MacroGenics (MGNX) Q1 2023 Earnings Call Transcript

MacroGenics (MGNX -0.19%)
Q1 2023 Earnings Call
May 09, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. We will begin the MacroGenics 2023 first quarter corporate progress and financial results conference call in just a moment. All participants are in a listen-only mode at the moment, and we will conduct a question-and-answer session at the conclusion of the call. At this point, I will turn the call over to Jim Karrels, vice president, financial officer of MacroGenics.

Please go ahead. 

Jim Karrels -- Vice President and Financial Officer

Thank you, operator. Good afternoon, and welcome to MacroGenics' conference call to discuss our first quarter 2023 financial and operational results. For anyone who has not had the chance to review these results, we issued a press release this afternoon outlining today's announcements, which is available under the Investors tab on our website at macrogenics.com. You may also listen to this conference call via webcast on our website, where it will be archived for 30 days beginning approximately two hours after the call is completed.

I would like to alert listeners that today's discussion will include statements about the company's future expectations, plans, and prospects that constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our annual, quarterly, and current reports filed with the SEC. In addition, any forward-looking statements represent our views only as of today. It should not be relied upon as representing our views as of any subsequent date.

While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change, except to the extent required by applicable law. And now I'd like to turn the call over to Dr. Scott Koenig, president and CEO of MacroGenics.

Scott Koenig -- President and Chief Executive Officer

Thank you, Jim. I'd like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key updates on our clinical programs. But before I do so, let me first turn the call back to Jim, who will review our financial results. 

Jim Karrels -- Vice President and Financial Officer

Thank you, Scott. This afternoon, MacroGenics reported financial results for the quarter ended March 31, 2023, which highlight our financial position. As described in our release this afternoon, MacroGenics total revenue consisting primarily of revenue from collaborative agreements was $24.5 million for the quarter ended March 31, 2023, compared to total revenue of $11.1 million for the quarter ended March 31, 2022. Revenue for the quarter ended March 31, 2023, included recognition of the $15 million milestone received from Incyte for the U.S.

FDA approval of Zynyz $3.6 million in contract manufacturing revenue and MARGENZA net sales of $3.5 million compared to $3.6 million for the quarter ended March 31, 2022. Our research and development expenses were $45.9 million for the quarter ended March 31, 2023, compared to $61.4 million for the quarter ended March 31, 2022. The decrease was primarily related to decreased vobramitamab duocarmazine, development costs, and decreased costs related to our discontinued studies. These decreases were partially offset by increased expenses related to discovery projects and preclinical molecules and increased clinical expenses related to lorigerlimab.

Our selling, general and administrative expenses were $13.5 million for the quarter ended March 31, 2023, compared to $16.3 million for the quarter ended March 31, 2022. The decrease was primarily related to decreased legal and consulting expenses. Our net loss was $38 million for the quarter ended March 31, 2023, compared to a net loss of $66.4 million for the quarter ended March 31, 2022. Our cash, cash equivalents, and marketable securities balance as of March 31, 2023, was $241.7 million compared to $154.3 million as of December 31, 2022.

Our cash balance as of March 31, 2023, included the $100 million upfront payment received from a wholly owned subsidiary of DRI Healthcare Trust for the sale of our single-digit royalty and global net sales of TZIELD. Our March 31, 2023 cash balance did not include a $30 million payment subsequently received from Sanofi related to the November FDA approval milestone for TZIELD. Finally, in terms of our cash runway, we anticipate that our cash, cash equivalents, and marketable securities balance of $241.7 million as of March 31, 2023, plus projected and anticipated future payments from partners and product revenues should provide us with a cash runway through 2025. Our anticipated funding requirements reflect expected expenditures related to the phase 2 TAMARACK clinical trial, the phase 2 portion of lorigerlimab in metastatic castration-resistant prostate cancer, as well as our other clinical and preclinical studies currently ongoing.

And now, I'll turn the call back to Scott. 

