MacroGenics, Inc. (MGNX) Earnings Call Transcript & Summary

Good morning. My name is Gabriel Cruz, and I'm a member of the health care investment banking team here at JPMorgan. Thank you all for joining us today. Today, I have the pleasure of presenting Scott Koenig, CEO of MacroGenics.

Thank you very much. So thank you very much for the opportunity to present at JPMorgan. I will be presenting forward-looking statements during the course of this presentation. So please refer to our SEC filings to understand the risks associated with an investment in MacroGenics. MacroGenics is a leader in the development of antibody therapeutics for the treatment of cancer. We have developed our company through our core platform technology developed in-house. First one is Fc-engineering, where we've incorporated this technology in 2 of our molecules and have demonstrated coordinate activation of the innate and specific immune responses to produce clinical benefit. Our second core technology is around bispecifics, which we call our DART technology, where we have been exploiting this technology through multiple mechanisms to enhance immune responses. Every one of our molecules in clinical development has shown clinical activity in one or more tumor indications. But it is our long-term vision to combine these specific modalities to enhance and maximize clinical benefit through synergistic, mechanistic actions. So what we have announced last week is our plans for 2020. And to be succinct, I'd like to highlight what our plans going forward. And it results in 2 major objectives: to initiate, to advance and to execute registrational studies in multiple indications in an expeditious and cost-efficient manner; and to extend as far our runway of our cash position, hoping to get to the end of 2021 and possibly into 2022. To achieve this goal, as noted here, we have, in part, reduced the number of clinical assets that we're pursuing where we have 7 clinical assets in development. Our later-stage assets, as I will point out, are moving towards registrational intent studies. And our earlier assets are progressing quite nicely through Phase I development, and we will outline plans for Phase II development in more limited indications. Leading our programs here is margetuximab, our Fc-enhanced antibody where we're pursuing a registration in metastatic breast cancer. And in partnership with Zai Labs, we will be developing margetuximab in front-line metastatic gastric cancer with the recent initiation of a study called MAHOGANY. Our flotetuzumab molecule, our first DART molecule in the clinic, is being pursued for a subset of AML patients currently, patients with refractory disease, and we intend to start a registration study later this year. MGA012, our anti-PD molecule, which is partnered with Incyte, as they announced earlier this week, is moving forward quite nicely with multiple combination and single-arm studies going with registrational intent for the single-arm studies. And as they have noted earlier this week that some of these studies will be announced results later this year. Enoblituzumab, our second Fc-engineered molecule, will be pursued for front-line metastatic head and neck cancer, and I will outline our plans going forward for a registrational study with this molecule. The 3 earlier molecules listed here, MGD013 is progressing quite nicely. And we expect to be able to present dose escalation data and initial results in targeted particular indications at ASCO this year. The 2 other remaining early molecules, MGD019, our PD-1 by CTLA-4 bispecific, has progressed quite nicely through dose escalation. And I'm happy to report today we achieved our top targeted dose with evidence of objective clinical responses and without the toxicity often associated historically with combinations of anti-CTLA-4 and anti-PD-1 combinations. Furthermore, I am happy to announce that MGC018, our first ADC molecule that has entered into the clinic, has also gone through dose escalation. We are finalizing the final dose in the first half of this year. And here, again, I'm happy to announce with a relatively tolerable safety profile, we have achieved objective responses. And in the second half of the year, we should be able to provide further guidance on the development of both MGD019 and MGC018 in 1 or 2 tumor indications. So let's explore some of the later-stage molecules a little more in depth. Obviously, in the past year, there's been a great focus on margetuximab, our Fc-engineered antibody targeting HER2. We're happy to announce that this molecule is progressing nicely with the filing of the BLA in December of the last month. And we expect to meet with the FDA very shortly on our introductory presentation of this molecule. And as you know, the FDA has 60 to 75 days to come back to us after the filing to announce whether they will accept the filing, which we expect. And then as we have publicly announced, we have expectations that they may require an ODAC later this year and will announce a PDUFA date later this year. So as I pointed out, with success in breast cancer and the progress in MAHOGANY, we look forward to further advancement of this molecule successfully. To give you a little bit of background with regard to the activity in breast or in gastric cancer, we conducted a Phase III study called SOPHIA in patients who had a prior treatment with standard anti-HER2 therapies, which include HERCEPTIN, Perjeta, and in most cases, Kadcyla. Patients were randomized after the choice of 1 of 4 chemotherapies to an arm either receiving margetuximab or trastuzumab. And 536 patients were enrolled in the study, and sequential primary endpoints of PFS had been previously announced and an interim OS result has been announced. We also had explored a particular allelic variant of CD16 as a population that may have the greatest benefit for margetuximab. Here was the data that we presented in February of this year, where we achieved statistical significance of the intent-to-treat population for PFS with a 24% risk reduction with a little less than 1 month of PFS benefit of margetuximab versus trastuzumab. As important is the prespecified exploratory subpopulation