MacroGenics, Inc.

Good afternoon. We will begin the Macrogenet 2022 Second Quarter Corporate Progress and Financial Results Conference call in just a moment. All participants in the 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 Chris James, Vice President of Investor Relations and Corporate Communications of Macrogenet.

Thank you, Operator. Good afternoon and welcome to Macrogenics' conference call to discuss our second quarter 2022 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. We 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 State Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated for these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our annual quarterly and current reports filed with the SEC. Any forward-looking statements represent our views only as of today and 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 Chief Executive Officer of Macrogenics.

Thank you, Chris. I'd like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key updates on our clinical programs as well as our restructuring plan intended to extend our cash runway. But before I do so, let me first turn the call to Jim Carrolls, our Chief Financial Officer, who will review our financial results.

Thank you, Scott. This afternoon, Macrogenics reported financial results for the quarter ended June 30, 2022, which highlight our financial position as well as our recent progress. As described in our release this afternoon, MacroGen's total revenue, consisting primarily of revenue from collaborative agreements, was $26 million for the quarter ended June 30, 2022, compared to total revenue of $30.8 million for the quarter ended June 30, 2021. Revenue for the quarter ended June 30, 2022, included Margenza net sales of $4.7 million, compared to $3.2 million for the quarter ended June 30, 2021. As a reminder, Margenza was launched in the U.S. in March 2021 in coordination with our commercial partner, Eversana. Our research and development expenses were $51.7 million for the quarter end of June 30, 2022, compared to $55.8 million for the quarter end of June 30, 2021. The decrease was primarily related to decreased reticulum manufacturing costs for Insight and decreased costs related to discontinued studies. These decreases were partially offset by increased development costs of discovery projects and preclinical molecules, increased clinical expenses related to loridurlamab, and increased costs related to MGCO18. Our selling general and administrative expenses were $13.7 million for the quarter ended June 30, 2022, compared to $15.2 million for the quarter ended June 30, 2021. The decrease was primarily related to decreased margin selling costs, as well as decreased consulting expenses. Our net loss was $41.3 million for the quarter ended June 30, 2022, compared to a net loss of $39.9 million for the quarter ended June 30, 2021. Our cash, cash equivalents, and marketable securities balance as of June 30, 2022 was $133.7 million, compared to $243.6 million as of December 31, 2021. The June 30, 2022 balance did not include $34.5 million subsequently received from collaboration partners in July 2022. Finally, In terms of our cash runway, we anticipate that our cash, cash equivalents, and markable securities balance as of June 30, 2022, the $34.5 million in payments subsequently received from collaboration partners, projected and anticipated payments from partners, product revenues, plus anticipated savings from our corporate restructuring plan announced today, which Scott will walk through momentarily, should extend our cash runway into 2024. This updated cash runway guidance now reflects anticipated expenditures related to the planned Phase 2 portion of the MVCO18 Phase 2-3 study in metastatic, castration-resistant prostate cancer, as well as macrogenics, other ongoing studies. And now I'll turn the call back to Scott.

