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

So first and foremost, thanks for everybody attending. It's the first conference in a couple of years we're back to in person. So thanks for the enthusiasm and support. And thank you so much, Scott, for attending and all your time.

Always a pleasure.

Always a pleasure to chat with you.

Same here.

We've only got 25 minutes though. That's the only...

Absolutely. So you only get to ask one question, I think.

Jeff, it's a pleasure having you here.

Maybe first question, kind of where you -- where the differentiation is of the company. Do you think -- is it the pipeline, the ability to combine the pipeline? What's the...

Well, I mean, I think the thesis for MacroGenics from its inception, as you know, we've been in operation for over 20 years now, when we were building this company from the ground up to be a fully integrated company, to be able to do everything from target and platform discovery all the way through commercialization. And over these 2 decades, we have been able to achieve that. And so what really differentiates us is that we're continuing to organically grow. We've always had a very rich and deep scientifically validated pipeline that is both hitting very novel targets -- as you know, we're -- one particular one that we're exploring is B7-H3, which is what I'm sure we'll talk about today. but the beauty is that the expertise we have is it allows us to take our proprietary platforms, which include our bispecific DART technologies that are applied both to redirected killing and checkpoint molecules or Fc engineering, and obviously, more recently, ADC molecules, and then to combine those molecules to essentially enhance immunologically motivated responses across the board. So being able to control the destiny of the company and continue to evolve the company is one of our great strengths.

Perfect. And the idea you have your own checkpoint inhibitors whereas you could partner, just that decision...

That was a very early decision. What we had seen is that it was back to the controlling your own destiny. And so if you remember in the history of the company, we started out on the Fc engineering, the bispecifics. And then said, look, to get the maximum effect of these immunologically active molecules will likely take, in certain cases, checkpoint molecules. So from the get-go, we created our own anti-PD-1, which as you know, we outlicensed to Incyte to continue that development. But for us, we structured that deal to both be economically smart for us but also have the ability to combine it with anything in our portfolio, which we are doing, to use that with any partner as well, which we are doing, and ultimately, making new variations of that, which are our DART bispecifics, which incorporate not only the same PD-1 specificity which we fully own, but obviously other checkpoint molecules. So again, it's controlling our destiny. When we saw that when, obviously, Merck and Bristol first entered the PD-1 scene, there was very limited ability to take those assets and combine them with a molecule. It was very strict conditions. And so we just said, look, we want to be able to have something that we can advance our portfolio quicker and have control over.

The strict conditions, have these -- have they kind of lapsed with more molecules, more PD-1s appearing?

Well, I think there is opportunities to partner with other companies. So there are obviously more choices these days. But having said that, it's quite different when you know you are making the molecules yourself. In fact, we're making those molecules that Incyte is using in their clinical trials. We have the right to manufacture those molecules for their use when that hopefully gets approved some time in the near-distant future. So it really just takes a major uncertainty away. And that also provides opportunities because companies come to us and say, "Hey, can we use your checkpoints combined with us?" So it actually creates opportunities for us as well.

Just in this current environment, is there more kind of partnership discussions? Just how should we -- we're always thinking about M&A eventually for -- within biotech, it's a common outcome. Just what's that tone like? Is it -- is it more balanced doing partnerships there versus M&A based upon what you're seeing?

Well, I would say that if you look at the history of MacroGenics, we have been one of the most successful companies at developing partnerships. And it gets back to the point that not only do we have a large number of clinical assets, we have our platforms in multiple preclinical assets. And so if you look at the history of the company since the IPO back in October 2013, we have brought in over $700 million of nondilutive capital from these partnerships. And so again, back to what this provides for the pharma or the biotech partner is an opportunity to come to us at all levels of product development, because they can come to us and say, "Hey, we have this -- we like this molecule," or "We like your platform. Can you make this for us? Can you manufacture for us? Can you conduct the clinical trials for us?" And so for them, it's not a burden. It really is basically a cash deal. And then in some cases, doing work jointly. But the beauty of working with MacroGenics is that we're self-sustaining. And really, what's just limiting us is the capital to advance these things forward. So if a big company comes to us with an idea and they will provide the capital, we can do everything internally.

You mentioned this about the controlling destiny. Is that because of what you've got flexibility around the trial design when you own your own PD-1? Or what other things does that imply?

Well, I would say it is which things you want to put together, how you design those clinical trials, what are your decision points in the development of that product. So I would say they all come into play when you have the ability to make the molecule. I would say also, especially in this time frame where there is a huge lag in getting partnerships to manufacture molecules because of difficulties of getting raw materials and such, when we decide that, hey, we need more of something, I just go to a manufacturing group. "Can you start making more of this next week?" And it's like that, because we've already had the raw materials ready to do any of these things. So that's a huge opportunity that others can't do.

And I'd love to talk B7-H3. Just, I guess, initially on the modified dosing that kind of came up, I guess, over the last 6 months it's kind of come to a head.

