MacroGenics, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018, including unaudited fourth-quarter results. The company is a clinical-stage biopharmaceutical developer of antibody-based cancer therapies; it had no approved products and no product-sale revenue.
Financial performance and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Total revenue | $60.1 million | $157.7 million |
| Research and development expense | $190.8 million | $147.2 million |
| General and administrative expense | $40.5 million | $32.7 million |
| Operating loss | $171.2 million | $22.1 million |
| Net loss | $171.5 million | $19.6 million |
| Net loss per share, basic and diluted | $4.19 | $0.54 |
| Operating cash flow | $(153.2) million | $14.4 million |
| Cash, cash equivalents and marketable securities, year-end | $232.9 million | $305.1 million |
| Total assets / total liabilities, year-end | $332.1 million / $89.3 million | $373.9 million / $74.6 million |
Revenue was primarily collaboration and government-agreement revenue, not product sales. The filing reports no debt balance. The company reported an accumulated deficit of $490.3 million and expects continued losses. No conventional product gross margin is provided; the business remained pre-commercial.
Fourth-quarter 2018 revenue was $15.8 million and net loss was $44.6 million, or $1.06 per share. Fourth-quarter 2017 revenue was $152.4 million and net income was $105.7 million, or $2.87 per basic share; the comparison was substantially affected by the Incyte upfront payment recognized in 2017.
Material changes versus prior period
- FY revenue fell 62% year over year, largely because 2017 included recognition of Incyte’s $150.0 million upfront license payment. 2018 included $15.0 million of Incyte development milestones, $22.2 million from Incyte clinical-supply services, and other collaboration revenue.
- R&D expense rose 30% to $190.8 million, mainly reflecting margetuximab Phase 3 and manufacturing costs, plus expanded flotetuzumab, MGD009, MGA012 and MGD013 activities. G&A increased 24%.
- Operating cash flow shifted from $14.4 million provided in 2017 to $153.2 million used in 2018. The prior year benefited from the Incyte upfront payment.
- Year-end cash and investments declined $72.3 million. Financing included approximately $103.3 million net proceeds from an April 2018 stock offering.
- Adoption of ASC 606 increased FY 2018 revenue by $0.5 million versus the prior accounting basis and reduced opening accumulated equity by $6.5 million.
Outlook, management commentary and risks
- Management expected year-end 2018 cash and investments, the net proceeds from a February 2019 equity offering, and anticipated collaboration receipts to fund operations into 2021, assuming programs and collaborations progress as planned. The February 2019 offering raised $118.5 million net.
- In February 2019, MacroGenics reported that the Phase 3 SOPHIA trial of margetuximab met its first primary endpoint: progression-free survival risk reduction was 24% versus trastuzumab plus chemotherapy (HR 0.76; p=0.033). Overall-survival follow-up remained ongoing; the company anticipated a BLA submission in the second half of 2019 and expected OS results in 2020.
- The company planned additional studies, including a registration-directed margetuximab combination study in gastric cancer and a Phase 2 enoblituzumab study. It expected MGD013 data in 2019 and further flotetuzumab data in 2019.
- The FDA’s partial clinical hold on MGD009 studies, imposed in December 2018 after hepatic adverse events, was lifted in January 2019. The events were described as short-lived; safety and continued development remain relevant monitoring points.
- Servier declined its option for MGD007 in late 2018. Incyte holds global development and commercialization rights to MGA012; MacroGenics retains combination-development rights and potential manufacturing participation.
- Key risks include clinical failure or delays, regulatory uncertainty, adverse effects, competition and biosimilars, reliance on collaborators and contract manufacturers, manufacturing scale-up and commercialization costs, intellectual-property disputes, and the need for additional capital. Revenue was concentrated: Incyte represented 68% of FY 2018 revenue.
- The company reported no material legal proceedings. It reported effective disclosure controls and internal control over financial reporting; the ERP system was phased in during 2018.
Investor facts to verify
- Final SOPHIA data, especially the sequential overall-survival endpoint, and the FDA’s view of the PFS data and planned BLA.
- Cash runway against actual operating cash use, the use of February 2019 offering proceeds, and timing/conditions of expected collaboration payments.
- Updated safety, enrollment and efficacy data for MGD009, flotetuzumab and other clinical programs, including whether trial plans or timelines changed.
- Collaboration economics and execution: Incyte milestones and royalties, Zai Lab’s regional program, and any further partner decisions.
- Potential dilution from equity financing, and the ability to transition manufacturing capacity and build commercialization capabilities.