Thank you, Jim. We made important progress in the second quarter with regard to multiple investigational molecules. Before I walk through progress we've made on our pipeline, let me update you on a macrogenics restructuring plan that we are announcing today. Listeners will recall that over the past several quarters, we have prioritized our pipeline of product candidates and discontinued certain studies to reduce our spending. We have initiated additional cost saving measures to extend our cash runway with the goal of delivering value creating data with our existing and anticipated financial resources. The additional decisive actions we have announced today should put macrogenics in a stronger position to execute on our prioritized programs. The cost-saving measures include an approximate 15% workforce reduction in full-time employees and closure of two of our satellite facilities, including a Brisbane, California-based research site and a smaller-scale, non-commercial GMP manufacturing site in Rockville, Maryland. We believe these measures will provide resources to advance our pipeline of innovative product candidates. The reduction in workforce announced today will be implemented immediately in some areas and completed over time as certain projects are wound down and sites are closed. The decision to reduce our workforce and close two sites was not taken lightly, and we are grateful to every Macrogenics employee who has helped advance our company. With these actions, we believe our updated cash runway should enable the delivery of interim data from the phase two portion of the MGC-018 prostate cancer study by the end of 2024, data from the phase one dose expansion of lorajirilumab by early 2023, and data from the dose escalation of MGD-024 in AML patients, as well as the execution of our other ongoing clinical and preclinical studies. In terms of our pipeline, since our last quarterly update, we completed enrollment of the Phase 1-2 dose expansion study of lorigerlumab, a bispecific DART molecule targeting PD-1 and CTLA-4 in advanced solid tumors. Also in July, we dosed the first patient in the phase one study of MGDO24, our next generation CD123 by CD3 dark molecule in patients with CD123 positive hematologic malignancies. In addition, we continue to dose patients in the dose escalation combination study of MGCO18, our B7H3-directed antibody drug conjugate with lorajerolamab in patients with advanced solid tumors. Also, I am happy to announce that our planned Phase 2-3 study of MGCO18 in patients with metastatic castration-resistant prostate cancer has a name, which is Tamarick. We continue to expect to start the Tamarix study by year end. In addition to these programs, we and our partners continue to progress our other clinical and preclinical candidates and expect to provide further updates as the data matures. With that backdrop, let me use our remaining time to walk through our updates on our portfolio of investigational clinical molecules, starting with MGCO18, our ADC designed to deliver DNA-alkylating duracomycin cytotoxic payload to tumors expressing B7H3. B7H3 is a member of the B7 family of molecules involved in immune regulation. MGCO18 was designed to take advantage of this antigen's broad expression across multiple cell tumor types. We continue to make progress as we operationalize the Tamarack study. After constructive interactions with the FDA and EMA, we provided key details about the design of the Tamarack study during the first quarter conference call. As a reminder, during the Phase II portion of the study, approximately 150 patients will be randomized one-to-one-to-one to receive either 2 mgs per kg or 2.7 mgs per kg of NGCO18 every four weeks in the experimental groups, or physician's choice of an antigen receptor access target or ARAT agent, such as abiridarone, enzalutamide, and apalutamide, not previously received in the control group. Following completion of the phase two portion of the study, an interim analysis of the data will be performed to further inform the phase three portion in which we plan to randomize additional patients one-to-one to receive either MGCO18 at the recommended dose or the ARAT agent for the control group. We continue to expect to start the Tamarack study by year end and anticipate delivery of interim data from the study by the end of 2024. Next, let me update you on loradrelumab. We continue to dose patients in the phase one dose escalation combination study of MGCO18 with loradrelumab in patients with advanced solid tumors, including renal cell carcinoma, pancreatic cancer, ovarian