready to go, they may have a complication even before they enter in the trial.

And so, while we started this trial last year, it's been slower than, obviously, I liked it.

But at this point, we continue to do the dose escalation.

What I can say is, is that we are -- obviously, this is a molecule that we have a partnership with Servier on.

And we are in plans with them to even expand this program even further to, hopefully next year, include sites in Europe, and also broaden the indications beyond AML into other targets which overexpress CD123.

So we expect in 2016 to be able to update you on the clinical progress of this program.

Okay, great.

And then just on the -- I guess the short half-life, I know there may be some advantage to that in some sense and in some indications.

Could you maybe elaborate on that?

I guess the question is, where does this fall relative to some potential competition in this space that's got the longer half-life?

And how do you look to sort of have an advantage there?

Thanks.

So, you know we are well-poised to answer that in the sense that, given that the broad number of different indications in which this molecule can be used, there may be certain settings where you want to have a shorter half-life, and other cases you want to have a longer half-life.

We have -- right here have developed an Fc bearing version of this molecule as an alternative in cases where we want to have an extended half-life.

But as this was the first DART molecule we moved into the clinic, we felt it was most prudent to have a short-acting half-life where we had the total control both on a safety and an efficacy standpoint.

So we had great latitude.

And now that we not only have the experience with the short half-life, having this year we will have four different other molecules with a long half-life, to be able to then make a decision whether it is necessary to introduce a longer half-life anti-CD123 molecule.

So we have that latitude.

Okay, great.

Thanks for the color.

Congratulations on the quarter.

Thank you much.

(Operator Instructions) Stephen Willey, Stifel.

This is Philomena Kamya calling in for Stephen Willey.

Congratulations on the progress made thus far and a wonderful quarter.

I just have a couple of questions with respect to the mechanism of action for the MGA271 B7-H3 molecule.

I was wondering if you could just give us some sort of indication as to what you think the mechanism of action is, and what the rationale is for the combination with other checkpoint inhibitors, please?

Well, thank you very much for that question.

We are very excited about the prospects of MGA271.

It targets a very interesting molecule B7-H3.

As you know quite well, there is a very large literature that shows that overexpression on almost every solid tumor is associated with a worse clinical outcome when a patient's tumors bear high levels of this antigen.

Mechanistically, we've taken advantage of the fact that tumors have high levels of expression, but normal tissues have very low levels of expression.

And so that's why we were able to design a molecule that incorporated our enhanced Fc receptor engagement.

As a consequence, we had shown quite nicely in published data that we can get dramatic increased killing of not only tumor cells that express this antigen, but also cancer stem cells.

And we have very good evidence that we can control the growth of blood vessels which are associated in the growth of tumors.

So, mechanistically, we know that the direct killing affect can have a dramatic effect on tumor growth.

But in addition, because this molecule has been shown quite nicely to inhibit T cell activation and the activation of other immune cells, there is the additional possibility that by downgrading, reducing the density of expression on tumor cells, we may allow some of the adaptive immune T cells to engage in a -- an active immune response.

At this point, in the context of the clinical studies, we don't know right now which mechanism bears the greatest impact on the growth of tumors.

There are also other ancillary mechanisms which may be employed here.

The fact is, is that there is a strong literature that shows that B7-H3 may be involved in tumor cell migration, which may lead to greater metastasis.

And, in fact, that may also impart a biological function on tumor cells as well.

So we hope as we continue to advance forward with these clinical studies, and we begin to acquire tissues from the patients themselves, we will be getting a better insight in terms of the impact on the mechanism.

Ultimately, the generation of antigen-specific T cell responses, which has been shown to be very important, may in fact obviously be favored by combining this and one of these many mechanisms by which MGA271 may be acting, with the reenergizing on the T cells that are found in the tumor compartment.

Brilliant.

That was -- thank you so much for answering that.

Can I just ask one more question which is pertaining to D700 -- D007?

Could you just let us know -- because you are exploring this particular molecule in a number of indications, and do all these indications have evidence of overexpression of gpA33?

And if so, how would you standardize for that?

So, let me clarify this and correct it.

Currently the only indication we are pursuing at this time are patients with advanced colorectal cancer.

Over 95% of these patients are -- cancer cells, both primary and metastatic cells, expressed gpA33.

There also is a minority of other G.I. tumors, which also expressed gpA33, including gastric cancer and pancreatic cancer.

So, right now we are just focusing on the colorectal population.

Obviously, this is a somewhat a heterogeneous population.

But at this point, we are not distinguishing between different colorectal cancer types.

Brilliant.

Thank you very much and, again, fantastic quarter.

Thank you so much.

Thank you.

(Operator Instructions) At this time, there is no other questions in queue.

I'd like to turn it back to Dr. Koenig for any closing remarks.

Thank you, operator.

And thank you all for joining us.

I hope to see many of you at our R&D conference in October.

Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes your program.

You may now disconnect.