Yes, sure. So I mean just to frame it out for those who haven't followed the story, this is obviously -- this is a target, B7-H3, we've been working on for over a decade. We have 2 active molecules in the clinic. We have actually a number of preclinical molecules [ too ] targeting B7-H3. What Peter is referring to is obviously the MGC018, an ADC molecule, where we've had very significant achievements in clinical outcomes so far in our Phase I study, where what we have indicated is is that by analyzing the results from the Phase I study in prostate cancer in the other indications, looking at that in the context of side effect profile and response rate, looking at the pharmacokinetics of the drug, we've come up with some tweaking and alterations that we're proposing to go forward towards a registration-directed study in prostate cancer. We have said we will be meeting with the FDA this quarter. Given that it's the middle of March, basically, we will be meeting with the FDA in the next 2 weeks to discuss the design of that model, which includes some of the modifications of the dosing we're proposing to them. And so once we've had that meeting, we should be in a better position to begin to discuss what that design of the trials are and the dose modification. The 2 things we have considered is slight reduction in dosing from initial dosing from what we were doing in the Phase I study, which was dosing at 3 mg per kg on a Q3 weekly basis. And the second was just slightly increasing the dosing interval on the drugs. The reason why is that, as I said, we modeled this. We feel that we can get, in fact, as good or possibly even better efficacy, because you're mitigating some of the side effects in these patients and you can treat these patients longer as a result. And obviously, it's tolerating better and ultimately, a better outcome for the patients. So we'll see what the FDA says about that.

And what will we see or what will we hear after that meeting with them? A press release or...

Yes. We haven't decided the forum in which to discuss it, whether this will be on an earnings call or a press release. But it really depends on the magnitude of the things that they come back with us on. And we obviously would like to see the written comments before we go out publicly on that. There's also -- the other aspect of this is that there is a competitive landscape. And so as much as we want to inform the investors, we also want to maintain our competitive advantages. So we'll have to weigh exactly based on that feedback on what we will discuss. But I would assume it will be some time in the second quarter to provide some update.

And that modified dosing, was that primarily hand-foot or was that...

So again, we looked at the totality of the side effects. The one that seemed to be most bothersome to patients was hand-foot syndrome as an annoyance rather than obviously a morbidity that was -- in fact, most of the patients had a Grade 1, Grade 2 side effect profile from hand-foot. We saw that as likely mostly due to area under the curve exposure. And so again, making those modifications, that seemed to model very well with that. There are other side effects that may be ascribed to a Cmax. I think maybe some of the hematological effects, particularly the neutropenias may be coming from Cmax, although it may not be exclusive of that. But that can be also addressed by, as we've said before, giving GCSF, holding dose. We have not seen febrile neutropenia or anything like that. So it's more of a laboratory observation than an actual dramatic clinical adverse event.

Does the addition of GCSF -- does that kind of hinder the label or potential label?

No. It's not being prescribed as a prophylaxis. This is a response to a patient that has particular counts that would be standard of care, and this is routinely used for many chemotherapeutics as a way of mitigating neutropenia in patients.

Got you. And then with the outcome of your meeting with the FDA, how quickly would you adjust dosing, and when could we see that?

So we are working on the operational aspects of this program. We're meeting and making decisions with which CRO to engage. We have a very active identification of sites around the world to participate in the study. So once we have that, and depending again on the feedback, we feel that we can operationalize that during the course of this year. And if everything falls into place, we could be starting the study later in '22.

Okay. So we wouldn't see kind of the impact of that until probably '23? Is that how you...

Well, I mean, we -- if we begin to enroll in '22, obviously it's going to take time to get all the sites up and getting patients enrolled. But if we can -- in that time frame, if we can go from where we are in mid-March to starting a registration-directed study in the end of '22, I think we'll be in pretty good shape.

Okay, perfect. Which indications? So that would be prostate? The registration...

Yes, that's in prostate cancer, right, castration-resistant prostate cancer.

Got you. And then I guess, as we think about the other data that we could see this year, so it would be prior dosing, and that would be across sort of melanoma, triple-negative prostate.

Yes. So as we've said, we have enrolled patients in the 16- to 20-patient cohorts beyond prostate in triple-negative breast, melanoma and lung. And we are still enrolling that same small cohort for head/neck. We haven't finished that cohort. So we won't see any data in head and neck. We are likely to identify 1 or 2 of those other indications to provide updates on. What we like to do is see that data continue to mature. We're still following many of those cohorts and those patients and also we'd like to see more mature data. But what I've said a number of times now is that that amount of data is not sufficient to make any drastic decisions on registration for any of those additional indications. We just don't have enough data there. And so what we would likely do is pick 1 or 2 of those to now apply the dosing strategy after we speak to the FDA on prostate, apply to that to add additional cohorts of somewhere 20 to 40 additional patients, and again hope to start that in late '22.

And you mentioned 1 to 2 indications, so that could be the melanoma and triple-negative or...

I'm not going to specify which one. Good try.

If you had to kind of trim a program, what would you trim?