cancer, hepatocellular carcinoma, metastatic castration-resistant prostate cancer, and melanoma. Based on data from our preclinical studies, antitumor activity with MGCO18 may be enhanced by combination therapy with an anti-PD-1 agent without significant incremental toxicities. During the second quarter, we completed enrollment in a Phase I-II dose expansion study with Loragirilumab as monotherapy in cohorts of patients with microsatellite-stable colorectal cancer, MCRPC, melanoma, and checkpoint IE non-small cell lung cancer. We expect to provide a data update from this study by early 2023. Next up, I'll discuss our efforts to advance treatment of patients with CD123-positive hematological malignancies. MGDL24 is our next-generation bispecific CD123 by CD3 DART molecule that incorporates a CD3 component designed to minimize cytokine release syndrome while maintaining antitumor cytolytic activity and permitting intermittent dosing through a longer half-life. We recently dosed the first patient in a Phase I study of MGD024 in CD123-positive relapsed or refractory hematologic malignancies, including patients with acute myeloid leukemia and myelodysplastic syndromes. Inovatuzumab is an investigational FC-engineered B7H3-directed monoclonal antibody created using our FC optimization platform, being evaluated in cell tumors. In July, we issued a press release announcing the closure of the Phase II study, evaluating the investigational regimen of enoblotuzumab in combination with either retofanilamab, an anti-PD-1 monoclonal antibody, or tibotelamab, a PD-1 by LAG-3 bispecific DART molecule, in the first-line treatment of patients with recurrent or metastatic swing cell carcinoma of the head and neck. The decision to discontinue the study was based on an internal review of safety data and a risk-benefit analysis in frontline patients of squamous cell carcinoma of the head and neck. We don't believe this decision has any impact on our other B7H3-directed programs or our ability to develop a nobutuzumab in other indications. At ASCO in June, investigators from Johns Hopkins presented a poster with encouraging clinical activity from an ongoing Phase II study of anobletuzumab in patients with localized prostate cancer in a neoadjuvant setting. Anobletuzumab showed encouraging clinical activity with 66% of patients having PSA 0 at one-year post-op, which correlated with peripheral expansion of tumor-associated T cell clones. The published data from the ongoing investigative-sponsored trial to date provide rationale for further evaluation of the Novituzumab in prostate cancer. Next, I will provide an update of our product candidates being developed by our collaboration partners for which we retain certain economic rights. Our second investigational ADC, IMGC936, which targets ADAM9, a cell surface protein overexpressed in several solid tumor types, is being advanced under a co-development agreement with Immunogen. Under our 50-50 collaboration, Imidagent is leading clinical development and has indicated our plan to complete dose escalation in the phase one study evaluating IMGC936 in multiple cell tumors with initial data intensified before year end. Teplizumab is an anti-CD3 monoclonal antibodies that prevention bio acquired from us under an asset purchase agreement in 2018. Prevention is developing Toplizumab for the treatment of type 1 diabetes. On June 30th, Prevention announced the FDA has extended its review period by three months for the BLA for Toplizumab. The extended PDUFA target action date is November 17, 2022. Macrogenics is eligible to receive royalties on net sales of teplizumab if approved, in addition to milestone payments, including $60 million upon BLA approval in the United States. Retifalamab is an investigational anti-PD-1 MAD that we exclusively license to Insight Corporation. Macrogenics is eligible to receive royalties on net sales of retifalamab if approved, in addition to milestone payments. In July 2022, Macrogenics received $30 million in milestone payments from Insight as part of its collaboration agreement. Ritifamumab is currently being studied as monotherapy or in combination with other agents across multiple studies. In conclusion, we continue to believe 2022 will be another important year for Macrogenics. During the first half of the year, we initiated two clinical studies, and we expect to start Tamarack, a registration-directed study of MGCOAT in MCRPC by year end. We remain committed to developing and delivering life-changing medicines to cancer patients. We would be now happy to open the call for questions. Operator?

