MacroGenics, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this is an annual filing, not a standalone fourth-quarter report. MacroGenics is a clinical-stage antibody therapeutics company whose first U.S. product, MARGENZA, launched in March 2021. The company reported one operating segment.
Financial results and liquidity
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total revenue | $77.4 million | $104.9 million | Down 26% |
| Collaboration and other revenue | $63.3 million | $97.8 million | Down $34.5 million |
| Net MARGENZA product revenue | $12.3 million | None | First year of product sales |
| Government agreement revenue | $1.8 million | $7.1 million | Down $5.3 million |
| Research and development expense | $214.6 million | $193.2 million | Up 11% |
| Selling, general and administrative expense | $63.0 million | $42.7 million | Up 48%, including MARGENZA launch costs |
| Operating loss | $(202.8) million | $(131.1) million | Loss widened |
| Net loss | $(202.1) million | $(129.7) million | Loss widened; basic and diluted loss per share was $(3.37), versus $(2.47) |
| Operating cash used | $(143.8) million | $(111.9) million | Cash use increased |
| Cash, cash equivalents and marketable securities | $243.6 million | $272.5 million | At December 31; 2021 includes $123.5 million cash and $120.1 million marketable securities |
Margins: MARGENZA product revenue less reported cost of product sales of $2.7 million implies an approximate 78.5% product gross margin. This is not necessarily a normalized margin: 2021 product costs included reserves and royalties, while some inventory sold had been expensed as R&D before FDA approval. Company-wide operating and net margins were approximately negative 262% and negative 261%, respectively.
Funding and obligations: Management expected available liquidity, together with anticipated and potential collaboration payments and product revenue, to fund operations through 2023, assuming programs and collaborations advance as planned. This estimate excludes potential costs of late-stage MGC018 development in metastatic castration-resistant prostate cancer (mCRPC) and further expansion of ongoing studies. The filing reports no debt balance; lease liabilities were $25.5 million, including $4.7 million current. Operating activities used $143.8 million, investing activities used $36.6 million, and financing activities provided $122.8 million in 2021. Net loss since inception had accumulated to $973.9 million.
Material changes and business developments
- MARGENZA generated $12.3 million in its first year of U.S. sales. The company warned that sales are unlikely to make it profitable; competition and final overall-survival results from the SOPHIA trial may limit adoption.
- Collaboration revenue fell mainly because of lower Incyte milestones and clinical-supply activity, the absence of a 2020 Boehringer Ingelheim payment, and lower revenue under the 2018 Zai Lab agreement. These declines were partly offset by $20.3 million recognized under the 2021 Zai Lab agreement and increased I-Mab and Incyte commercial-supply revenue.
- R&D spending increased, led by MGC018: program expense rose to $31.3 million from $12.8 million as dose expansion and related development progressed. SG&A rose with the MARGENZA launch, labor and legal expenses.
- Financing included approximately $98.2 million of net proceeds from the 2021 at-the-market offering and approximately $19.6 million from Zai Lab’s stock purchase. Outstanding common shares increased to 61.3 million at year-end from 56.2 million.
Outlook, pipeline, risks and contingencies
- MGC018: In the August 2021 data cut, 21 of 39 evaluable mCRPC patients had PSA reductions of at least 50%; four of 16 evaluable patients with measurable disease had partial responses, two confirmed. In NSCLC, four of 16 evaluable patients had unconfirmed partial responses. Across 86 patients, 50% experienced Grade 3 or higher treatment-related adverse events, and two Grade 5 events were reported, one of unknown cause and one due to COVID-19. Management planned further data and regulatory discussions in 2022 and described a potential registration-directed mCRPC study; these were plans, not approvals or established outcomes.
- MGD024: The company submitted an IND in late 2021, but FDA comments left trial initiation on hold pending alignment. Management believed it could address the comments. Flotetuzumab development was discontinued to prioritize MGD024.
- Program reprioritization: MacroGenics decided not to proceed with the next phase of the MAHOGANY gastric cancer trial, despite encouraging initial response data; Zai Lab also stopped enrolling its module. Management cited pipeline priorities and the competitive treatment landscape. Zai Lab separately discontinued enrollment in tebotelimab indications in its territory while evaluating other plans.
- Partnered programs: Incyte received an FDA Complete Response Letter for retifanlimab in anal cancer, with additional data requested; the European application was withdrawn. Provention Bio received a Complete Response Letter for teplizumab in 2021, citing pharmacokinetic comparability and product-quality matters rather than identified clinical efficacy or safety deficiencies; a resubmission was announced in February 2022.
- COVID-19 and execution risks: Management reported slowed clinical enrollment and expected potential near-term effects on study initiation, commercialization and enrollment. Other material risks include clinical failure or delay, manufacturing and supply-chain interruptions, dependence on collaborators and contract manufacturers, MARGENZA market uptake and reimbursement, competition, and the need for additional capital. Funding may require equity or debt financing, partnerships, or reductions to development programs.
- Legal matter: A securities class action concerning statements about the SOPHIA trial was dismissed with prejudice in September 2021, but the plaintiff appealed; the appeal was pending in the Fourth Circuit. The company had not accrued a liability and could not reasonably estimate a loss range. Management also reported ordinary-course legal and regulatory matters and did not expect them to materially adversely affect results, while acknowledging an unfavorable resolution could affect results or cash flows.
- Other notable disclosures: MARGENZA carries boxed warnings for left ventricular dysfunction and embryo-fetal toxicity. The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal control.
Investor verification points
- Track MARGENZA sales, net pricing and channel demand, and reconcile launch costs and product gross margin with the unusual pre-approval inventory accounting.
- Review the complete financial statements and subsequent filings for cash burn, collaboration receipts, share issuance and whether the stated runway assumptions remain valid, especially if MGC018 advances to late-stage testing.
- Verify FDA feedback and trial-start timing for MGD024, and assess whether MGC018 response and safety findings are confirmed in larger, later-stage studies.
- Monitor the appeal in the securities class action and developments in the retifanlimab and teplizumab regulatory programs.
- Assess the terms, performance and concentration of collaboration revenue: Incyte, Zai Lab and I-Mab each represented more than 10% of 2021 revenue.