Scott Koenig -- President and Chief Executive Officer

Thank you, Jim. The U.S. FDA recently approved Incyte Zynyz or retifanlimab for the treatment of adults with metastatic recurrent locally advanced Merkel cell carcinoma. This approval represents the third U.S.

marketing clearance of our product originating from our pipeline of proprietary or partnered product candidates with Margenza and TZIELD being the first and second, respectively. We are delighted that the approval of designers provides an additional option for treating patients with Merkel cell carcinoma, a rare and aggressive type of skin cancer. In addition to royalty payments for Zynyz and TZIELD, we remain eligible to receive more than $1 billion in milestone payments related to the continued advancement and successful commercialization of these two approved products. Over the past nine months, these and other programs have allowed us to generate $270 million in nondilutive capital, extending our cash runway fully through 2025.

Of course, we continue to believe our proprietary pipeline of product candidates has great promise, and I will walk you through our key programs now. flotetuzumab comazine or vobra duo is our ADC designed to deliver a DNA-alkylating dual chemocin cytotoxic payload to tumors expressing B7-H3. B7-H3 is a member of the B7 family of molecules involved in immune regulation. Vobra duo was designed to take advantage of this antigen's broad expression across multiple solid tumor types.

As we reported on our last earnings call in March, we had initiated the phase 2 portion of the TAMARACK study of vobra duo in patients with metastatic castration-resistant prostate cancer in late 2022 and modified the study protocol more recently based on the changing treatment landscape for patients with metastatic castration-resistant prostate cancer. Regulatory approval of a modified study protocol primarily reflecting removal of a control arm has been obtained in the U.S. in all countries targeted for study enrollment in the EEU. We continue to anticipate commencement of enrollment under the revised protocol beginning this quarter and expect to provide a clinical update in 2024.

As a reminder, the TAMARACK study is designed to evaluate vobra duo in 100 patients across two experimental arms. Two mg/kg or 2.7 mg/ kg every four weeks. Next, let me update you on lorigerlimab, our bispecific tetravalent PD-1 x CTLA-4 DART molecule. Please recall that we designed lorigerlimab to have preferential blockade on dual PD-1 CTLA-4 accessing cells, such as tumor-infiltrating lymphocytes, which are most abundant in the tumor microenvironment.

At the ASCO General Urinary Cancer Symposium in February, we presented encouraging preliminary clinical results from a single-arm dose expansion study lorigerlimab in patients with advanced solid tumors in a poster session. Based on the strength of the mCRPC data presented, we plan to commence enrollment of a randomized phase 2 study of lorigerlimab in combination with docetaxel versus docetaxel in second-line chemotherapy naive mCRPC patients in the second half of this year. A total of 150 patients are planned to be randomized two-to-one. The current study design includes a primary study endpoint of radiographic progression-free survival.

In addition, we continue to enroll patients in the phase 1 dose escalation combination study of vobra duo with lorigerlimab in patients with advanced solid tumors including renal cell carcinoma, pancreatic cancer, ovarian cancer, hepatocellular carcinoma, mCRPC, and melanoma. Next up, MGD024 is our next-generation bispecific CD123 x DART molecule that incorporates a CD3 component designed to minimize cytokine release syndrome while maintaining anti-tumor cytolytic activity and permitting intermittent dosing through a longer half-life. Our phase 1 dose escalation study of MGD024 is ongoing in patients with CD123-positive relapsed or refractory hematologic malignancies, including acute myeloid leukemia and myelodysplastic syndromes. Recall that Gilead has the option to license MGD024 at predefined decision points during the phase 1 study.

Finally, enoblituzumab is an Fc-optimized monoclonal antibody that targets B7-H3. In April, results from an investigator-sponsored phase 2 study conducted at the Johns Hopkins Kimmel Cancer Center was published in Nature Medicine. In the reported study, 32 men with high-risk or very high-risk prostate cancers who are scheduled for prostate cancer surgery were treated with six weekly infusions of enoblituzumab prior to surgery and were followed for an average of 30 months thereafter. The sponsors reported at 21 patients or 66% as an undetectable prostate-specific antigen PSA level 12 months following surgery suggesting to the authors that there was no sign of residual disease.

