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

Good morning, everyone. Welcome to the 39th Annual JPMorgan Healthcare Conference. My name is [ Bader ] [indiscernible]. I'm a member of the Healthcare Investment Banking team here at JPMorgan. Thank you for joining this next session we have with MacroGenics. Before I hand over to our presenter, Scott Koenig, President and CEO of MacroGenics, I'd like to remind everyone that we have a Q&A session after the prepared remarks, and that you'll be able to submit questions through the blue submit a question button. So we'll commence the Q&A session in approximately 20 to 25 minutes. And with that, I'll turn it over to Scott.

Thank you, [ Bader ], and thank you for the opportunity to present at the JPMorgan Conference. I hope everyone is safe and healthy under these unusual circumstances. Slide 2, I will be making forward-looking statements during my presentation, so please refer to our SEC filings to understand the risk in investing in MacroGenics. Slide 3. 2020 was an extraordinary year in the 20-year history of MacroGenics, and 2021 is shaping up to be a great year as well. We received FDA approval of our first in-house developed proprietary product MARGENZA. We have multiple registration-directed studies ongoing. We have validated all of our technology platforms by demonstrating both objective clinical responses and enhancement of immune-based mechanisms using our bispecific DART technology, our Fc optimization platform and our ADC-based antibody molecules. Of the 8 molecules in clinical development, we retained major market rights for 7 of them, and we've shown clinical activity in 7 of our 8 molecules, the eighth of which is in dose escalation. Importantly, we have secured a cash position that will allow us to advance our objectives into 2023 Let me review some of these points specifically for you. Slide 4. MARGENZA is an Fc-engineered antibody that antagonizes their HER2 receptor and has been approved by the FDA to be used in combination with chemotherapy for the treatment of patients with metastatic HER2-positive breast cancer after they've received 2 or more prior anti-Her2 therapies, at least one of which was in the metastatic setting. This approval is based on the only head-to-head Phase III clinical study using HERCEPTIN plus chemotherapy as a controlled treatment, where a PFS benefit was observed in metastatic breast cancer patients treated with MARGENZA plus chemotherapy compared to HERCEPTIN plus chemotherapy. Slide 5 outlines the safety information on the label with warning similar to HERCEPTIN. Slide 6, treatment of patients in the metastatic breast cancer setting have changed rapidly in 2020 with 4 recently approved therapies plus older treatment options. Our label indication allows treatment for patients as early as a second-line setting, but we expect use of the product to occur within approximately 7,000 patients in third-line or later. Slide 7. In anticipation of a launch, which will occur in March, we entered into a risk-sharing 5-year agreement with EVERSANA, who will provide access to a broad set of commercial services to co-commercialize in the U.S., where we will book sales and control decision-making, lead all development and manufacturing activities and maintain the flexibility to enter into future licensing agreements. For their risk sharing, EVERSANA will share in revenue payments and may achieve up to 125% of their service fees. Slide 8. With this arrangement, we will be able to pursue and support our deep pipeline of immune-based products. Beyond breast cancer, margetuximab is being tested in a front-line metastatic gastric cancer setting, along with our partner, Zai Lab. Flotetuzumab, our CD123 x CD3 DART molecule is in a registration study for refractory AML patients. Retifanlimab, our anti-PD-1 molecule licensed to Incyte is being pursued in multiple registration-directed monotherapy studies as well as combination studies. Enoblituzumab, our Fc-engineered molecule with the same Fc modifications as MARGENZA, targeting B7-H3 at checkpoint ligand will begin studies this quarter in frontline head and neck cancer in combination with retifanlimab in patients who are PD-L1 positive and tebotelimab in patients with PD-L1 negative tumors. Tebotelimab is our PD-1 x LAG-3 DART molecule that is being examined in patients with solid tumors and Non-Hodgkin's lymphoma and also being pursued with Zai Lab in different indications. MGD019 is our second combo checkpoint DART molecule that is being tested now in MS stable colorectal cancer and squamous cell carcinoma of the lung. Our second B7-H3 targeted molecule, MGC018, is an ADC candidate in expansion studies of patients with castration-resistant prostate cancer, triple-negative breast cancer and lung cancer. The eighth molecule, IMGCO936, in a 50-50 partnership with ImmunoGen is an ADC molecule targeting the metalloproteinase ADAM9 in a Phase I dose-escalation study in multiple tumors. Let's examine a few of these in more detail. Slide 9. Our interest in gastric cancer indication for