of CD16A F allele patients, which represent 85% of the population where we saw a benefit of approximately 1.8 months. Furthermore, we have now done 2 interim overall survival analysis, the last one at 270 events, which we announced just before the San Antonio Breast meeting late this past year. Our final OS analysis will occur later this year when we achieve 370 events. As noted here, both in the intent-to-treat population, we see favoring of margetuximab over trastuzumab, although not statistically significant. And in the prespecified exploratory F allele population, we're seeing a median difference in overall survival benefit from margetuximab of 4.3 months. And while not statistically significant yet nominally, the hazard ratio is, at this point, at the 270 events of 0.79 with a p-value of 0.087. So we are hoping that this will continue to improve and maintain the differential benefit for margetuximab. With regard to our experience in the treatment of gastric cancer, we explored the use of margetuximab in metastatic gastric cancer in the second-line setting in combination with pembrolizumab. And as you see from these plots and the response rate in the IHC 3+ population, we're seeing quite significant response rates, where about 1/3 of the patients overall are responding in the IHC 3+ population. And if you look at the subset of patients who had been previously examined for PD-L1 expression, on their initial treatment, we're seeing over a 50% response rate and a very long overall survival benefit. To put this in context, in the second-line setting here, when you compare this to standard of care in the second line, which is ramucirumab plus paclitaxel, we're more than twice the benefit in terms of overall survival at 20.5 months in the PD-L1 positive population compared to the 9.6 months. And even compared to front-line therapy, which is the standard TOGA regimen, which is HERCEPTIN plus chemotherapy, we're seeing a very significant survival benefit. As important is that because this treatment is in the absence of chemotherapy, we're seeing a much-reduced Grade 3 adverse event rate. And as a result, we have moved forward in what we call the MAHOGANY study where we are exploring the use of margetuximab initially in combination with our own anti-PD-1, which is partnered with Incyte, called MGA012 in patients with IHC 3+ positive, PD-L1 positive. We are, as announced earlier, looking to explore initially up to 40 patients. And as we reported last week, we are focusing in trying to accelerate the enrollment in this arm, so by the early part of the second half of this year, be able to make a decision to further advance this study. From previous discussions with the FDA, we believe that with success in terms of response rate and safety, we could achieve accelerated approval with a single-arm study. Furthermore, we will explore the use of margetuximab in combination with anti-PD-1 in chemotherapy in traditionally defined HER2-positive patients irrespective of PD-L1 status. And we will also look at the value of adding our PD-1 LAG-3 bispecific MGD013. Zai Labs will initiate enrollment in this study in the middle of this year, and we will follow soon thereafter to join this international study. Now turning our attention to flotetuzumab, our first DART molecule, we are establishing our leadership in the CD123 targeting bispecifics. To just refresh your memory, CD123 is part of the alpha chain of the IL-3 receptor, which is upregulated on leukemia stem cells and blast cells in patients with AML and other leukemias. It does -- it is expressed on a subpopulation of normal committed hematopoietic stem cells and some normal tissues as well. We have demonstrated in the last 2 ASH meetings the significant activity of this molecule, particularly in patients with refractory AML. And as I pointed out earlier, we are looking forward later this year to start a registration study in this refractory population. In data which we presented in December of this year in patients who had been targeted at the dosing schedule that we have been developing over the last few years, we were able to achieve a CR/CRi rate of over 32%. To put this in perspective, this particular population has a historical response rate to high-dose chemotherapy in the low teens and subsequent efforts to achieve remissions with salvage therapy drops close to 0. And so with a response rate of CR/CRh in the high 20s and CR/CRi rates of over 30%, we believe that this will introduce a standard of therapy, if successful, that no other drugs or combination drugs have been able to achieve. To put this in perspective, to look at the specific treatment that these patients that had responded had received prior to receiving flotetuzumab, they've included, obviously, high dose 7+3 and other chemotherapies, but also include agents such as venetoclax and experimental agents such as CD33xCD3 bispecifics. We have found that patients, particularly even those who had not historically been thought to be subjects that could receive transplants or cures who entered and were remissioned by treatment of flotetuzumab, as you see here on this graph, many of these patients who have received transplant have had long lives and are doing quite well with this therapy. So what is the future of flotetuzumab? Initially, as we follow-up with the FDA, we will design a registration study, which we expect to start later this year and hope to complete by next year. We are also conducting a study in combination with MGA012, our anti-PD-1, based on data that we presented 2 years ago where PD-L1 is upregulated on AML blast and on cells of patients that are unresponsive to flotetuzumab with evidence of enhanced anticytolytic activity with that combination. We have begun to enroll patients outside the U.S. in 3 countries and expect to expand this and be able to provide updated data later this year. We have also shown that combinations of flotetuzumab with low-dose HMA patients in both fit and unfit -- cells from unfit and fit patients also have enhanced responses. And so there is opportunity to expand the use of flotetuzumab more broadly in the AML population. Turning attention now to MGA012, our anti-PD-1 