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

Hello, everyone. I'm Stephen Willey, one of the senior biotech analysts here at Stifel. Glad to have with us here this morning, presenting from MacroGenics is the Chief Executive Officer, Scott Koenig. He is going to -- we're just going to have an informal discussion here. I think that there's a chat function for anyone who's listening to populate some questions into, and we can get those asked and answered, I guess, as appropriate. But Scott, I guess, before we get into Q&A, any kind of opening statements you want to make just with respect to kind of who you are, what you do and where you are?

Thanks, Steve, and appreciate the invitation today. It's a very exciting time for the company. As you know, we've made tremendous progress during the year. Currently, we have 8 molecules in clinical development, Phase I to Phase III, have a very large preclinical portfolio. Our molecules are using 3 technologies, our Fc-engineering technology in tumor molecules. We have our DART technology bispecifics that are being employed through different mechanisms of redirected killing as well as working and targeting multiple checkpoints. And now we have 2 ADC molecules in the clinic. We made tremendous advances this year. As you know, one of the major themes that we've put forward is that we have multiple number of these molecules in registration or registration-directed studies, and we intend to advance even some of the earlier ones in the course of the next year towards developing registration-intent studies. So very exciting prospects. And as you know, we have a PDUFA date coming up, and that's a big event in the history of a company.

Yes. So maybe just with respect to the PDUFA data, I know the agency has suggested that there's no need for an advisory committee meeting. What's your level of confidence just based on [ the interactions you had ] with them today?

So you never be 100% sure on interactions. We've had a -- we've had very good discussions over the course of the year since submission of the BLA with the FDA. I would say that the feedback has been generally favorable. We -- most of the more recent questions that have come in are CMC related. We've responded to them. But until we hear from them in December, nothing is finished and formal, but we are optimistic.

Yes. And you guys are doing the manufacturing for this product, correct? Or...

Actually, that is not correct. We are manufacturing the product here that is being used in various INDs, particularly for the MAHOGANY study, we made multiple batches. But the actual material that is on the basis of submission for the BLA was done at a CMO. So that's it. That's the only molecule right now that is being produced at a CMO, All the other molecules in our portfolio are being produced at our manufacturing site here in Rockville.

Got it. I know you've talked previously about some of this. How active are those discussions right now? And what's been the rate-limiting step on that front in terms of being able to execute on a partnership? Is it the actual approval decision itself? Is it the prospects of what a label might look like? Is it the need for final OS data to help streamline ex U.S. regulatory discussions?

So I would say it varies with the party that we're speaking to. I would, in general, discount the latter, which would -- was the OS events with regard to partnership. Clearly, having that data, ultimately, as you know, we announced on our earnings call that the patients are living longer. Right now, we anticipate not having the 385 events until the second half of next year. So if we can demonstrate a significant prolongation, either in the intent-to-treat, which we have said publicly probably will not likely happen, although it still could statistically happen, but more likely a nominal stat sig on the F allele population is possible. We don't think that is the major factor. I would say, in general, given we're so close to PDUFA date, it's either going to be approved or not approved, so that can be built into any contractual discussion going forward. So I would say that probably the biggest decision becomes the size of the market for the late-line population. We're very cognizant of the successes of -- in HER2 and tucatinib in the similar line population and, obviously, the approval of neratinib as well. So there is a competitive element to this. And clearly, the market size for that late-line population is not as big as we first anticipated going forward. So therefore, the type of party that you engaged in is some -- more limited than probably when we first started out developing a molecule.

Yes. So would that imply that you're just kind of strictly looking for help then just on the commercial execution side. And you perhaps don't want to strategically encumber this asset just given the opportunity for marge and, say, the MAHOGANY trial and some of these other indications.

So we are -- had discussions, as I said on the earnings call, both ways in terms of vendors that can help us in the commercialization, but also biopharmaceutical companies who have expressed interest in that. So both sets of discussions are ongoing. And obviously, contracts can be developed in different ways and opportunities for participation going forward. Right now, we're looking solely on a U.S. participation from the varying opportunities now. But our expectation is over the course of the next month or so, we should be in shape to be able to describe our plans going forward there.

Would an ex U.S. filing strategy essentially require you to achieve that stat sig on OS in all-comers? Or have you talked to the EMA regarding inability to carve out that F allele population as kind of one of interest...