margetuximab stems from our Phase II study that we conducted in second-line metastatic patients after they progressed on HERCEPTIN and chemotherapy. Most notably, we found a profound effect on the HER2-positive PD-L1 positive patients, where survival benefited over 20 months and a dramatically better safety profile compared favorably to standard of care in second line, which is ramucirumab and paclitaxel as well as results from the TOGA trial where HERCEPTIN and chemotherapy is used in a frontline setting. Slide 10. Given that we designed a registration intent trial that is designed in 2 modules. The first module A is selecting for HER2 3+ positive PD-L1-positive patients for a single-arm treatment with margetuximab plus retifanlimab where an interim analysis will be conducted after enrolling 40 patients. If that meets our internal criteria of overall response rate and tolerability, additional patients will be recruited with a plan to apply for accelerated approval. Enrollment is almost complete, and we should be able to provide updates by mid-year. The other module is enrolling conventionally defined HER2-positive patients, where we will be examining the effects of margetuximab plus chemotherapy plus 2 different checkpoint molecules as compared to HERCEPTIN and chemo as standard treatment. Enrollment is currently ongoing by our partners, Zai Lab in Asia. Slide 11. Turning to our first DART molecule, flotetuzumab, it is designed to engage CD3 on T-cells and CD123, which is upregulated on leukemic blasts and leukemic stem cells in AML. This molecule promotes killing by T-cells of the leukemic cells in the absence of major histocompatibility restriction. Our current study is targeted to a large segment of AML population representing those patients with primary induction failure or early relapsed disease. A registration study is enrolling currently. Slide 12. Recent data presented at the December ASH Meeting with a population targeted for the registration study, demonstrated that flotetuzumab can achieve a mid-20 CR/CRh rate in an intent-to-treat analysis and over a 30% response rate in the primary induction failure population. This compares quite favorably with the historical response rates of 5% to 12%. More than half of these patients were able to proceed to stem cell transplant with an intent to cure, not possible previously because of their inability to achieve complete responses. We expect to enroll the majority of these patients in the single-arm registration study in 2021 and expect to provide updates of the clinical results at the time of the next Ash Meeting. Slide 13. MGC018, our ADC molecule targeting B7-H3, utilizes a cleavable linker toxin payload called duocarmycin. MGC018 binds the B7-H3, which is overexpressed in both dividing and nondividing cells in the tumor microenvironment, delivering the payload, which alkylates DNA and promotes cell death. B7-H3 is found on actively dividing tumor cells, the endothelium of the vasculature of tumors, but not normal vessels, cancer stem cells as well as T regulatory cells that promote immune suppression. Slide 14. In our Phase I study reported at ASCO, we observed profound PSA reduction of over 50% in 5 of 7 late-stage castration-resistant prostate cancer patients when treated at either 2 or 3 mg per kg. Most of these patients had primarily bony disease. Slide 15. Also in the study, 2 patients with non-small cell lung cancer were enrolled, both of which showed tumor reduction, the most notable one at a 24% reduction in tumor size as their sixth line of therapy. Based on the interim Phase I results and the observable favorable pharmacokinetics of MGC018, the patients treated either at 2 or 3 mg per kg, we initiated an amendment to expand the protocol and are currently recruiting up to 40 patients with castration-resistant prostate cancer following chemotherapy and treatment with at least one AR inhibitor as well as up to 20 patients with late-stage triple-negative breast cancer and non-small cell lung cancer who are being treated at 3 mg per kg every 3 weeks. Updates of the study are expected midyear. In the meantime, we have also enrolled patients in unselected tumor types at 4 mg per kg. This part of the study is continuing and results will be updated at the same time. Slide 16. Retifanlimab, our anti-PD-1 molecule licensed to Incyte, has been advancing nicely with 5 registration-directed studies ongoing in 2020 in addition to combination studies with novel agents. Data presented by Incyte at ESMO for patients with squamous cell anal cancer and Merkel cell carcinoma showed activity in safety in patients that appear comparable to other anti-PD-1 molecules. So far, MacroGenics has received $55 million in milestones from this partnership, $40 million of which occurred in the fourth quarter of 2020. Slide 17. Registration-enabling studies beyond anal and Merkel cell cancer include patients with MSI-high endometrial cancer and first-line non-small cell lung cancer patients in combination with platinum-based chemotherapy. Slide 18. Tebotelimab, our tetravalent