MacroGenics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2018. MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based therapies. It had not generated product sales and reported continuing losses.
Financial results and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Total revenue | $20.8 million | $1.7 million | $44.3 million | $5.4 million |
| Research and development expense | $46.2 million | $41.0 million | $143.9 million | $108.2 million |
| General and administrative expense | $9.6 million | $8.4 million | $30.0 million | $24.2 million |
| Net loss | $34.0 million | $47.0 million | $126.8 million | $125.4 million |
| Basic and diluted loss per share | $0.81 | $1.28 | $3.13 | $3.50 |
- At September 30, cash and cash equivalents were $201.8 million and marketable securities were $58.3 million, totaling $260.1 million. Total current assets were $285.6 million; current liabilities were $48.0 million. The filing reports no debt balance.
- For the first nine months, operating cash use was $126.0 million, investing activities provided $11.6 million net, and financing provided $104.5 million, primarily from the April public offering. Cash declined $9.9 million from year-end 2017.
- Total assets were $355.4 million, total liabilities $72.7 million, and accumulated deficit $445.6 million at September 30.
Changes versus prior comparable periods
- Nine-month revenue increased $38.9 million, mainly from Incyte collaboration and manufacturing revenue, Roche research collaboration revenue, and the Provention agreements. Q3 collaboration and other revenue was $20.6 million versus $1.1 million a year earlier.
- Nine-month R&D expense rose $35.7 million, reflecting increased clinical-trial activity, manufacturing and development costs, and staffing. Spending increased for margetuximab, flotetuzumab, MGA012 and other programs, while some program costs declined.
- Nine-month operating cash use increased from $97.4 million to $126.0 million, driven by clinical activity, materials for the new manufacturing suite, and headcount.
- MacroGenics completed an underwritten offering in April 2018, selling 5.175 million shares in total and receiving approximately $103.0 million net. Shares outstanding were 42.2 million at September 30, compared with 36.9 million at December 31, 2017.
Outlook, collaborations and notable items
- Management estimated that cash, cash equivalents, marketable securities, and anticipated collaboration payments would fund operations into mid-2020, assuming programs and collaborations progress as planned. The company expected continued losses and higher R&D spending; no product-sales revenue was expected until a candidate receives approval and is commercialized.
- Incyte holds worldwide development and commercialization rights to MGA012. MacroGenics recognized $10.0 million in development milestones in Q3; after quarter-end, a further $5.0 million proof-of-concept milestone was achieved and was expected to be recognized in Q4. Potential future payments include development and commercial milestones and tiered royalties, contingent on success.
- Provention agreements transferred rights to MGD010 and the teplizumab asset. MacroGenics recognized $6.1 million of revenue in May for the transferred rights, with consideration represented by warrants valued using a model. Additional milestones and royalties depend on future development and commercialization.
- ASC 606 was adopted January 1, 2018 using the modified retrospective method. Adoption increased the opening accumulated deficit by $6.5 million. For the first nine months, it increased reported revenue by $0.4 million and reduced reported net loss by the same amount compared with the prior accounting basis.
- The company reported no material changes to previously disclosed risk factors. It identified clinical and regulatory outcomes, funding needs, collaboration milestones, competition, manufacturing investment recovery, and intellectual-property protection among forward-looking uncertainties. Management judged disclosure controls effective at the reasonable-assurance level; ERP implementation continued.
Important facts for investors to verify
- Whether the stated mid-2020 cash runway remains supportable as clinical, manufacturing, and staffing costs evolve and contingent collaboration payments are realized.
- Progress and costs in major clinical programs, particularly margetuximab, flotetuzumab, MGA012, and MGD013, and whether trial results or timelines change.
- Achievement and timing of Incyte, Servier, Roche, and Provention milestones, and the effect of revenue-recognition judgments and deferred revenue.
- Manufacturing-suite investment, operating cash use, and the extent to which Incyte manufacturing revenue offsets related costs.
- Effects of share issuance and stock-based compensation on dilution; also monitor adoption of lease accounting standard ASC 842, planned for 2019.