Okay, the floor is now open for your questions. To ask a question at this time, please press star 1 on your telephone keypad. At any point you would like to withdraw from the queue, please press star 1 again. You will be provided with the opportunity to ask one question and one further follow-up question. If you have any further questions, you may raise your hand and queue up again. We'll take a moment to render our roster. Okay. Our first question comes from John Miller from Evercore. Please go ahead.

Hi, guys. Thanks so much for taking the question. And congrats on restructuring and biting the bullet a little bit and extending the runway a little bit further. I'd love to get a sense of exactly what the new guidance is, though, precisely, because it seems like there were two different languages being used. Into 24, I think, was mentioned in the press release. But then also, Scott, you mentioned having runway through year-end 24 where the Tamarack data was expected. So, do you just remind me what the exact guidance is with the languages you're going with?

Yeah, thanks, John. I'll start, and I think Scott will probably finish. So the exact guidance is that our cash runway, which reflects not only the $134 million that we had at June 30, but the additional $34.5 million that we received subsequently in the month of July, plus product revenues and other anticipated payments from partners, pushes our cash runway into 2024.

Yeah, and just further on, John, obviously, we can get more precision on this when the study starts and how quickly the patients get enrolled. But given where we are right now in that process, We are confident that we'll be able to start this study before the end of the year, get it enrolled during 23, and have the readout by the end of the year. So we think that, you know, without exact precision right now, because in addition to the milestone payments, which obviously... We can never guarantee we have a considerable amount of BD activity ongoing, which could obviously extend runway further. We should be able to provide further precision in the future with regard to how far into 24 that goes. All right.

Thanks very much. And one, maybe one or two more, if I may. I'm curious now at this point about Innobly versus 018 overlap. And I think maybe it made sense to have them separate before, but I'd love in light of the prioritization for you to tell me a little bit about how you're feeling about having both of these, having studies ongoing for both these programs. Are they differentiated enough to justify keeping both active, especially as 018 sort of advances to later stage trials? And then, you know, not exactly the same, obviously, but a little bit related. Should we expect similar dynamics for O2-4 as we had from flotacuzumab. So should we be looking for the same sorts of signals in terms of patients, the populations, refractory versus relapsed patients, that sort of thing as we look forward to early data there. Thanks.

Great questions. So we were very excited about the update that the Johns Hopkins Group was able to provide at ASCO. As you know, that received a lot of positive feedback in a neoadjuvant setting, which, as you know, is either not or very little efforts are being conducted there in that early setting. Despite the fact of the head and neck setback with regard to the stopping the study for Novotuzumab, the safety profile for Novotuzumab in the early EOF and prostate setting was excellent. And based on both the encouraging data, the biomarker data, and the patient's responses, the group that conducted that study and an expanded group are very enthusiastic to look at a very early setting for prostate cancer and inoblituzumab. As you know, our current efforts right now with regard to MGCO18 is in the later line metastatic setting. And so we're, again, focused on both patients that have been experienced with ARAT agents as well as taxane agents. Still opportunities to move up the line, but given that you need to have a very clean drug for treating patients with localized disease, we think inoblutuzumab is better set up for pursuing that indication. Now, I should also indicate that we are looking at other possibilities of anovotuzumab beyond that of early-stage prostate cancer. And of course, as you know, we have the ongoing combination studies of NGCO18 and lorajerumab in seven different tumor types, and based on the results of those studies, can guide us in other solid tumor indications. going forward with MGCO18. And now with regard to the question that you had about the MGDO24 with respect to Clotiduzumab and its use in refractory disease, as we've outlined at the last ASH meeting, we are very encouraged that the use of MGD-024, both based on the better profile in reducing cytokine release, as well as intermittent dosings, will allow a much broader application of MGD-024 beyond what we were able to do with Clotiduzumab, both in late line refractory patients, as well as patients with early disease. In particular, we are extremely encouraged by the combination studies we had with MGDO24 and other standard therapies and look to using this quite broadly after we initially do the dose escalation studies. in patients with relapsed refractory disease. We're also looking at the opportunity of MGDO24 beyond AML, using it in tumor settings where CD123 is overexpressed. including myelodysplastic syndrome and other indications. So there is certainly a differentiation and expansion of our intended use for MGDO24, which provided some of the rationale of why we stopped further pursuing platitudes of MAP development.

Our next question comes from David Dye. From SMBC.

Hey, great. Thanks for taking my questions. So I have a couple of questions as well. So first question is just around MGC018. So when we look at the phase one dose expansion study that was presented at ESMO last year, we saw that about 30% of patients were dose reduced and 55% of the MCRPC patients were dose interrupted. So could you provide some color on what was the lowest dose level that was dose-reduced, and how long were the duration of the dose interruption for these patients? And then how should we think about the potential read-through to the reduced dose regimen for the Tamarack trial, the Phase II-III Tamarack trial?

