MacroGenics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. MacroGenics is a clinical-stage biopharmaceutical company and reported no product sales to date; revenue is primarily from collaboration and government agreements.
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $18.3 million | $18.7 million | $52.2 million | $39.0 million |
| Research and development | $44.7 million | $44.9 million | $150.9 million | $143.4 million |
| General and administrative | $9.7 million | $11.8 million | $30.2 million | $34.2 million |
| Operating loss | $36.1 million | $37.9 million | $128.9 million | $138.5 million |
| Net loss | $36.0 million | $44.6 million | $127.7 million | $121.4 million |
| Net loss per share | $0.66 | $0.91 | $2.49 | $2.54 |
Gross margin is not presented; the company had no product sales. Revenue increased 34% for the nine-month period, while R&D expense rose 5%. Q3 revenue declined 3% year over year.
Cash, liquidity and capitalization
- At September 30, cash and cash equivalents were $201.6 million and marketable securities were $79.0 million, totaling $280.7 million. Current assets were $310.1 million versus current liabilities of $50.1 million.
- Operating cash use was $106.4 million for the first nine months, compared with $96.2 million in 2019. Investing activities provided $8.3 million; financing activities provided $173.2 million, mainly from the at-the-market stock offering.
- The company reported $28.5 million of lease liabilities; the balance sheet lists no borrowings or other debt financing.
- Shareholders’ equity was $291.6 million and accumulated deficit was $769.7 million. The company sold 6.6 million shares through its ATM offering for net proceeds of approximately $170.5 million during the nine months.
Material changes and notable items
- Nine-month revenue growth reflected a $15.0 million Incyte development milestone, a $12.0 million payment from Boehringer Ingelheim to retain rights to two DART molecules, increased NIAID contract revenue, and Zai Lab milestones and manufacturing revenue. The Incyte milestone was received in October 2020.
- Q3 revenue included the $15.0 million Incyte milestone, which offset lower revenue from several prior collaboration upfront payments and reduced Incyte clinical-supply activity. Servier had given notice of its intent to terminate the flotetuzumab agreement effective January 15, 2020.
- R&D spending increased year to date, particularly for flotetuzumab, retifanlimab and tebotelimab, partly offset by lower margetuximab costs and reduced spending on discontinued programs. Lower G&A costs reflected reduced external spending, including consulting.
- Q3 net loss improved year over year, while nine-month net loss increased. Other income was $1.2 million for the 2020 nine-month period versus $17.1 million in 2019, partly reflecting the prior-year revaluation of Provention warrants.
Outlook, risks and contingencies
- Management expected cash, cash equivalents and marketable securities at September 30, the subsequent $15.0 million Incyte receipt, and anticipated or potential collaboration payments to fund operations into 2023, assuming programs and collaborations progress as planned.
- Margetuximab’s BLA had a December 18, 2020 PDUFA target action date. If approved, the company expected to rely on third parties for sales, marketing, market access, distribution and logistics, and might pursue a commercialization collaboration.
- COVID-19 had slowed clinical-trial enrollment. The company delayed a planned enoblituzumab Phase 2 study until Q1 2021 and stopped enrollment in an ex-U.S. flotetuzumab/retifanlimab study, with plans to resume and activate U.S. sites in the future. Further trial, supply-chain or regulatory delays remained possible.
- A securities class action alleges misleading statements concerning the SOPHIA trial. The company intends to defend the case; it could not reasonably estimate any loss and recorded no liability.
- Management reported effective disclosure controls. The filing states that COVID-19 and the company’s funding needs could adversely affect operations and that additional capital may not be available on acceptable terms.
Investor facts to verify
- Whether the margetuximab BLA received FDA action by the stated December 18, 2020 target date, and the resulting commercialization plans.
- Clinical-trial progress and enrollment, particularly for programs affected by COVID-19 and the delayed or paused studies.
- Future cash burn, collaboration receipts and the assumptions underlying the stated runway into 2023.
- Progress and potential financial exposure in the SOPHIA-related securities litigation.
- Further ATM issuance, share dilution and milestone or royalty eligibility under collaboration agreements.