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

Okay. So just gone live. My name is Peter Lawson. I'm one of the biotech analysts at Barclays. I cover SMID cap predominantly SMID cap oncology-focused companies and have the pleasure of covering MacroGenics for a number of years. Up on stage with me is Scott Koenig, the President and CEO of MacroGenics.

First question I've been asking companies have just been more kind of macro just with the various movements that have happened with the new administration. So just some of that always concerns me, I guess, from COVID was just like if there are any supply chain issues that we should be thinking about as we kind of think about tariffs kicking in or cranking up?

Yes, I would put it into perspective of going back to COVID and even before, one of the strategies that MacroGenics has set out is really to do as much as we can internally. And so going back to 2005, we initiated our own manufacturing facility and now have a commercial manufacturing facility. So in that context, to be able to control the production of not only our own molecules, but which include all the molecules in clinical development, we also make 2 commercial products and molecules for other organizations that are in clinical research. So we have to always be ahead of the game in terms of supply chain issues and be there. But you never know when a particular component is going to be challenging to get especially if they're not sourced within the U.S. I could tell you like, for instance, during the summer for one of the controlled products that were being used in the clinical trial, there was some shortage that we ultimately resolve -- it was resolved within a few weeks, but that is always a concern. And you've heard about shortages of antibiotics, for instance, that occur. So at this point, I think we're in very good shape in terms of anticipating our needs over the next couple of years, but we'll have to see how the environment evolves.

Got you. And just as we think about the FDA with proposed and, I guess, current cuts, have you seen any slowdown in communication patterns or do you anticipate any slowdown in...

Well, I think it's too early to tell. Obviously, there's a lot of disruption as we all are encountering in government and particularly within the HHS and FDA. Patrizia Cavazzoni leaving and senior members of the FDA leaving, often presents challenges in the operation. And I little bit anxious to see how this gets all played out. I guess this week, we've heard that employees that are supported by the fees from companies of PDUFA are not at risk, but I could tell you, there is a lot of anxiety. Given that we are located in Rockville and very close to the FDA, we do hear of a lot of FDA and NIH people looking for jobs. So we'll have to see how that all evolves.

Okay. And then I guess the other component is just like if there's any worry about restrictions over like biologicals manufacturing and whether it's here or overseas and partnerships and any cross-border licensing agreement worries?

Well, again, I think that as we built MacroGenics is a fully integrated discovery to commercialization, but including the manufacturing, we are trying to control our needs for our own programs as our primary objective. And so we do have, obviously, contracts for some CRO work on a more limited basis. Currently, right now, for instance, the ADC molecules, we have vendors that we've had good relationships with in the U.S. to do the conjugation. But at any time that could be impactful, I think, more to others than us. But again, we have to be aware of those challenges going forward.

Got you. And the final question just around NIH cuts. Mean clearly, that -- I assume that's a terrible thing long term and just your view on the near to midterm kind of how that could impact innovation?

I am very concerned about that. Having grown up within the academic and government infrastructure, training in universities being at the NIH for over 6 years and then going to industry, it takes a long time for the organizations to build themselves into a mass. And given so many challenges in our health care system, any disruption of the infrastructure there, I think, will have very long-term impacts. In particular, as we've heard of funding cuts, as of a couple of years ago, individuals weren't getting their first R01 grants till they were 42 years of age. And now if your pay line is being cut even worse, there is no incentive for people to build out academic careers there, which will have a horrible impact on the basic research infrastructure. I think a lot of the -- if this continues, I think a lot of the burden for both basic as well as translational work will fall on the biotech and pharmaceutical industry going forward.

Got you. No, that's kind of front-end change. So as we get back to your platform and B7-H3 ADC, kind of, what do you want to see to move that forward, so it's been really encouraging data, there's been safety signals, and you've kind of tried to mitigate some of those. But just what's -- what are the particular metrics you want to hit, whether it's rPFS or other components?

