MacroGenics, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also reports unaudited fourth-quarter results. MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based therapies, primarily for cancer. It had no approved products and generated no product-sale revenue.
Financial performance and position
| Metric | FY 2019 | FY 2018 | Change |
|---|---|---|---|
| Total revenue | $64.2 million | $60.1 million | Up 7% |
| Research and development expense | $195.3 million | $190.8 million | Up 2% |
| General and administrative expense | $46.1 million | $40.5 million | Up 14% |
| Operating loss | $177.2 million | $171.2 million | Loss widened |
| Net loss | $151.8 million | $171.5 million | Loss narrowed |
| Basic and diluted net loss per share | $3.16 | $4.19 | Loss per share narrowed |
| Operating cash flow | $(134.3) million | $(153.2) million | Use decreased |
Revenue was primarily collaboration and other agreement revenue ($62.0 million); government agreement revenue was $2.2 million. Operating margin was approximately negative 276% of revenue. No gross profit margin is presented; the filing does not provide a meaningful product-sales margin because there were no product sales.
Fourth quarter: Revenue was $25.2 million and net loss was $30.4 million, or $0.62 per share, versus revenue of $15.8 million and net loss of $44.6 million, or $1.06 per share, in Q4 2018.
At year-end, cash, cash equivalents and marketable securities totaled $215.8 million, down from $232.9 million. Total assets were $312.5 million and stockholders’ equity was $230.6 million. Current assets were $239.8 million against current liabilities of $45.2 million. The filing lists no borrowings; lease liabilities totaled $30.6 million. Future minimum operating lease payments were $42.3 million.
Investing cash outflow was $79.4 million, primarily reflecting purchases of marketable securities; financing provided $120.0 million, mainly from a $118.7 million net public-offering proceeds. Cash and cash equivalents decreased by $93.7 million. The company reported an accumulated deficit of $642.1 million.
Material changes and unusual items
- Net loss improved year over year despite a larger operating loss, primarily because other income was $25.4 million in 2019 versus a $0.2 million expense in 2018. The 2019 amount included a $20.1 million gain from revaluation of Provention warrants, which were exercised and the resulting shares sold during 2019.
- R&D increased modestly, with higher costs for MGD013, enoblituzumab and MGC018 partly offset by lower margetuximab and MGA012 costs. G&A rose mainly due to market research and commercial-preparation consulting.
- The company issued 6.325 million shares in a February 2019 offering for net proceeds of approximately $118.7 million, increasing outstanding shares and diluting existing holders.
- Revenue remained concentrated among collaborators: Incyte contributed 35%, Zai Lab 29% and Servier 18% of 2019 revenue. Servier’s agreement termination became effective January 15, 2020, returning worldwide flotetuzumab rights to MacroGenics. Roche’s collaboration ended in November 2019.
Outlook, pipeline, risks and contingencies
- Management estimated that year-end liquidity, together with anticipated and potential collaboration payments, would fund operations into 2021 under its operating assumptions; it said program prioritization and resource realignment were intended to extend the runway into 2022. The company expected operating expenses to continue increasing and may need additional funding.
- MacroGenics submitted a BLA for margetuximab in December 2019; FDA accepted it for review in February 2020. Management anticipated standard review, a PDUFA date by year-end 2020 and likely an advisory committee meeting. These are expectations, not approval outcomes.
- In SOPHIA, margetuximab plus chemotherapy improved median progression-free survival in the overall population versus trastuzumab plus chemotherapy: 5.8 versus 4.9 months (HR 0.76; p=0.033). The second interim overall-survival analysis favored margetuximab but was not statistically significant: 21.6 versus 19.8 months (HR 0.89; nominal p=0.326). Final OS analysis was projected for the second half of 2020. Exploratory genetic-subgroup findings are not definitive.
- Other pipeline milestones included planned initial MAHOGANY data in the second half of 2020, and anticipated 2020 dose-escalation completion for MGC018 and MGD019. Flotetuzumab’s potential U.S. registration path remained subject to FDA discussions.
- Key risks include clinical and regulatory failure or delay, uncertain margetuximab overall-survival results, competition and reimbursement pressure, manufacturing and supply constraints, dependence on collaborators, patent challenges, and the need for additional capital. The filing also flagged possible disruption to trials from the 2020 coronavirus outbreak.
- A securities class action filed in September 2019 alleged misleading statements concerning SOPHIA. The company intended to defend the case, could not estimate a loss range and recorded no liability. Management reported effective disclosure controls and internal control over financial reporting; the auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- FDA review progress, advisory committee outcome and eventual decision on the margetuximab BLA.
- Final SOPHIA overall-survival results and their effect on regulatory and commercial prospects.
- Actual cash burn, collaboration receipts and whether management’s stated runway assumptions remain achievable.
- Clinical results and development timelines for MAHOGANY, flotetuzumab, MGD013, MGC018 and MGD019.
- Developments in the securities class action, collaborator commitments, and any additional financing or share issuance.