MacroGenics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based cancer therapies and commercializing MARGENZA with a partner.
Financial performance and position
Amounts below are in millions of dollars, except per-share data. Comparisons are with the corresponding 2021 periods.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $41.7 | $15.7 | $78.8 | $63.3 |
| Operating loss | $(25.0) | $(53.0) | $(133.4) | $(144.6) |
| Net loss | $(24.8) | $(52.9) | $(132.6) | $(144.1) |
| Net loss per share | $(0.40) | $(0.86) | $(2.16) | $(2.42) |
| Research and development expense | $48.2 | $49.8 | $161.4 | $158.7 |
| Selling, general and administrative expense | $15.4 | $17.2 | $45.3 | $47.4 |
- Q3 revenue rose 166%; nine-month revenue rose 24%. The Q3 increase was primarily driven by a $30.0 million Incyte milestone. Nine-month growth also reflected Incyte and Zai Lab milestones, higher MARGENZA sales, and new Incyte manufacturing revenue. Collaboration and milestone revenue can vary substantially by period.
- MARGENZA net sales were $4.4 million in Q3 and $12.6 million for nine months, up 22% and 64%, respectively. The filing does not provide a clear consolidated gross-margin figure; product cost included inventory reserves, royalties, and fill-finish costs.
- Nine-month operating cash use was $116.3 million, versus $89.5 million in 2021. Investing activities provided $76.5 million, while financing provided $0.3 million; the 2021 financing inflow included $117.8 million from stock offerings. Cash and cash equivalents declined $39.5 million to $84.0 million.
- At September 30, cash, cash equivalents, and marketable securities totaled $123.6 million, versus $243.6 million at December 31, 2021. Total assets were $195.3 million and stockholders’ equity was $123.0 million. The balance sheet reports no borrowings; lease liabilities totaled $22.0 million. Current liabilities were $50.0 million.
Material changes and notable items
- R&D spending was broadly stable for the first nine months, increasing 2%. Higher MGC018, lorigerlimab, MGD024, and discovery/preclinical spending was offset by lower spending on flotetuzumab, retifanlimab, tebotelimab, and other programs.
- In August, the company announced a restructuring and approximately 15% workforce reduction to focus on lead assets; expected savings are uncertain and one-time employee termination costs are expected.
- Incyte paid $30.0 million in retifanlimab milestones in July, recognized as Q3 revenue. Retifanlimab’s application for anal cancer had received an FDA Complete Response Letter; Incyte is pursuing other development programs.
- In August, Zai Lab and MacroGenics discontinued R&D on the 2021 agreement’s Lead Program. I-Mab notified MacroGenics it intends to terminate the enoblituzumab license agreement effective February 25, 2023. Zai Lab also discontinued tebotelimab development in certain territory indications and is evaluating future plans.
- After quarter-end, Gilead paid MacroGenics $60.0 million under an October 14 option and collaboration agreement for MGD024 and up to two additional research programs. Potential milestone payments are up to $1.7 billion, plus royalties; these contingent amounts are not guaranteed revenue.
Outlook, risks, and contingencies
- Management said September 30 liquidity, the subsequent Gilead payment, anticipated or potential collaboration payments, product revenue, and restructuring savings were expected to fund operations into mid-2024. The financial statements also state management believes resources are sufficient for at least 12 months from the filing date. The outlook depends on uncertain funding, collaboration, product, and cost-saving assumptions.
- Planned spending includes the Phase 2 portion of the MGC018 TAMARACK study and other ongoing clinical and preclinical programs. The company may need to seek additional capital; if funding or collaboration revenue is unavailable, it may delay, reduce, or eliminate programs or further reduce expenses.
- Key risks include clinical-trial safety, efficacy, enrollment, and timing; regulatory approval uncertainty; COVID-19 and supply-chain disruption; inflation, higher interest rates and geopolitical conditions; and whether restructuring delivers expected savings. MARGENZA carries warnings including left ventricular dysfunction and embryo-fetal toxicity.
- A securities class action concerning statements about the SOPHIA trial was dismissed with prejudice in 2021, but the plaintiff appealed; the appeal was pending in the Fourth Circuit. The company had not accrued a loss and said the outcome could not be reasonably estimated.
Investor facts to verify
- Whether the Gilead agreement’s options, milestones, and research programs progress, and how the $60.0 million upfront payment is recognized and used.
- Actual cash burn, collaboration receipts, MARGENZA sales, and remaining liquidity relative to the mid-2024 funding outlook.
- Clinical and regulatory updates for MGC018, MGD024, lorigerlimab, and other priority programs, including trial timing and safety findings.
- Whether the restructuring achieves expected savings without impairing clinical, manufacturing, or commercial execution.
- Effects of I-Mab’s planned termination and the discontinued Zai Lab Lead Program on future collaboration revenue and development plans.