Yes. Let me put it in a little broader context. As you know, MacroGenics has been the leader in developing B7-H3 targeted molecules in the history of the company. We were the first to put a therapeutic in testing. We've had historically 4 different molecules targeting B7-H3, 3 are currently in clinical testing. I think right now, you're alluding to the vobra duo molecule, which is an ADC molecule with a linker/toxin called duocarmycin that the mechanism is based as a DNA alkylating agent. As we recently reported at ESMO, we provided 6-month landmark endpoint in September of a TAMARACK study, which was looking at 2 lower doses of the molecule in castration-resistant prostate patients. These are ones who have been both naive to chemotherapy as well as experiencing chemotherapy. And we were, in a sense, trying to compare it to our historical dosing in the Phase I study at 3 mgs per kg Q3, testing it versus in the TAMARACK study of either 2 Q4 or 2.7 Q4. The landmark data was very encouraging. So we had established that at the 6-month landmark endpoint of these 2 lower doses already a better PFS profile where we were already at 8 to 8.5 months for those 2 doses. And we had seen dramatic improvement in some of the safety parameters going forward. In July of last year, we stopped dosing the patients who had not progressed or study and said we would continue to follow those patients for another 6 months. And that would -- that was actually the study design and the endpoint. As we've described, this early part of this year, we would provide an update both on the final median PFS as well as the safety profile as final valuation. But in a broader context, we're looking at that response in the whole development plan for any drug for prostate cancer. How good is the efficacy? Is the safety manageable to move forward? What is the competitive landscape? What else do we have in our clinical pipeline in the prostate setting? And then ultimately, given our broad pipeline and so many active drugs ask the question for doing a Phase III study, do we want to devote it to this molecule or to other molecules. And I think in the general conclusion, which we have expressed previously, is that for us to go forward with all the other success -- if we're successful in all those other parameters, we would want to have a partner to take forward given the cost of doing a large Phase III study. So we will provide updates very shortly about the opportunity on vobra duo and probably at a later time later this year, present a more wholesome, a full data set for the entire program, so people get an appreciation of what was done in the TAMARACK study.

Got you. So the idea of a partner from kind of a large Phase III study, would that also sort of capture both vobra duo and also kind of the next generation or the Topo 1 labeled?

So as you know, Peter, we have been very successful in the whole history of the company of doing partnerships. So we're very open to different strategies on partnering molecules. I would say that it would be more likely just to focus on a vobra duo opportunity with a partner, but we never discount that if somebody wants to have a broader relationship, given that, as I already alluded to that, we have multiple B7-H3 targeted molecules that we might possibly include that. So never excluded, but I would say the inclination would be to focus on just the vobra duo as an opportunity.

Do you think vobra duo versus 026, do you think there's a difference in the different indications that could go...

Oh, absolutely. Again, if you recall, the strategy, which we set out a number of years ago, was that experiences, as everyone is well aware, is that different tumors will respond to different chemotherapies and mechanisms of action. We had an excellent variable domain antibody for targeting B7-H3. And so we started out with the duocarmycin as the first toxin, but as more data came in on the potential of TOPO 1 inhibitors to treat lots of different tumors and our relationship with Synaffix, identifying what we think is a superior TOPO 1 inhibitor platform, we said it would be, I think, a smart idea for us to develop 2 parallel molecules. So in the context, for instance, you're talking about prostate cancer, it may be vobra duo maybe better than TOPO 1 inhibitor, we just don't have enough data right now on 026 to address that at this point.

Got you. And then the efficacy from -- or the difference in efficacy you get from a TOPO 1 payload, is that depth of response? Is it durability?

I think it could be all depending on the tumor. As you know, a lot of competitive molecules out there right now targeting B7-H3 has shown very good efficacy for instance in small cell lung cancer, depending on which study you look at, probably about half the patients have had objective responses. But in the end, it's what line of therapy you're going to give it. Are giving this as a single agent or in combination, what is standard of care of this? And as I have highlighted for the ultimate treatment for prostate cancer, this is not -- the drugs on the market are not curative, they're palliative. And so ultimately, doing combination therapy with orthogonal mechanisms, I think, will be the best way to go to hopefully get to a cure for prostate cancer.

So with 026 and vobra, when you look at that versus Daiichi's molecule, which are more similar and...

