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

Hi. Welcome to Barclays Global Healthcare Conference. My name is Peter Lawson. I'm one of the biotech analysts at Barclays. It's my great pleasure to introduce MacroGenics. With us today, we have Scott Koenig, CEO of MacroGenics. Scott, welcome. And before we get into the Q&A, perhaps you could give us a high level introduction to the pipeline, therapeutic focus, technology focus and cash runway. Thank you.

Sure. Thank you, Peter, for the invitation today. So MacroGenics is a company focused on immune-based therapeutics for the treatment of cancer. We have developed proprietary technologies around the Fc domain of an antibody to enhance its activity to destroy tumors as well as a bispecific technology, which we call DART. Currently, we have 7 molecules in clinical development from Phase I to Phase III. I know we'll be talking about today, our lead asset that is under FDA review, following the BLA submission and acceptance. But in addition to that asset, margetuximab, we have 6 additional assets that all show activity in the clinic. This is very exciting times because it is a validation on our 2 core technologies as well as the opportunity to develop these into very broad market opportunities. They include a molecule called flotetuzumab, targeting the CD123, CD3 molecules as a bispecific DART molecule for the treatment of AML, where lead activity is focused on refractory patients. We have an asset targeting the checkpoint molecule PD-1, called MGA012, which we have a partnership with Incyte, which is being pursued now in over 20 clinical trials. We have 2 combination bispecific DART molecules; MGD013, targeting PD-1 and LAG-3; and MGD019 targeting PD-1 and CTLA-4. And we have 2 very interesting molecules targeting a very novel ligand in the B7 family. This is a molecule, B7-H3, which is structurally similar to PD-L1. One molecule, which incorporates the -- our Fc engineering technology, called enoblituzumab, is -- will be pursued in a frontline metastatic head and neck study. And we have an ongoing Phase I study for an ADC called MGC018, also recognizing B7-H3. So in summary, this is a very exciting year for MacroGenics, given that our clinical assets are moving forward quite nicely. We are moving forward and planning up to 4 registration studies over the course of the next 2 years. And many of our preclinical assets also are advancing as well. So with that, I will give the floor back to you.

On margetuximab, so we get final OS data from the Phase III SOPHIA in the second half. If you could maybe talk about -- maybe a step back, first of all, just on margetuximab, briefly on the mechanism of action, and where you think it works better in this 158F allele subgroup. That would be great.

Sure. Yes. So this was a core technology which we've developed since the inception of the company. This is an Fc modified antibody that recognizes the same epitope as HERCEPTIN. And we've incorporated 5 amino acids in the Fc domain to achieve a better binding activity to CD16, the major activating Fc receptor, and combining it with a reduced binding to the major inhibitory receptor, CD32B. That combination dramatically increases immune function. We have demonstrated -- markedly enhanced both innate and antigen-specific immunity to HER2 as a consequence of treating patients with its molecule. So that combination, we believe, is responsible for a large part of the clinical success we've observed with this molecule. As you know, we conducted a Phase III study called SOPHIA. In all 500 patients, where we demonstrated a superior benefit of margetuximab over HERCEPTIN, both in combination with chemotherapy, with regard to progression-free survival, both statistically significant with a benefit of reduction of progression of 24% in the overall intent-to-treat population. As we pointed out, we had identified a major subpopulation of patients who entered the trial. This is a variant of the CD16 molecule. There are minor genetic variations of this molecule based on a single amino acid. And that single amino acid will determine the affinity of the Fc domain for that CD16 receptor. And so what had been previously demonstrated by Marcelino and a group of other investigators is that patients who bore the 158F allele as opposed to a homozygous VV allele at position 158 of the CD16 molecule, tended to do both poorly in the context of metastatic breast cancer as well as patients treated with HERCEPTIN in an adjuvant setting. And so we surmised that with the added binding benefits of this Fc receptor, which we incorporated through our Fc engineering, we would -- we speculated that we would observe a better therapeutic response by incorporating these 5 amino acids. And sure enough, when we assessed this population, specifically, we saw increased benefit as demonstrated for PFS. There is a longer time on those patients with the F allele treated with marge versus HERCEPTIN. And very encouraging is also the interim analysis on the overall survival at 270 events also shows an enhanced benefit of this F allele population with regard to overall survival, where we've seen, at 270 events, a 4.3-month survival benefit of those patients treated with margetuximab compared to those treated with HERCEPTIN. And obviously, this is, right now, not statistically significant. We -- the P value currently at the 270 events is 0.087. But it is going to be reanalyzed at 385 events and looking also at the subpopulation. And so we think we have a good shot at achieving nominal significance in this subpopulation.