David, thank you very much for that question. And obviously, we've been spending a lot of time of analyzing the data that we extracted from that study, not only in patients with prostate cancer, but those that we tested in other solid tumor indications. Again, just to refresh everyone's memory, the expansion cohorts for these studies started out with a 3 mcg per kg dosing on a Q3 week level. It turns out the majority of patients had either dose reductions or holding doses with longer periods before the patients were restarted and dosing largely due to side effect profiles. We took this into account. We looked at the full data set from all patients treated with MGCO18 and identified the ultimate dose that every patient was ultimately treated with during their course of therapy and came out with an average amount of drug that was delivered to those patients. sized up that result with their clinical responses, both in terms of side effect profiles as well as responsiveness. And by doing this, we were highlighting particular side effects that seemed most problematic to the continued treatment of patients. Ones that we highlighted before was hand-foot syndrome, where while the majority of patients had only grade one or grade two side effect profiles, very few grade threes. It turned out a significant number of patients who had grade twos, which was manifested by the appearance of pain in those patients, caused many of those patients to stop continuing treatment. And so when we did an analysis, of the actual dose that was both effective in inducing responsiveness as well as reducing the incidence and severity of side effects, we saw a difference that fell in that range that we ultimately decided on treating these patients. two mgs per kig on a Q4 weekly basis, up to 2.7 mgs per kig on a Q4 weekly basis. So we've boxed in that dosing range to ultimately move forward in this now Phase II component of the Phase II-III study.

Our next question comes from Steven Wiley from Stiefel.

Yeah, good afternoon. Thanks for taking the questions. Maybe just with respect to O2-4, is there anything that you can say about, I guess, how you're dosing this drug during cycle one? Is it just a flat dose that you're administering? Is there going to be some attempt to migrate over to some kind of titration regimen? And if you could speak to the premedication that you're using as well, that'd be helpful. And then just have a quick follow-up on Tamarac.

Yeah, thanks, Steve. You know, based on interactions with the FDA, we started out with Mabel dosing of this drug. This was a requirement. And as you know, we spent a lot of time with Clotiduzumab, ultimately getting a dose escalation and A increase, particularly on the 1st week, we ultimately believe on the dosing that this can be based on. Either weight or body weight or on a flat dosing. going forward. So, you know, we'll have to see how that goes. But particularly at the lower doses, we expect those to move up quite quickly, but we'll have to see as we move up the line.

Okay. And then just with respect to Tamarack, can you I guess, speak to the number of sites that you're hoping to enroll these 150 patients across. And should we just expect that interim analysis of, I guess, of efficacy data? What is the trigger for the presentation of that interim data on the efficacy side? Is it going to be based upon some threshold number of radiographic progression events

if there's i guess anything that you can say to that that'd be uh that'd be helpful so with regards to number sites so we haven't come up with a final number we're obviously starting um given the you know the regulatory timing of things uh in u.s sites um our plan is to have this as a a worldwide uh study in um u.s europe and asia um So I can't come up with a specific number that we will ultimately end up with. Obviously, it will be a large number of double-digit initially as we do the phase two studies, and the intent would be to expand as we move over from phase two to phase three. We hope by the time we start the enrollment at the end of the year, we'll be able to get a little bit more precision on site engagement and plans for expeditions, especially when we get feedback from the European sites With regard to the analysis of the data, we have predefined analysis defined in our protocol that is being given to the DSMB. Again, we're not at liberty right now to disclose what those specific, which will include obviously response rates, We obviously have also had the ability to amend that at any particular time during that course of that Phase II study. There will be a futility analysis that is incorporated in this during the course of enrollment. Again, the plan is to enroll 150 patients in those three groups, the two experimental groups and one control group.

Thanks for taking the questions.

Thanks, Steve.

Our next question comes from Epser Daraut from BMO Capital Markets.

Great. Thanks for taking the question. Just, again, on MGC 018, just wondered if you could speak to a little bit about perhaps the population of patients that you'll look at in the metastatic cancer-resistant prostate cancer cohort. Should we think about it similar to what, you know, you looked at in the phase one, two? And then maybe, you know, if you can, again, speak to any appropriate benchmarks we should think about now for that study in terms of, you know, how to kind of compare responses that we'll see in our interim analysis. Thank you.