Additionally, the investigators reported that the drug was well tolerated overall. No patients had any surgical delays or medical complications during or after operation. Let me next provide an update on our product candidates being developed by our collaboration partners for which we retain certain economic rights. As we previously announced, we received a $100 million upfront payment in March from DRI for the sale of our single-digit royalty on global net sales of TZIELD, while we retained the right to receive a 50% share of the royalty on global net sales above a certain annual threshold.

As a result of Sanofi's acquisition of both Prevention Bio and DRI's royalty interest in TZIELD in April. Our economic interests are unchanged and we are eligible to receive from Sanofi a total of up to $430 million in milestone payments, including $105 million upon the achievement of certain regulatory approval milestones, $225 million upon the achievement of certain sales milestones and $100 million in potential payments from Sanofi assumed from DRI. Also, as previously announced in March, the FDA approved Zynyz a humanized monoclonal antibody targeting PD-1. We had initially developed this molecule and licensed it to Incyte in October 2017, pursuant to an exclusive global collaboration and license agreement.

Incyte continues to conduct global registration studies of retifanlimab across multiple indications, including lung, anal, and endometrial cancer. Under our amended agreement with Incyte, we received a $15 million milestone payment from Incyte based on the approval of Zynyz in Merkel cell carcinoma during the first quarter of 2023, and are eligible to receive up to $320 million of potential remaining development and regulatory milestones and up to $330 million in potential commercial milestones. We were also eligible to receive tiered royalties of 15% to 24% from insight on any global net sales of the product. Finally, we will manufacture a portion of Incyte's global commercial supply of retifanlimab.

To conclude, we believe we have shown that we have the technical development and clinical expertise and now the necessary financial resources to support execution on our plan of developing and delivering life-changing medicines to cancer patients in 2023 and beyond. We would now be happy to open the call for questions. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] Please stand by while we compile our Q&A roster. Our first question comes from the line of Jonathan Chang with SVB Securities. Your line is open.

Please go ahead.

Jonathan Chang -- SVB Securities -- Analyst

Hi, guys, thanks for taking my questions. First question on cash position. How are you guys thinking about your cash position now following the non-dilutive deals you've completed over the past nine months? At this point, do you feel you have enough to execute on your plans until the value inflection point? And are you still actively seeking opportunities to continue bolstering your balance sheet?

Scott Koenig -- President and Chief Executive Officer

Nice to hear from you, Jonathan. So we're very pleased, obviously, with our cash position, and as stated on the call, this will take us through 2025 into early 2026. And yes, this has all the opportunities to execute on the plan that we have outlined and the programs that we discussed today. and potentially looking at additional opportunities, especially in prostate cancer and beyond in solid tumors.

Of course, as you know, we have been always very active in business development activities and have continuous ongoing discussions, both in terms of our preclinical and clinical pipelines, and we anticipate in the future that further revenues could be accrued via successful execution of those business deals.

Jonathan Chang -- SVB Securities -- Analyst

Got it. Thank you. And second question, should we expecting clinical data from the vobra duo plus lorigerlimab combo study this year? And if so, could you help set expectations out of that update?

Scott Koenig -- President and Chief Executive Officer

So as I had mentioned on earlier calls, we've been moving forward with identifying the proper dosing for individual components in that combination and obviously open up the study to six different tumor indications to participate in the study. We have not yet settled on the specific dose to move forward in expansion studies and would anticipate once that is achieved, we would move forward in one or two expansion studies of particular indications which I expect would probably include prostate and one and possibly another. At this point, given where we are this year, it is less likely that we will have data by the end of this year and more likely in the first part of 2024.

Jonathan Chang -- SVB Securities -- Analyst

Understood, thanks for taking my questions.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Charles Zhu with Guggenheim. Your line is open.

Please go ahead.