And then, I mean so the reason why -- why is it hitting the 185F (sic) [ 158F ] allele or not hitting? Why is it binding better? Is there -- is it something that you did with your Fc? Or -- and why didn't you get those kind of remaining, I guess, the alternate allele?

Yes. I mean that was the actual design of this molecule. We actually selected molecule based on the binding characteristics. Looking at this particular variance, the -- in fact, we selected these molecules based on the F allele because we, again, historically, these patients with this FF or Fc, historically, performed worse. And so therefore, we characteristically selected these 5 amino acids to switch out in the Fc region to enhance that binding to that version of the Fc receptor. And in fact, when we did some of the preclinical testing using transgenic mice that have an F allele variant, which is, again, is the worst version, there we saw, again, improved responsiveness of those treated with margetuximab over those treated with HERCEPTIN. And that included using cell lines that were refractory -- from a patient that was refractory to treatment with HERCEPTIN. So all the characteristics that we were looking for lined up, and that was the reason why we cited that particular population is the one that would be most likely to benefit from the -- I should also say that there is improvement in terms of the binding characteristics of VV variants as well. But given that, historically, those patients did better, we thought that, that would be a higher bar potentially to see improved responses in that subpopulation.

Got you. And do you think physicians will look for that variant? And use that variant to... Go ahead.

Yes. So we have filed the BLA with the intent for treating all patients, irrespective of the variant. But obviously, we have included in our application to the FDA, the observations we've made in this particular major subgroup, representing 85% of the patients. Obviously, it's up to the FDA to make decisions of whether to look at all patients who have progressed on HER2 therapies or ultimately limited to the 85% with the F allele variant. To prepare and to give the best opportunity to treat the patients optimally, we are working with a vendor to prepare a test, a PCR-based test, to be able to determine if a -- which version of the CD16 molecule a patient may bear so that the physician and the patient can decide whether they would like to go on therapy based on this. But at this point, we're just preparing, and we have no specific guidance from the FDA with regard to selection of patients based on such a test or whether they would limit patient treatment to that specific population.

Great. And then with the BLA, I mean, you're kind of expecting approval based on PFS. That seems to be based upon, historically, what you've seen in the space. Do you think that FDA would wait for OS benefit? And do you think gain in the OS benefit is going to provide a competitive edge, even if the FDA don't want to see that?

So clearly, we will -- we are accumulating the data. The patients that are being followed right now for achieving -- unfortunately, the 385 patients in total that succumb to the disease, we expect at this time that this will occur late this year. And as a result, without the precision of knowing exactly when the FDA may analyze the data set as presented, or may ultimately require the additional data, given the timing, the PDUFA date of this application is in the middle of December. So it is possible if the OS final evaluation occurs much earlier, we will certainly have that data available to submit for review. But, at this point, the application as submitted without the final OS data and only the interim OS data is under consideration. So we'll have to see what the feedback is from the agency with regard to having the final OS data set.

Got you. And then maybe if you could just talk about the competitive landscape, evolved somewhat. So it would great to kind of get some color around or some further detail around where you fit in, in that space?

Sure. Obviously, this, as you point out, has become a very exciting area for patients, given that there are a number of very active molecules that are now available or will be available for treatment. So in addition to margetuximab, as we hope that the FDA approves it, currently, the 8201 or the ADC molecule in [ HER2 ], which is now approved for patients that have progressed on anti-HER2 therapies is now being offered to patients. As we also know, tucatinib TKI inhibitor has been shown in scientific meetings to provide benefit from patients with regard to PFS and OS, particularly those patients with metastasis to their brains from the tumor. We believe that margetuximab offers an option for patients, given a quite comparable safety profile to HERCEPTIN, which has been in use for over 20 years. And given the clinical benefit that we have observed with this comparable safety profile, I should point out that the way we tested this, and this was the only ever head-to-head study against HERCEPTIN and was successful with the end point results, is that this can be combined with up to 4 different chemotherapies for treatment. So it gives a lot of optionality for the treating physician and the patient, depending on their historical treatment regimens. And I would also point out though, the interim analysis at 270 events is still under consideration. We did see that 4.3-month survival benefit in this F allele population, and that compares quite favorably to approximately the 4 months that was observed with tucatinib. So I think that, ultimately, the patient and treating physician have to consider what the history has been with regard to their treatments, the side effect profiles for the other drugs that are available and the tolerability or risks that the patient may have to contend with for these other treatments. And again, given the -- what I think is a quite favorable safety profile for our drug and favorability in terms of responses, I think it gives optionality for the patient and their physician.