And so thanks so much for that question or sets of questions with regards to Tamarack. So again, very similar to what we had enrolled in the expansion cohort of the 40 patients. These will be metastatic castration-resistant prostate patients that had one prior angioreceptor targeting agent. They can have, they will have one prior docetaxel regimen and we will also allow up to one prior cabazitaxel regimen, obviously an optional but no other prior chemotherapy. The patient will be stratified based on visceral disease, whether they've had cabotetaxel, and also regional analysis of the drug. Again, I think the benchmarks differ depending on lines of therapy. And I mean, you're very well aware that that has a wide range of baseline responses of overall response rates in the two to three months to up to four months of baseline, depending on the previous lines of therapy. For that reason and obviously that the changing landscape of what these patients are now receiving and obviously introduction of new agents into the metastatic market, we have included a control group so we'd be able to do a very good job of benchmarking to the current status of patients.

Our next question comes from Jim Masaga from FactSet. Your line is open. Please go ahead.

We can skip to the next one.

Our next question comes from Jonathan Chang from SVB Securities.

Hi, guys. Thanks for taking the question. This is Faisal Khurshid on for Jonathan. I wanted to ask for the MGC018 plus lorajirulumab combination. Can you remind us the study design here, in particular what dose of MGC018 is being used, and then also when we might be able to see data for that combination? Thank you.

Yeah, thanks very much. So the starting dose for MGCO18 is one mix per Kig on a, I think it's a Q4 weekly basis now. And lorajelumab is at six mix per Kig on the same dosing regimen. The plan would be to dose escalate the MGCO18. We're gonna, the expected next dose, would be two mgs per kg, and we have other interval dosing. There can be modifications based on side effect profiles, et cetera, but right now we're targeting the lorigerumad dose we'd like to take forward, both as monotherapy and combination, and slowly titrate up the MGCO18 dosing.

Our next question comes from Charles Zhu from Guggenheim.

Hi, this is Edward for Charles. Thanks for taking our question. Maybe regarding MGC018, apologies if I missed this, but are you planning to present some of the expansion data that you had on the old dosing regimen? I think you talked about last time about maybe later this year having some prostate and melanoma data.

Yeah, so thanks very much for the question. At the time we discussed this, we were intending to add an expansion cohort for melanoma. And as you've heard today with regard to the prioritization of programs, one of the things we said we're going to hold off on was adding additional patients to the melanoma cohort at this time, despite encouraging data that we had at scene. So our plans right now on updates on this program, it will depend on when we are going to initiate additional studies with other indications. And at that time, we'd update everyone regarding our experience with these other indications. As for the prostate, we have our feedback from the key experts, from the regulators, and the plan going forward with regard to the Tamarack study. So right now, you know, further updates on this would come in some sort of scientific publication at a future date.

Great. Thank you.

Our final question comes from Peter Lawson from Barclays.

Hi, this is Cheyenne for Peter Lawson. Thanks for taking the question. With the restructuring, could you help us how we should be thinking about the effects for the remainder of 2022 and through 2023? Thank you.

Yeah, we're not providing specific guidance today, Shay, with regard to the expenses. What we are providing, as you've heard it say, is the cash runway. I'll note that the anticipated savings from headcount on a steady-state basis should be approximately $10 million annually. Now, that's not this year, obviously, because we're more than halfway through the year, but, you know, in full, the full amount of the savings from the approximate 15% of reduction in force.

Great. Thank you.

All right. We do have a final question from Jem Masaga from FACSEP. Your line is open. Please go ahead. At this time, I would now like to turn the call over to Dr. Scott Canning for closing remarks.

Thank you, everyone, for joining our call today. We look forward to updating you on the progress of our various programs in the near future. We hope you have a good evening.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for your participation. You may now disconnect.