Well, I think if you look at what we've done over the course of the last 9 months, we've been very conscientious about making relative judgments on our programs. As you know, for the MARGENZA/MAHOGANY study in gastric, we stopped that because we just -- even though the data was very strong, we felt that the opportunity for commercialization was not as great given the competitive HER2 space. We made decisions recently, which we announced on our earnings call, with regard to flotetuzumab and AML. And again, the cost of finishing that out and doing additional studies as compared to bringing the next-generation molecule to the clinic, the balance said we should go with the next generation because of all the advantages of that molecule. And then with regard to tivo, which is the PD-1 LAG-3, we just haven't pulled the trigger yet on the next set of studies because we wanted to get the B7-H3 program moving forward. But in the background, we have been very diligent on figuring out which indications that we want to pursue for tivo. But we want to have enough capital in place to make sure the B7-H3 is covered before we trigger those studies.

For tivo, is that something you'll more than likely partner? Or would you partner part of it? What's the...

We have ongoing discussions, this and other assets in our portfolio, as potential partnerships. So those things are ongoing. I can't promise anything specific with regard to a partner in tivo. But I could say that there is certainly interest from outside others to help fund the development of that molecule.

Got you. And then your PD-1 CTLA-4, that's been combined in prostate.

Yes.

If you could walk us through the strategy of like the combination strategy you're thinking and just how do you think that could potentially pan out.

We're very excited about that molecule, lorigerlimab, which is the PD-1 CTLA-4. This is a tetravalent bispecific molecule. We spent a lot of time designing this molecule and came up with a 2 sites binding the PD-1 and CTLA-4. We made this as an IgG4 molecule, so it would not eliminate Treg cells, which we believe is a large part of the toxicity observed with Ipi/Nivo combinations. This has been borne out both in preclinical and clinical studies. We've had objective responses in multiple tumors. We have evidence of, mechanistically, of expanding both CD4s and CD8s in patients as well as up-regulating ICOS of CD4s, which is the basic mechanism by which CTLA-4 is blockaded. So right now, we're in expansion in 4 different tumor types for the lorigerlimab molecule alone, but the data is encouraging enough to start this. What you're alluding to is this combination study, which we announced on our earnings call. We hope to have the first patient in very shortly. This was based on very nice data preclinically where we showed that an ADC like MGC018, when combined with various checkpoint molecules, dramatically increases the antitumor effects and likely, obviously, help to propagate a probably specific immune responses as well as innate immunity. And so I think it's almost the best of all worlds. The way that is being designed right now is that we're starting with a dose of lorigerlimab at the intended go-forward dose as a monotherapy, meaning 6 mg per kg on a q3 weekly basis. We are starting with MGC018 at a lower dose again, to do a 3-plus-3 design to obviously make sure that we're not seeing increased toxicity of that combination. And so obviously, modifications will come if we see things going forward. But that's being applied now to multiple tumors, including ones that have been included in our MGC018 trials as well as the lorigerlimab trials, plus new tumor types that we didn't have in either study historically.

Got you. And just the competitive landscape for B7-H3, clearly, has been heating up over the last decade, I guess. What's the read-through from Daiichi's data? Is that the one we should really be focused on?

Well, I think it is appropriate to look at competitive molecules that are producing worthy data. And so as you know, they have presented data at ESMO and then recently at the ASCO GU on the update on the prostate side. They've discussed some responses in patients in the dose escalation in small cell and GI cancers. And the update in prostate showed overall responses that were comparable to what we had presented also at ESMO, but a lower PSA50 reduction than what we had reported on our last presentation. So I would see this as a glass half full, which is a nice validation that this is a target worth pursuing. But it also encourages, I think, those who look at our program as that we have a nice position. Obviously, Daiichi is a big company, and so we have to do all we can to advance this as quickly as we can to remain competitive. I think one of the advantages, what we just talked about, is that we have our own checkpoint molecules that we can combine. I don't know -- Daiichi obviously can find other parties, but I don't know of their own internal checkpoint models that they [ can't ] combine. As I said, we have other B7-H3 molecules besides 18 that also could be hopefully successful. Enoblituzumab, which we have very excited about prospects there in our frontline head-and-neck study, which we should have some initial data likely later this year. And then as I alluded to before, we have a number of preclinical molecules that I'm excited about that are shaping up very nicely going forward.

Got you. Just so touching upon that, the preclinical molecules you have in B7-H3, kind of what are they and...

So what I've commented on is that, as you know, historically, we've had a DART redirected killing CD3-directed molecule that we took out of the clinic. One of the challenges was back to as many of the redirected killing CD3-dependent molecules had a cytokine release. We have talked about our next-generation CD3-redirected bispecific DART. That molecule is getting constructed and other variations of that. And then we have a couple of other molecules which we're not going to comment on, which is completely novel, that we'll talk about in the future.

Got you. I guess, what's the worry with Daiichi? Do you think this could be like a zero-sum game where the winner takes all?

No. Look, when a particular molecule has a very limited spectrum of clinical activity, meaning a particular mutation, a particular tumor type, I think those gains can have -- the beauty here is is that because B7-H3 is so widely expressed in most solid tumors and there will be different profiles of drugs and different combinations, I think it opens up an opportunity for more than one molecule to be successful in the therapeutic area here.

Perfect. Thank you. We did that nicely. Just overrun slightly.

Thank you very much. It's a real pleasure.

Thank you. Thanks for your time.

Good to see you. Thank you so much.