We haven't had a discussion with the regulators in Europe specifically what the requirements were. Obviously, if the drug is approved in the U.S., that's obviously valuable to us. And clearly, the filing form of that will be a different structure. But historically, European regulators have required the final OS readings. And we'll just have to see how it comes out with regards to both the intent-to-treat and the F allele population and how that discussion. Clearly, there is a value of this drug for patients in late-line breast cancer and, what we believe, a building opportunity in early lines breast cancer and other indications. As you know, not only in MAHOGANY, but the data we presented at SITC and at ASCO with regard to combining this to the checkpoint molecules, there is a great opportunity here with a drug that we believe has superior properties compared to HERCEPTIN and treating different populations going forward.

And within MAHOGANY, you're not specifying for allelic status, is that correct? Or...

That's correct. That's correct.

Then I guess, what was the decision behind not trying to do the signal that you saw in SOPHIA?

We didn't see a tremendous association. Remember, we did a second line study in the context of the -- of pembro, when we presented that data that was published in the summer. We didn't see that specific requirement of the F allele -- of which F allele population. So we didn't feel the need to predefine that for the gastric. Whether this is peculiar to a difference between gastric versus breast cancer, whether this is a difference by now combining with a checkpoint, as we pointed out in the recent SITC presentation with tebotelimab combination with margin late-line HER2-positive patients, we saw responsiveness exclusively in the F allele population, but that was because we had so few VVs in that population, I can't make any conclusions about that at this point. So this is an area we will continue to explore based on tumor types whether the effects are only going to favor the F alleles or whether VVs are going to have a benefit. I could tell you that while the preclinical data suggests the benefit mostly in the FFs and the FVs in a hierarchical fashion, there was an increased binding activity over baseline to the VVs as well. So there's not that it isn't possible to have therapeutic benefit in the VVs as well. So -- and that may actually be the case of what we're seeing in gastric cancer.

Okay. You mentioned the SITC data that was just presented in combination with tebotelimab. This was in HER2-positive solid tumors with marge. So I know that there's an arm in module B of MAHOGANY, right, where you're looking at this combination as well as a potential go-forward strategy. Does what you've seen at SITC at all somehow kind of enhance your understanding of what that MAHOGANY data might look like?

Well, no, there are actually apples and oranges on the MAHOGANY B. Remember, MAHOGANY B was the potential to combine it with tebotelimab or retifanlimab, the anti-PD-1 or the PD-1 LAG-3. But remember, we were adding chemo in the MAHOGANY B. Here, this is a chemo-free regimen in a late-line population versus an upfront population. Having said that, we're very encouraged by the data we're seeing in this chemo-free regimen in late-line populations. And clearly, we have to build the data set with further enrollments here. But I am encouraged by the overall immune activation and modulation and also the therapeutic benefit these patients are seeing in such a late-line setting, so that invariably, I think tebo would be a very good partner for marge in the frontline setting, and one would envision even a further benefit, if you layer on chemotherapy. Obviously, you'll lose some of the safety benefit by not having chemotherapy, but you probably have the potential to have an increased response rate. So that's what the trade-off is here.

And you showed, I think, within that data that there appeared to be a correlation of clinical benefit to LAG-3 expression. I guess is there an opportunity for you to further enrich that patient population? And is there any reason to believe why chemotherapy might actually drive higher LAG-3 expression intuitively?

I don't know if chemotherapy per se is driving LAG-3 expression. But that's something we'll have to take a look at. Obviously, with some chemotherapeutics, you do get immune activation. And therefore, the chances of checkpoint molecules will go up in certain settings. But I can't say that there is a direct correlation with that. Thank you for pointing that out. We were very excited about, even though it was only an analysis of 19 patients in that data set and the levels of LAG-3 expression in these late-line HER2 patients were very low, but there was clear -- if you looked at the Pearson correlation there, it was pretty good for such a small data set. And so obviously, we have to build on that data set by looking at additional patients to see if LAG-3, either alone or in combination with other biomarker data can help to enrich and predict greater responsiveness, both in the case of the combination with the Fc-engineered molecules like marge, but also, as you know, as we've pointed out at -- post ASCO, is we saw that LAG-3 correlation in the monotherapy treatment as well, where LAG-3 at higher levels clearly did associate with responsiveness. So we're building out that database right now. The expectation is, over the next couple of months, we'll have -- we should have an answer on do we see LAG-3 and other potential biomarkers as ways of enriching for patients that have a higher likelihood to respond. And if that -- and we -- if we come to that conclusion, we will then design a study in a couple of different tumor indications to test that hypothesis out.

Okay. And so I guess, will the rate-limiting step here as well in terms of your ability to pursue this further, will that be dictated by the response rates that you're seeing in patients who were previously treated with HER2-targeting therapy?

No. I don't -- I mean, overall, with regard to tebotelimab, you have to think of this as sort of a bifurcated development plan, one in which we're going in HER2-negative tumors and, again, signing a biomarker plan to enrich for the populations. Separate from that, with regard to marge...