bispecific DART molecule, provides blockade of PD-1 and LAG-3, 2 markers of exhaustion on T-cells. Preclinical data in the literature demonstrates additive or synergistic anti-tumor activity in model systems using monoclonal antibodies in combination targeted to these 2 checkpoint molecules. Our own preclinical data demonstrated increased T-cell activating properties of our DART molecule in vitro compared to combination of individual antibodies to these same receptors. We have conducted a large Phase I dose-escalation study of tebotelimab in late-stage patients and did not reach a maximum tolerated dose when treated as high as 1,200 milligrams every 2 weeks. Favorable receptor occupancy and pharmacokinetics were demonstrated at doses of greater than 400 milligrams, with a safety profile consistent with those observed with anti-PD-1 agents. Slide 19. We expanded that study in cohorts of 16 to 20 patients of 9 different tumor types who are treated with 600 milligrams every 2 weeks. Antitumor responses were observed in patients with triple-negative breast cancer, ovarian cancer, non-small cell lung cancer, including those treated historically with anti-PD-1 and PD-L1 therapies and other tumors as well. Responses appeared to associated with LAG-3 levels in archival specimens examined by immunohistochemistry as well as the quantity of LAG-3 RNA transcripts Increased responses were also observed with genes associated with immune activation, particularly gamma-interferon associated genes. Slide 20. We also observed encouraging data reported at ASH in late-stage refractory patients with DLBCL, with objective responses of over 50% in evaluable patients, including those post CAR-T treatment. Further updates on this cohort and next step should be available later this year. Slide 21. We have also explored combining tebotelimab with our Fc-engineered molecules, taking advantage of the observation that our Fc-engineering is able to enhance innate and specific immune responses and can promote increased expression of checkpoint molecules such as PD-L1 and LAG-3. Noting that many patients, including those with so-called cold tumors, might benefit by the activating properties of Fc-engineered mabs, such as margetuximab. We treated late-stage patients with different HER2-expressing tumors with a combination of margetuximab and tebotelimab every 3 weeks. Significant numbers of patients achieved objective responses, including many who had absence or very low levels of PD-L1 on their archival specimens. Response rates so far exceed levels reported by Merck for patients with late-stage metastatic HER2-positive breast cancer who are treated with HERCEPTIN and pembrolizumab with no responders observed in that study without detectable PD-L1. Expansion studies are in progress of up to 90 patients, including those with breast cancer, gastric cancer and a basket of other HER2-positive tumors. Slide 22. The second combination checkpoint DART molecule, MGD019, also a tetravalent in structure, is directed to PD-1 and CTLA-4. This molecule is designed to achieve all the T-cell activating attributes of ipi + nivo combination, but without the anti-toxicities normally observed with doses greater than 1 ml per kg of ipi when used in patients. Preclinical studies of MGD019 in monkeys demonstrated T-cell activation comparable or better to that observed and reported preclinical studies with Ipi/Nivo with a dramatically improved safety profile that enabled dosing of MGD019 at 100 mg per kg in the monkeys without dose-limiting toxicities. Similarly, Phase I studies in late-stage cancer patients designed to be tumor-agnostic showed safety and tolerability up to 10 mg per kg every 3 weeks, not reaching a maximum tolerated dose with evidence of significant T-cell activation of CD4 and CD8 cells and ICOS activation in CD 4 cells, which is associated with blockade of CTLA-4. Slide 23. Objective responses were seen at 3 mg per kg in patients with castration-resistant prostate cancer, MS stable colorectal cancer, a thymoma with very low levels of PD-L1. Tumor reduction was also observed in other CRC patients. As a result, expansion cohorts are in progress for patients with MS stable colorectal cancer and patients with squamous cell carcinoma of the lung. Update should be available midyear. Slide 24 shows our anticipated milestones, which I have already noted, and updates for 2021 are summarized on this table. What I have not discussed is that for our SOPHIA study, we will provide the updates on final results for overall survival of margetuximab in our late-stage breast cancer study in the second half of this year. Slide 25. Finally, we ended the quarter with $281 million in cash and cash equivalents, which do not include an additional $40 million milestone payment received since then. As noted previously, current cash and some collaboration payments should provide runway into 2023. We also expect future non-dilutive capital likely from future business development transactions. And with that, I thank you for your attention and turn this back to [ Bader ].