Unknown speaker

This is Edward on for Charles Zhu. Thanks for taking our questions. Maybe just a question on the lorigerlimab/doletaxel combo trial that you're looking toward what sort of efficacy signal would you anticipate from the docetaxel control arm? And what sort of efficacy signal in the combo arm would give you confidence in the combination going forward? And that's both with respect to the control arm, but also with respect to the broader competitive landscape in the chemo-naive setting? Thank you.

Scott Koenig -- President and Chief Executive Officer

So, thanks for the questions, Edward. So, if you look at the historical data of the docetaxel control arms, in patients who have progressed on ARAD agents. RPFS has been consistent across the board with KEYNOTE-921 preside the phase 3b and TRITON3 of 8.3 months and median overall survival of 19 and 18.9, respectively, in 921 and TRITON3. So obviously, we would like to exceed those, certainly meet them, but certainly exceed them with the current study.

And obviously, longer is better in this case.

Unknown speaker

And then maybe just as a follow-up. Thanks for that. So what are your -- how are you seeing the sort of the competitive landscape shaping up in the chemo-naive setting again with PSMA4 we know it hits that big. So just kind of how you're thinking about it there and how you see the combo fitting in? Thank you.

Scott Koenig -- President and Chief Executive Officer

Well, I mean, clearly, the historical data on checkpoints in first of all, in prostate in general or prostate, certainly in that line of setting has been dismal. If you look at all the studies that have been conducted with pembrolizumab, including KEYLYNK-010, KEYNOTE-921, 991 and 641, they did not meet the expected outcomes, even though those are in different lines of therapy and different combinations. And as you know, from the recent data on CheckMate 650, with a combination of nivolumab and ipilimumab, the responses at nivolumab 3 were not good with a 9.3% overall response rate in the PSA 50 of 13.8%. So we think that we have an unusual molecule now as a bispecific to introduce a checkpoint molecule on top of standard therapy that could really change the course of this disease.

Operator

Thank you, and we'll move on to our next question. Our next question comes from the line of Yigal Nochomovitz with Citi. Your line is open. Please go ahead.

Ashiq Mubarack -- Citi -- Analyst

Jim, this is Ashiq Mubarack on for Yigal. Thanks for taking my questions. Maybe just asking another one on lorigerlimab. I think in the past, you alluded to the idea of lowering the lorigerlimab dose as a way to better manage AEs, but still have full target engagement I guess within that context, how are you thinking about dosing for the docetaxel cohort combo cohort you're planning on starting to very shortly? Are there any specific comments you can make on the lower girth dose in that combo?

Scott Koenig -- President and Chief Executive Officer

Yeah. Thank you very much for the question. And as you've noted before -- noted, we have a very robust data set from our dose escalation and expansion studies where in our dose escalation, we went up to 10 mg per kg without dose-limiting toxicity designed the study on expansion at 6 mg per kg on a Q3 weekly basis, in 127 patients, which we presented recently at the ASCO GU meeting. As we have pointed out previously, we get full occupancy of the PD-1 receptor and 1 mg per kg or higher and have historically shown in the dose escalation study of oral objective responses at 3 mg per kg and also at 6 mg per kg.

And we were seeing biomarker data of expansion both CD4 and CD8 at 1 mg per kg or higher, as well as the induction o ICOS in CD4 positive cells in the similar ranges. So we have a very wide window of opportunity to adjust treatment doses based on either combinations of drugs that may add on additional toxicities. So back to your initial question, we are starting at 6 mg per kg on a Q3 weekly basis, we had the opportunity to make adjustments. And we're also looking at potential future studies where we would study more than the 6 mg per kg dose in prostate cancer or potentially other tumors as well to get the best safety and efficacy profile for the drug.

Ashiq Mubarack -- Citi -- Analyst

Got it. If I could ask one more on vobra duo. I guess, we're still waiting for the TAMARACK before it ultimately makes an ultimate decision. But do you have any updated thoughts on how you're thinking about vobra duo as a monotherapy within prostate cancer? And maybe once we have clarity on the treatment paradigm maybe within the coming years.