Yes. With respect to marge.

We would -- all we're looking for now is what is the response rate clinically? And what is the population we want to focus on? Is it all HER2 comers? Is it patients with breast cancer, gastric cancer, colorectal cancer, lung cancer, that's what we want to decide, and that's just getting sort of bigger numbers here. And as we've pointed out, our plan right now is to enroll up to 30 patients with breast, 30 with gastric and 30 with a basket of these other tumors. Again, I would say I'm very encouraged by the data we've seen today.

Okay. Maybe we can just shift gears to flotetuzumab here for a second. I know we're going to be seeing some updated results from the registrational Phase III trial at ASH. I know the data that was reported in the abstract looked to be pretty interesting, right, especially in the context of the CR rate that you announced last year. Maybe you can speak a little bit as to what's kind of driving that improvement in CR rate that we saw relative to last year? And is a 40% CR rate in this patient population something that you feel like investors should be giving you more credit for at this point?

I would say that investors will give us credit for whatever they want to give us credit for. And I don't really focus in on that with regard to that. Our goal right now is to get the best defined population, the best response and safety profile of our drug, and that's what we're focused on now. I think in that context, we're very encouraged by the data. Number one is asking why do we think we're having a tick up on responsiveness, is I think that as we engage the FDA and additional data that we provided them from -- which we will update at the ASH meeting, is that we were able to better define this primary induction failure population and the early relapsed population based on previous treatment regimens and lines of therapy. And so the data that you will see -- and just let me be clear about it. Remember, last year, we presented about 30 patients in that study. What we did is, is using the criteria that we agreed with, with the FDA that's going to be in the registration study, we have included in this upcoming ASH meeting, 15 of those patients as a basis, those ones would fit the enrollment criteria for the registration study. Plus, in what we saw in the abstract, there was 38 patients, we had 23 additional new patients that you haven't seen data on. And in fact, since the abstract, we've enrolled several additional patients that will also be included in the presentation that's upcoming there. So what I can say is, is that we're very encouraged that we have very consistent responsiveness as we reported last year, where one of the major goals, as I pointed out on the earnings call is that the best chance for cure for this population, in fact, which is essentially a salvage population, is trying to get them to transplant. And if we can get at least half of those patients to transplant and for chances of cure here, that would be a tremendous advance for this population. And I should also point out that this is not a trivial population. I mean, from our own analysis of outreach as well as looking and talking to key opinion leaders and looking at literature, this represents at least 1/3 to maybe as much as a 1/2 of overall AML populations on an annual basis. So while they were historically lumped in into so-called relapsed refractory patients, we are clearly redefining this population, both on the clinical characteristics but as you know, there's been a lot of work with our colleague, Sergio Rutella, in the U.K. on defining biomarkers, which may be able to predict patients who will respond to chemotherapy versus molecules like flotetuzumab going forward.

Yes. And then -- and you've talked about your ability to administer this drug in the outpatient setting as well, right, which I think [ in the context of ] AML becomes really important from a reimbursement perspective.

Yes. I mean, the fact in the matter is, this is not any different than blinatumomab. The expectation is, the patient would be in the hospital for the first 8 days and then presuming they do well on the initial infusions would be able to go to an outpatient setting.

Okay. And I thought what was interesting, right, is that we know that there's another kind of competitor, CD123, CD3 bispecific in development. And they, too, are going to have some data at ASH. And it kind of looked like they were achieving a demonstrably lower response rate relative to what you guys were seeing? So how much of that do you think might be just patient selection versus something associated with the actual format itself?

It's hard to tell. I don't know what the specifics around -- I mean, I did read the abstracts from some of the competitive molecules. They talked about responses in low tumor burden. In fact, we've seen tremendous responses in high tumor burden and low tumor burden. So that is not the distinguishing characteristic here. So I can't comment whether some of it is on the actual specificities we would weigh, the way we've designed this as a DART molecule, which has quite unique characteristics versus other bispecifics. I think we've spent a lot of time in how to best maximize the engagement of the T-cells to the target with minimizing the cytokine release. So that has been a big attribute for the advancements we've made for this program. As you and I have discussed before, then we told you is that, this -- being this is the first DART molecule we moved into the clinic, we were very concerned that the cytokine release could undermine the value of the program and so we spent a lot of time on how to deliver this molecule safely as well as getting the best therapeutic benefit. Now that we have a good understanding on that and a pathway now forward with us, we also have developed the next-generation molecule that has a long half-life, has a dramatic reduction in cytokine release. And we see -- and we are planning to have that in the clinic next year as a way of ultimately to be used not only in AML for maintenance and consolidation, but also expanding this to other CD123 positive tumor populations.