Thanks, Scott. So just to remind everyone on the call, you can submit a question through the blue submit a question button. I will -- time to kick it off here. Scott, so maybe we'll just focus in on margetuximab and the approval. Could you talk a little bit about sort of anticipated pricing for the product?

So as I noted, we expect to launch the product in March this year. So it's just preliminary at this point. We have not actually selected the final pricing for this. And should be able to update that, obviously, as we approach the March launch.

Got it. Okay. And just continuing on that same theme, you noted, obviously, there is a number of drugs that have been approved in the third and fourth-line setting. How do you think about positioning of margetuximab relative to those products in the market?

Thank you very much. Obviously, we did -- the only head-to-head study against HERCEPTIN in chemotherapy for a proof of the PFS benefit of this drug. And obviously, we're still waiting for the OS update later this year. Given the safety profile, quite equivalent to that of HERCEPTIN, and with a very long experience of more than 2 decades use of HERCEPTIN, this is a logical drug to use. If someone is considering use of HERCEPTIN in this late-stage setting. Of course, there are a number of opportunities to use other agents. And you have to consider the individual circumstances of the patient. As you know, some of the other competitive molecules have additional side effect profiles, which could limit use. So for instance, individuals with underlying lung disease. Someone who has GR issues may not want to use some of the other competitive molecules on the market. So it is a great opportunity. And of course, as you know, unfortunately, most of these patients will progress at some time. And so it adds additional opportunities to use MARGENZA, even if they have used one of these other agents.

Okay. Great. So just keeping on along the same lines with MARGENZA, we obviously noted the F allele's genotype and the implications of that for responsiveness. Can you maybe elaborate on how this might be used in practice with physicians, given it's not on the label?

Yes. So number one, as the label indicates, we can use this irrespective of the CD16 genotype. There will be a publication of the study coming out very shortly, it will be published, which includes the data with regard to the various allelic versions of CD16 in the supplemental portion of that paper. It's -- right now, given the exploratory nature, even though it was predefined as a look at the individual patients, it was not included specifically at the label. But of course, as treating physicians and patients have interest in this, we could obviously provide the updated data on that. We are also exploring the use of this marker in additional studies going forward. And there will be a LDT available at the time of launch if physicians want to determine the F allele characteristics of CD16 in that patient.

And how will that translate into your European regulatory strategies is that -- are you -- how are you going to think about that relative to the genotype?

So of course, what we are waiting for is the final overall survival data before we do our filing in Europe. And so as a result of that, we will include, in our application, the results both of PFS and OS in the intent-to-treat population, but also related to the observations we made with this predefined exploratory analysis.

Got it. Obviously, you're pursuing MARGENZA in the gastric cancer setting. Can you maybe talk to us about how you view that opportunity relative to the breast cancer opportunity?

I think that, in fact, it's equally as valuable given the high medical need in the gastric cancer population. And in particular, the fact that we are looking at this in a front-line setting using different modalities to treat this, it's a great opportunity for actually further enhancing not only the therapeutic effects of the drug, but also dramatically reducing the severe safety toxicities associated with current standard of care in the frontline setting. So as I've noted and as we've discussed before, we have developed 2 sets of modules for development initially to accelerate the development of this in the so-called PD-L1 positive population. And as I noted, we just about finished the first part of that study in terms of enrollment and should provide updates mid-year and discuss next steps going forward based on the overall response rate. Then we have the advantage of using MARGENZA in combination with 2 checkpoint molecules and chemotherapy in the more standard HER2-positive population. So we're very excited with the data so far. Obviously, we will not make any decisions until we have the full data set available to evaluate. I should also note, as I discussed earlier, that we have extremely encouraging data that we presented at the SITC meeting and ASCO this year with regard to tebotelimab and MARGENZA in late-stage HER2-positive tumors where we saw even in late-stage gastric cancer patients, which is related to your question, responses in MS stable patients as well as other HER2-positive tumors. So there's large opportunities to advance the use of MARGENZA in various clinical settings.

Great. And then maybe just the last one on MARGENZA. The -- and maybe this is for Jim. The partnership with EVERSANA, can you just elaborate a little bit more on what they bring to the table specifically in terms of commercial capabilities? Jim, do you want to go?

Jim, do you want to take...

Yes, sure. They're sort of an end-to-end commercial entity. They are a 3,000-employee strong company with -- that offers the full gamut of service -- commercial services, everything that would be needed in the full suite of services that a company would need to commercialize a product from start to finish.

I'll just add on that for us and where we had anticipated at least initial launch in the late-line setting and recognizing the competitive nature in that late-line setting, it made a lot more sense for us to be able to work with an organization that had all these -- this infrastructure already developed as opposed to for us to now start developing and put huge expenses towards that commercialization. So it's a nice way, and we can also tighter it up and down as we see what the sales are going forward.

Yes. I think you mentioned it also gives you the optionality to reinvest back into the pipeline and focus there. So I guess looking at your pipeline, it's quite expansive with 3 -- basically 3 different platforms or capabilities, whether it be the dots or the Fc optimization or even the ADCs. When you think about that platform and how expansive it is, which of these products are you, I guess, the most excited about and most jazzed about going into 2021?