molecule partnered with Incyte. Currently, there are ongoing 18 studies either of monotherapy with registration focus as well as combination studies being conducted either by us or by Incyte. To put this also in a financial context, in addition to a very significant upfront payment, which we received from them, with further success and the hope towards registering this molecule over the course of the next couple of years, we can receive up to $405 million of milestone payments just from the clinical and regulatory approval, and we have tiered royalties in the 15% to 24% range. Incyte announced earlier recently that in addition to the 3 monotherapy studies that they are conducting and the advance of the anal study, which they expect to have data later this year, they will be initiating quite shortly a Phase III study in non-small cell lung cancer. There are actually 2 studies for this indication. So if you look now in terms of the overall comprehensive plan for MGA012, Incyte has this dual strategy to get approval in niche indications, as I've already outlined, and start and expand studies in very large indications such as lung cancer in addition to the combination studies we are conducting. Now turning our attention to our bispecific DART molecule, MGD013, I should point out the PD-1 specificity contained in this molecule is the exact same one that's found in MGA012, but we own worldwide rights except for the partnership we have with Zai Labs in Greater China. This molecule is designed, as shown here in the cartoon, as a tetravalent bispecific molecule, where we have 2 binding sites for the PD-1 and LAG-3 specificity. And as I've noted earlier, we have now completed dose escalation of this molecule, expanded this molecule in 9 different tumor types, have treated over 150 patients. And by the time of ASCO this year, we should be able to provide both guidance in terms of specific tumor indications that we like to pursue further for Phase II development. I should point out that in the preclinical development of this molecule, we did a standard comparison to the gold standard at that time, which was the Bristol-Myers' nivolumab molecule and 25F7, which is the construct they are moving forward by themselves, as an anti-LAG-3 molecule. And as shown in this plot, we have found that a DART configuration of this molecule for normal T-cells that have been activated to upregulate varying checkpoints, performs better at restoring T-cell function as compared to the combinations of individual antibodies to PD-1 and LAG-3, either those of the Bristol specificity or those contained in the DART molecule. So we obviously have very high hopes that this molecule will continue to perform well in the clinic. And as I said, we will update that later this year. With regard to enoblituzumab, our second Fc-engineered molecule, which has the same 5 amino acids as margetuximab, we have shown a very significant data in multiple indications in combination with anti-PD-1 and had previously announced plans for a Phase II/III study based on conversations we had with the FDA in patients with head and neck cancer. In late-line patients, we had found both in patients that were HPV-positive and HPV-negative objective responses in this population as combinations of treatment in later-line therapies, either patients that have seen 2 or more chemotherapy regimens. And as you see in the inset, many of these responses were nicely sustained for long periods of time. Overall response rate in this population was about 33%, although the numbers of patients were small. But if you put it in historical perspective, as compared to historical data with either nivolumab or pembrolizumab, we're seeing response rates that are at least twofold or greater in terms of objective responses compared to anti-PD-1 therapies alone. So as a result for this promising data, we had decided to move forward into a Phase II/III study where we would examine enoblituzumab in combination with our own anti-PD-1 plus chemotherapy in a front-line setting trying to beat what -- current standard, which is pembrolizumab and chemotherapy, which is giving a response rate, again, in the mid-30s in a front-line setting. What we have announced quite recently, given the promising data that we have recently seen with our PD-1 LAG-3 bispecific molecule, before entering this formal Phase II/III study, we want to test the activity in small cohorts of patients in front-line head and neck cancer either with enoblituzumab plus MGA012, the anti-PD-1, or enoblituzumab plus the bispecific PD-1 LAG-3, and then make the decision from that point going forward on which is the best combination to proceed to the front-line studies. So let me just comment on the financials. As we announced last week, unaudited fourth quarter earning, which we will update at the end of February, we expect to have approximately $215 million in cash and cash equivalents. And as we noted in our press release last week, we are looking at ways to extend the cash, so it lasts us hopefully through the end of 2021 and maybe into 2022. This includes some of the things we discussed -- I discussed earlier, which is reducing the number of the programs and the number of indications we're going after. And of course, as you see our historical success in raising nondilutive capital through partnerships, we expect some of these things to come forward going forward. So in summary, we think that we have a great 2020 coming up with the advancement of margetuximab with the BLA filing and hopefully seeing acceptance of that filing and the review of that and possibly a PDUFA date by fourth quarter of this year; advancing the gastric study in MAHOGANY, particularly in the PD-L1 subpopulation, being able to provide updates of that in the second half of this year; after discussions with the FDA, the initiation of a registration study in refractory patients as well as continued development of combinations with anti-PD-1. We look forward to additional Incyte updates on MGA012, particularly with regard to the registration targeted studies and then, of course, the update on MGD013 likely at ASCO this year. And with that, I thank you for your attention.