Now are you achieving a reduction in CRS with this novel format through differential CD3 binding? Because I think we've seen from some of the other candidates, right, that it almost kind of seems like extending the half-life with a nonfunctional Fc, kind of almost -- seemed to drive CRS in a more exaggerated way.

Yes. So we were -- we spent a lot of time, and we had posters at a couple of meetings earlier. But the basis of this is that we had individual mutations throughout the CD3 molecule. And we identified ones by single amino acid changes that had different binding properties to CD3. It wasn't -- people always say, well, it's just the low affinity. There is some low affinity, but it's not -- the affinity itself did not determine whether there was going to have the therapeutic benefit with a lower CRS. It's a lot about the relative on-off rate, how fast do they come on, the relative affinities that turned out to be very important. And I could say that this is not a one off. We've incorporated this same specificity in DART molecules, so solid tumors have seen the exact same thing. So as you see us progress the next wave of DART molecules for redirected killing, you're going to see the incorporation of this alternative CD3 molecule because we think we ultimately can get -- achieve the functional activity with a much better safety and, obviously, easier to deliver structure.

Got it. Okay. And would you see 018, obviously, getting a lot of attention, I think, a, because of the data you showed us at ASCO, and, b, there's certainly a shine on all things that are ADC-related at this point. We saw some PSA data, right? I guess, we kind of know that's a bit of an imperfect biomarker. I guess, is there anything that you can say about the continued durability of those PSA responses that you've seen thus far in those patients that were previously presented at ASCO? And as you think about enrolling the expansion cohort in prostate, do you try to intentionally enroll some patients with soft tissue lesions so we can get a read on RECIST response?

Yes. So all good questions. I'm not going to comment on the individual patients. As you kind of note, of the 7 patients that were treated at 2 mg or 3 mg per kg, we had 5 of 7 that had greater than 50% PSA reductions, which was quite remarkable and clearly better than what the standard out there for other therapeutic regimens. We will provide updates at the next time we are presenting data. We felt that the incremental data that we presented to date wasn't sufficient, that for us the biggest bar is providing a larger patient database, which includes, as you alluded to, patients that we could evaluate by RECIST criteria. As we had originally presented, only one of the patients among the 7 had measurable disease that we could embody. So we have to make a decision when we decide to expand to 40 patients in this expansion cohort, which we are enrolling right now, is whether we just focus on patients with measurable disease or include patients with bony disease only. We decided for -- since that we were going to enroll 40 patients, we felt that we get sufficient numbers of both types of patients and rather than slow up the enrollment here, getting a larger database faster, I think, was the more favorable plan for us. So what we intend to do is that providing updates on this when we have a sizable amount of patients enrolled. Again, we're guiding without understanding what the influence of COVID is going to be on the enrollment at this point, but we expect no later than midyear to be able to provide -- next year to provide an update on this population. And then as I've said, is that we're also looking to enroll patients with non-small-cell lung and triple-negative breast between 16 and 20 patients in those cohorts. And again, if we have sufficient number of patients enrolled with that overall, we'll also present it at that time as well.

Okay. And then maybe just lastly for me here since we're running out of time. You're obviously partnered with Incyte on retifanlimab. I think we've -- you've now seen preliminary data from all of the Phase II trials that they've been running over the past couple of months, I think, including the MSI-high endometrial cohort at SITC. What is partner Incyte kind of telling you about the registrational intents of those studies now? I think that was a way that they had previously characterized those studies. They haven't really been too clear in terms of what a filing strategy might be. I know that they have a lung trial up and running right now. So where do you think this is going to go, I guess, from a regulatory perspective from here?

We're very encouraged by what they have disclosed to us, but we are restricted on what we can disclose what their plans are, which is registration-directed registration intent for a number of different monotherapy indications going forward as well as the combination studies going forward. My expectation is over the course of the next few months, they will be providing updates on the progress with regard to multiple programs. What I've said is that based on the data that has been presented to date, I'm very encouraged. And we do expect additional milestones to come to us over the course of the next few months based on progress we've made -- that they and we will be making clinically. So I will leave it to them to provide the specifics with regard to their registration plans.

All right. Very good. That's all we have the time. Scott, as always, I know we've been doing this for more than a few years now. I appreciate.

We're both getting old, but you are the one who looks young.

I'm not so sure about that. But enjoy the rest of your day. Have a happy and safe rest of '20.

Yes, you too, and stay well. Thank you.

Thanks.