Is there a possibility you would reconsider a pivotal trial with just the monotherapy? 

Scott Koenig -- President and Chief Executive Officer

Absolutely. I mean I think the current plan right now was just taking the realization of the time to enrollment where we made the amendments to the protocol of TAMARACK to remove the control group. The idea of this study right now is to execute as quickly as possible. So we were able to decide both on the safety and the activity what is the appropriate dose, either the 2 mg per kg Q4 or the 2.7 per kg Q4.

At that point, we would go into a -- our plan would be if we achieve the goals that we set for that study to go into a single-arm study moving forward in phase 3. And clearly, obviously, we're exploring the opportunity of combining it with other active agents, given as was discussed earlier, the combination with lorigerlimab, but we're also looking at other combinations potentially in the future? 

Ashiq Mubarack -- Citi -- Analyst

Got it very helpful. Thanks very much.

Operator

Thank you, and one moment for our next question. Our next question comes from the line of Kaveri Pohlman with BTIG. Your line is open. Please go ahead.

Kaveri Pohlman -- BTIG -- Analyst

Good evening. Thanks for the updates and congrats on the approval of Zynyz, for the phase 2 trial with docetaxel for lorigerlimab, can you provide any additional color on your development strategy? Can you maybe go for a registration-enabling trial if let's say the interim analysis looks positive given the big size of the study? 

Scott Koenig -- President and Chief Executive Officer

Yeah, that's an excellent question. And obviously, this is designed as a controlled study two-to-one, but given that this is only 150 patients, we do not expect that this study alone would be sufficient to meet the regulatory requirements for approval and would then base the successful study to expand that into a full phase 3 study, obviously, great overarching data trumps all. But right now, we don't intend that this study would serve as a trial for approval. 

Kaveri Pohlman -- BTIG -- Analyst

All right. That's helpful. And my second question is also on lorigerlimab. So based on KEYNOTE199 and CheckMate 650 trial results, it seems like CD1 CTLA-4 combination is more active than PD-1 alone.

Any thoughts on going into MSI high CRPC prostate cancer as monotherapy. Is it commercially attractive? And similarly, does the combination of PARP inhibitors make sense because CheckMate 650 trials showed better efficacy in HRD-positive patients.

Scott Koenig -- President and Chief Executive Officer

Excellent questions. So answering your question, obviously, responding and I agree with you based on the 199 study and the 650 study and the data that we have shown at ASCO GU in terms of a 26% objective response rate and over PSA 50 and all responding patients had actually greater than PSA 90 responses that we're in a very good position with this molecule to move it forward. With regard to MSI high, we have not set up a trial that's something we could consider. We certainly are looking at additional combinations and given that the treatment regimens for prostate cancer are evolving with the use of PARP inhibitors even in early line therapy without DNA repair defects we would consider additional combination studies in the future but have nothing right now that would incorporate this in our current studies.

Kaveri Pohlman -- BTIG -- Analyst

That's helpful. And maybe a last one on ADC. Since we're waiting for the updated data, but do you plan to show any mature data from the phase 1 trial, I believe, from the last readout in 2021? The sample size was decent for the patients who remained on treatment.

Scott Koenig -- President and Chief Executive Officer

Yeah. As we've noted on previous calls, we've had objective response rates in all the tumor types that we looked at and had historically considered actually studying additional patients after prostate cancer and melanoma. But because at that time, we did not have the cash runway to justify moving forward with that, we stopped that planned study. What I have said in previous calls is that we will provide data at times when we start or plan to initiate studies in additional indications and not until then.

Kaveri Pohlman -- BTIG -- Analyst

Got it. That's helpful. Thanks for taking my questions.

Scott Koenig -- President and Chief Executive Officer

I would also like -- let me just also add a comment from the earlier call that when I was discussing the treatment in the lorigerlimab study that I was talking about a single agent, not a single-arm study. So just to make sure that people were not confused by my statement.