Great. And then just on commercialization strategy. Where are you for thinking about partners for this? And would you potentially go alone if nothing comes through?

So to answer this, let me sort of give you a little historical perspective. As we had noted last year, we had engaged in a number of various parties who had demonstrated interest in the asset. Given the changing landscape that we've already discussed with regard to other molecules that were entering or soon to be entering commercialization, as well as now the regulatory review process, what we have done is sort of taken a pause with regard to aggressive partnering of this asset, both to understand where the market is going to end up with these other assets available, number one. Number two is, obviously, we'd like to continue to advance through the regulatory review process, and get more certainty around that. And I'm sure our partners would like that as well. But as important, I think, for this particular asset, I see marge as a late-line breast cancer indication as just an initial entry point. As you know, we've had a very exciting data in the gastric cancer space, where we have tested margetuximab in combination with an anti-PD-1, showing a significant prolongation of survival benefit compared to standard of care in the second-line and first-line setting. And as you know, we've launched into a frontline metastatic gastric treatment. And so I think that by the time we have the regulatory review available, we have a better understanding of the market in terms of breast cancer. We will have some of our initial data on the first part of our Module A on the frontline gastric cancer treatment. And so for a partner having positive data in that setting, obviously, we believe will increase the value of the asset. And clearly, such a demonstration could also garner interest of expanding this beyond gastric cancer, not only into breast cancer, but other HER2-positive tumors. So we think it's best and most judicious at this point to wait till the latter part of this year before we reengage with regard to partnering discussions on this asset. So nothing really more to say with regard to prospects at this point.

Okay. That's really helpful. What kind of response rates would you need to see in the kind of frontline gastric cancer setting for margetuximab? Where we thought...

So we had a very good meeting with the FDA when we were designing this study, and had agreements on the targeting response rate for that frontline population, particularly in Module A, where we're looking at the IHC 3+ PD-L1 positive first-line metastatic gastric patients. As you'll recall, from the TOGA study, which led to the approval of HERCEPTIN and chemotherapy in the frontline gastric setting, the overall response rate in that population was 47%, and that was with the -- I would say, the challenge also of a very high side effect profile given the high dose chemotherapy given at the same time, with 68% of those patients having treatment-related adverse events at Grade 3 or greater. And so what we have targeted through conversations with the FDA is having a response rate somewhat north of the 47%. And with a presumed markedly reduced side effect profile for us to consider an application for accelerated approval of this single-arm study.

Great. Just for the -- I guess, a minute left on the clock. Just as we think about COVID-19, is there any part of your underlying business that could be affected, I guess, partnerships? Any clinical trials that we should be thinking about?

Yes. So I think, obviously, that -- something that is affecting everybody in the industry is supply. As you know, we are a manufacturing clinical supply, for instance, for the MGA012 molecule, the anti-PD-1 we have with Incyte. And we'll, if approved that -- if that drug gets approved, then we will have rights for commercializing a significant part of the supply. So anything that could affect the supply chain, either from our own manufacturing for this molecule, but for others as well, could create problems. So far, we have not experienced that. As you know, we have a number of partnerships in China with Zai Lab and I-Mab. And clearly, the -- there's certainly opportunities for disruption. My conversations with them said that everything seems to be proceeding well with regard to clinical plans for our particular molecule. So we'll have to take a wait-and-see attitude and prepare as best we can. But right now, it's not having any dramatic effects on the timing or advancing of our programs.

Great. With that, I just wanted to thank everyone for taking the time out of the day. And thank you, Scott. Have a good day. Take care.

Thanks, Peter.