MacroGenics, Inc. — Q1 2018 Form 10-Q
Business context and reporting period
Biopharmaceutical company developing antibody-based therapeutics, primarily for cancer. The unaudited quarter ended March 31, 2018; comparisons are with Q1 2017. MacroGenics had no product sales and remained dependent on collaborations, government funding, and capital markets.
Financial highlights
| Metric | Q1 2018 | Q1 2017 or prior date |
|---|---|---|
| Total revenue | $4.7 million | $2.1 million |
| Research and development expense | $45.7 million | $32.8 million |
| General and administrative expense | $9.2 million | $7.5 million |
| Operating loss | $50.2 million | $38.2 million |
| Net loss | $49.5 million | $37.7 million |
| Basic and diluted loss per share | $1.34 | $1.08 |
| Cash used in operating activities | $31.3 million | $35.3 million |
| Cash, cash equivalents, and marketable securities | $260.1 million at March 31, 2018 | $305.1 million at December 31, 2017 |
Revenue was primarily collaboration revenue; the company reported no revenue from product sales. Operating expenses exceeded revenue substantially, and the filing does not present a meaningful product gross margin. No debt balance is reported in the presented balance sheet. Total liabilities were $78.8 million, including deferred revenue.
Material changes and notable items
- Revenue increased 128%, mainly from collaboration agreements, including $2.5 million recognized under the Incyte agreement. Government agreement revenue declined as less work was performed under the NIAID contract.
- R&D expense rose 39%, mainly due to margetuximab and MGA012 clinical activity. G&A expense increased 23%, primarily from consulting and costs related to the new ERP system.
- Operating cash use improved year over year, partly due to Roche’s $10.0 million upfront payment. Investing activities provided $19.4 million, including proceeds from securities maturities; property and equipment purchases were $14.5 million, primarily for facility and manufacturing-suite improvements.
- MacroGenics adopted ASC 606 on January 1, 2018. Adoption increased accumulated deficit by $6.5 million at transition and increased Q1 collaboration revenue by $0.1 million versus the prior accounting method. Deferred revenue was $25.9 million at March 31, 2018.
- On April 2, 2018, after quarter-end, the company completed a public offering of 5.175 million shares at $21.25 per share, receiving approximately $103.0 million net proceeds. It is not reflected in March 31 balances.
Outlook, risks, and contingencies
Management expected cash, cash equivalents and marketable securities at March 31, the April offering proceeds, and anticipated collaboration payments to fund operations into mid-2020, assuming programs and collaborations advance as planned. The company expected continued losses and increased R&D spending. Potential collaboration milestones and payments are contingent on development success and are not assured. Key risks include clinical and regulatory outcomes, commercialization, competition, intellectual property, financing needs, and the ability to recover investment in manufacturing capabilities.
Management stated that disclosure controls were effective at the reasonable assurance level. ERP implementation was ongoing, with new control processes requiring testing during 2018. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether clinical trial progress and spending—particularly for margetuximab and MGA012—remain consistent with management’s funding assumptions.
- Whether the April offering proceeds and cash burn support the stated runway into mid-2020.
- Timing and recognition of deferred collaboration revenue under ASC 606, and the conditions for potential Incyte, Roche, and Servier milestones and royalties.
- Progress, costs, and commercial utilization of the manufacturing facility, including the company’s ability to recover its investment.
- ERP implementation and internal-control testing outcomes during 2018.