Well, I would declare without the data that we have a superior molecule. But all joking aside, there is some rationale to that opinion. First of all, on the antibody side, we think we have a better variable domain than Daiichi molecule. We have actually made what we believe to be a copy of their molecule. And we know that we have excellent tumor to normal tissue binding ratios and an excellent incorporation of linker toxins into cells and seems to be superior to the variable domain that they have are using in their lead molecule. I secondly would argue that based on the Synaffix preclinical data and even some clinical data that's out there with their linker/toxin for the TOPO 1 exatecan, it has a profile that could be quite superior to the deruxatecan basis for the Daiichi, Merck molecule. In particular, data has been shown that it's more potent, meaning the Synaffix platform. It has a lower ability to induce multidrug resistance. And by the nature of the fact that the linker/toxin is hooked on to an engineered glycan within the Fc domain. If you go back to the data that Daiichi has presented with regard to interstitial lung disease, they account for both in HER2 as well as the B7-H3 interstitial lung disease to be secondary to the binding of the Fc domain of their linker/toxin to alveolar macrophages and other granulocytes, which are in the lung. Because the Synaffix platform knocks out Fc receptor binding by virtue of the binding to the glycan site, one would expect that the likelihood of interstitial lung disease should be reduced. Now this is theoretical, but that would be another reason. So great antibody looks like great linker/toxin, and I would also point out that the same linker/toxin has been licensed for other targets and for instance, Innovent is now doing a Phase III study with CLDN18.2 based on very good Phase II data. So we think we have a nice combination here of a superior variable domain and the superior Topo 1 linker/toxin that should bode well for the future development.

And Daiichi is not pursuing prostate cancer is suspicion why or why not?

Well, I would -- again, speculation, I don't live in the bowels of Merck or Daiichi, but if you go back to their original Phase I data, which had about 50 patients in late-stage prostate cancer, their rPFS value was 5.3. So not very encouraging, already as we have pointed out for vobra duo, we were at 8, 8.5, and we're hoping with the final data will be even higher. So it may be that they do not feel that their molecule or TOPO 1 is sufficient to address prostate cancer and the prospects for other tumor types may be better for them.

And the -- I guess as we think about 026 can that be accelerated quickly just because based upon your prior experience, does that help you with kind of dose escalation or prioritization of various indications?

I think we have tremendous experience and insights on this target and the whole development process here. I would say that the Phase I study is going exceptionally well. A lot of investigators who participate in the study are clamoring for additional slots in our trial. I would say that we're in a dose range that is maybe actually the dose we ultimately select or within one dose away. So I think by the second half of the year, we should be in a good position to select the dose and have -- once we get the pharmacokinetic feedback from our data set back, and obviously, a little more experience with additional patients. So with regard to particular indications, my expectation is that we will select a few to move forward into expansion into Phase II development.

Got you. And then are you currently enrolling old comers? Or do you...

I would say that it's a very wide range of tumors. There are a few exclusionary tumor types that we have not -- that are not participating, but it's a very wide set of tumor types.

And they're not tested for B7-H3?

No. This is irrespective of B7-H3 expression.

Do you get a sense if there is kind of a threshold level or if there's a...

Well, our experience in both on the 26 molecule on vobra duo and in our previous molecules so far has not identified a direct association of density of expression with responsiveness. Clearly, there are certainly tumors that have higher age scores and higher percentage of cells, but we just don't have enough data to say whether there is a particular cutoff value for responsiveness.

Got you. And when we see the data kind of how much data should we expect to see? What is it...

It's a typical Phase I study, and I can't give you the ultimate final numbers on these. I mean these are usual cohorts of 3 patients going up, and I would say it could be anywhere from 20 to 50 or 60 patients from that initial Phase I. We have design the study that you could do with many cohort expansions. So I don't know what the ultimate final data set is going to show.

And maybe on -- just on lorigerlimab, just kind of when we could see the initial top line kind of PFS number?

So we're very excited about lorigerlimab, which is the tetravalent PD-1 by CTLA-4 bispecific. The LORIKEET study, which is a 150-patient study, 2:1 randomization in patients who with castration-resistant prostate cancer, that are naive to chemotherapy. 100 patients are getting standard of care dosing of docetaxel plus lorigerlimab versus 50 patients getting docetaxel alone. We finished enrollment of that study in December. And given the historical time for progression for the control group, which could be anywhere on the average, a median of about 5, 6 or 7 or 8 months in that range. I think we'll be in a good position in the second half of this year to know where the study is going. This is an open study. So there are interim looks on the data, but it's an event-driven readout here of PFS. So I can't give you a precision about this, but I think given where the enrollment was completed, my projection would be second half of this year, we've been in a good position to say, hey, is the study moving in the right direction, where are we going next steps with lorigerlimab going forward for prostate cancer. I should also note that we will announce very shortly another tumor indication that we are going to proceed with lorigerlimab. So we are encouraged by what we have seen historically in the dose escalation of lorigerlimab, our expansion studies, the LORIKEET study to date to move forward with another tumor indication.

Perfect. Thank you so much. It was a pleasure to have you.

Always a pleasure. Thank you, Peter.

Thanks.