Well, as I've outlined, this is -- we're going to have a lot of data points from multiple programs here. There -- we've had now over 12 years of development targeting molecules to B7-H3. And as you know, we garnered a lot of excitement for the MGC018 study, the ADC for B7-H3 based on the results in these late-stage prostate -- castration-resistant prostate patients. So I would say that we are feverishly enrolling not only in the prostate study as an expansion, but looking for that opportunity much broader in other tumor types with hints of activity that we've already described, for instance, in lung cancer. And given the pervasive expression of B7-H3 across lots of different tumors here, it's an unusually large opportunity. I should also reemphasize that we think enoblituzumab, our Fc-engineered B7-H3, a second one to the same target, had very good activity that we reported 2.5 years ago at the SITC meetings in late stage, head and neck cancer patients and in lung cancer patients in combination at that time with an anti-PD-1. And so given that robust activity, we are -- we've launched, as I said, into a study that we will begin enrolling this quarter in front-line head and neck cancer. And again, taking advantage of the Fc-engineering properties of tebotelimab for PD-L1 negatives as well as the checkpoint value of adding retifanlimab to PD-1 positive patients. So as a 2021 event, updates on both those programs will be important. I should also note that we continue to invest in other preclinical molecules in targeting B7-H3, which will provide updates in the future about that.

Yes. That was going to be my next question, I guess given the depth of the pipeline and also the breadth of the capabilities that you have, what other sort of targets are you kind of -- are you guys looking at in the future?

That's an excellent question. So we are looking at this both as new target opportunities as well as advancing sort of the next wave of our platform technologies. A beautiful example is we've spent a number of years optimizing the flotetuzumab in terms of its delivery to patients. And as you know, we're in this registration study in the primary induction failure, refractory patients in AML and ultimately look broader to advancing that in other studies. Over the last few years, we've been developing a huge preclinical pipeline with the next-generation CD3 redirected killing mechanisms by just fine tinkering with the CD3 molecule, so that, that -- those bispecific DART molecules now can get all the advantages of killing the target, but not having the increased risks of cytokine release. And we've now proven that with the next-generation flotetuzumab molecule, which is called MGDO24, which will enter into the clinic in the second half of 2021. In addition, back to your question of new targets, we've now also applied that technology to solid tumor targets that have gone through preclinical development, including toxicology studies in monkey, which will also demonstrate the salutary properties of hitting the target, but not having the cytokine release. And so what you will hear about in going forward in 2022 and even later are additional molecules with that advancement on the platform.

So obviously, the -- across the pipeline, you've entered into a number of collaborations, typically for ex-U.S. rights and maintained U.S. rights. When you think about the sort of earlier-stage pipeline, the Phase I assets that are un-partnered, how do you think about your overall partnership strategy moving forward? And as you start to progress more of these products into the registrational trials and then, hopefully, approval, how do you think about that transition to a commercial company? I know we've got the partnership with EVERSANA. But do you see yourselves more as a development stage company? Or do you plan to sort of transition into a commercial stage company over time with much greater capabilities?

Thank you for that question. As I started off, so just to refresh everybody's memory, we're a 20-year-old company. And we've built this company from -- as a concept all the way now where we're now a fully integrated company. And so the relationship with EVERSANA allows us to dip our toes in the water on the commercial side of things, but we have internally all the infrastructure to do all the discovery, research and development. We have a commercial manufacturing facility that we, in fact, expect would get inspected this year and then by the regulatory agencies going forward. I should note that we are making all our molecules here, and we have a commercial relationship expected with Incyte to produce retifanlimab for at least a significant part of that commercial market. So getting back to the plans for future commercialization, yes, as we advance some of these late-stage registration-directed studies towards approval, then it would make a lot more sense to build that infrastructure internally so that we have all the sales and marketing capabilities in-house. Having said that, given the broadness of our portfolio and the depth of our portfolio, and many of these molecules hitting very large market opportunities across a whole spectrum of different tumor types, it may actually make sense to create co-development partnerships, especially at late stage, where the opportunity can be exploited much faster when you have somebody with large capabilities in developing many more clinical trials and many more clinical indications. So as you've seen historically, since our IPO, we have brought in a lot of nondilutive capital through these partnerships. We've obviously designed these partnerships to retain most or all or significant marketing rights of this. And I think we will take a very flexible, open strategy depending on what the partner can bring to the table in advancing these programs more rapidly and obviously helping in commercialization, particularly in areas outside the U.S. I think the first effort on our part for whatever infrastructure we built will be focused on U.S. development.

Great. Well, so thank you so much, Scott and Jim, for the time, and we really appreciate you guys presenting here at the JPMorgan conference, and we look forward to what will be a really interesting 2021 for you guys. So congratulations and thank you.

A real pleasure and stay safe and healthy during this year.

Thank you.