Operator

Thank you and one moment for our next question. Our next question comes from the line of Stephen Willey with Stifel. Your line is open. Please go ahead.

Stephen Willey -- Stifel Financial Corp. -- Analyst

Yeah, good afternoon. Thanks for taking the questions. So I know you've done a couple of licensing deals here just to gain access to some novel linker payload technology. And I guess -- just wondering how that preclinical work is progressing, whether you're specifically focused on Topo1 derivatives, which is, I guess, kind of seemingly where the entire landscape is tilting right now.

And whether the added balance sheet strength now allows you to accelerate some of those development efforts going forward.

Scott Koenig -- President and Chief Executive Officer

Great question, Steve. And as you know, we've been very high on the opportunities that have been afforded us by these additional licensing deals with Synaffix originally having access to three linker toxin combinations for specific targets that we expanded before additional targets. So, seven and all. The preclinical development is going exceptionally well, as we've pointed out on an earlier call, we intend to file an IND in the fourth quarter this year with the first of these new agents.

And at this point, it's all forward on the next one. And again, without giving precision here, we're trying to target for late '24 for the second one as we're building additional molecules going forward. You should be assured that many of these molecules will include a topoisomerase linker toxin opportunity.

Stephen Willey -- Stifel Financial Corp. -- Analyst

Right, thanks for taking the question.

Operator

Thank you. [Operator instructions] One moment for our next question. Our next question comes from the line of Shay Finney with Barclays. Your line is open.

Please go ahead.

Unknown speaker

Hi. This is Shay on for Peter Lawson. Maybe first, just quickly on the vobra duo lorigerlimab combo. It sounds like you're still finding the right go-forward dose here, maybe that is not until 2024.

But could you give a little more color on what's built into there? Is that the room to go dose escalate higher? Or is this more about finding the right balance from a safety perspective? Thank you.

Scott Koenig -- President and Chief Executive Officer

Excellent question, Shay. And as noted before, we want to have the -- both combinations that give the safety and activity that we think that can be achieved in both an additive or a potential synergistic way. And so we could envision that these could be both in terms of, let's say, lorigerlimab, which we start at 6 mg per kg, we didn't expect to go higher on lorigerlimab. So the opportunity was to keep that or going lower.

And the same story with vobra as you know, we are exploring 2 and 2.7 in the current study. And given the potential here for synergy here on activity -- there is also an opportunity that you may be able to even lower the doses from the historical use of this drug at 3 mg per kg. And as you know, we started initially at 1 mg per kg in the first cohort going forward. So where we end up at this point, we don't know.

And until we have that precision, we won't go forward into the expansion studies.

Unknown speaker

That's helpful. And just the last quick question. Considering the removal of the control arm for vobra duo and prostate I guess how are you thinking now about your registration strategy moving forward?

Scott Koenig -- President and Chief Executive Officer

As you know, this is a changing landscape where we sit right now with Predictive coming on board recently. We want to see how far that use of that drug is and in various lines of therapy, we want to see other combinations that was brought up earlier on this call about the use of PARP inhibitors. So what we are right now going to look at the landscape when we've completed and selected the doses for vobra going forward, and we'll see what the appropriate control. One can envision a specific control or one of several that investigators get to choose from, but we're right not ready yet to make that decision.

Unknown speaker

Great. Thank you so much.

Operator

Thank you. I would like to turn the conference back over to Jim Karrels for any further or closing remarks.

Scott Koenig -- President and Chief Executive Officer

Thank you, operator. This is Scott Koenig. I want to thank everybody who participated in this call today. We appreciate and look forward to updating you on our future studies on the next call. 

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jim Karrels -- Vice President and Financial Officer

Scott Koenig -- President and Chief Executive Officer

Jonathan Chang -- SVB Securities -- Analyst

Unknown speaker

Ashiq Mubarack -- Citi -- Analyst

Kaveri Pohlman -- BTIG -- Analyst

Stephen Willey -- Stifel Financial Corp. -- Analyst

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