MacroGenics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparative period is Q1 2021. MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based cancer therapies and commercializing MARGENZA with a partner.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $11.1 million | $16.9 million | Down 34% |
| Operating expenses | $77.7 million | $68.2 million | Up 14% |
| Operating loss | $66.6 million | $51.3 million | Loss increased |
| Net loss | $66.4 million | $51.3 million | Loss increased |
| Basic and diluted loss per share | $1.08 | $0.90 | Loss per share increased |
| Operating cash used | $57.7 million | $29.0 million | Cash use increased |
Revenue comprised $7.1 million from collaborations and other agreements, $3.6 million of net product revenue, and $0.4 million from government agreements. MARGENZA revenue rose $2.7 million year over year. Reported product gross margin was approximately 98.7%, but product costs were low partly because the product sold had been expensed to research and development before FDA approval; the company expects this benefit to continue while that inventory is sold.
Research and development expense was $61.4 million, up $8.3 million, primarily reflecting higher MGC018 development, manufacturing and trial costs and increased discovery/preclinical work. MGC018 expense rose to $16.5 million from $4.7 million. Selling, general and administrative expense was $16.3 million, up $1.2 million, partly due to MARGENZA selling costs.
At March 31, cash and cash equivalents were $47.3 million and marketable securities were $136.7 million, totaling $184.0 million, versus $243.6 million at December 31, 2021. Current assets were $218.2 million and current liabilities were $67.1 million. Total liabilities were $93.2 million, including $24.3 million of lease liabilities; the filing does not report borrowings or other financial debt. Cash and cash equivalents fell $76.1 million in the quarter. Investing activities used $18.5 million, while financing provided $0.04 million; the prior-year financing inflow included $98.2 million of net equity-offering proceeds.
Material changes and notable items
- Revenue declined $5.8 million year over year, mainly because Q1 2021 included a $10.0 million Incyte milestone and $3.0 million more Incyte commercial-supply revenue. Q1 2022 included a $5.0 million milestone under the 2018 Zai Lab agreement and higher MARGENZA sales.
- MacroGenics received $10.0 million upfront under a January 2022 Incyte manufacturing and clinical supply agreement and recorded deferred revenue; no revenue under that agreement was recognized in Q1. Operating cash flow benefited from $11.2 million received under the agreement.
- Deferred revenue was $31.9 million at quarter-end, including $6.4 million non-current, compared with $20.6 million total at year-end.
- Accumulated deficit reached $1.04 billion. Stockholders’ equity was $178.2 million, down from $239.6 million at year-end.
Outlook, risks and contingencies
Management said cash, cash equivalents and marketable securities, together with anticipated and potential collaboration payments and product revenue, were expected to fund operations through 2023. The forecast excludes anticipated costs for the full Phase 2/3 MGC018 study in metastatic castration-resistant prostate cancer, expected to begin by year-end 2022, and further expansion of other ongoing studies. Management believes it can fund the planned Phase 2 portion of that MGC018 study through existing resources, external funding or revenue sources, and project prioritization. Separately, the company stated its current resources were sufficient for at least 12 months from the filing date.
The company expects R&D spending to increase as pipeline programs advance and may need additional capital. If collaboration funding or financing is unavailable, it may delay, reduce or discontinue programs, cut other expenses, or downsize. Management cited potential effects from COVID-19 and geopolitical tensions, including Russia’s war in Ukraine and related sanctions. COVID-19 had slowed some trial enrollment; further disruption could affect trials, supply chains and operations.
Incyte’s retifanlimab application for anal cancer received an FDA Complete Response Letter in 2021, and Incyte withdrew its European marketing application for that indication. Incyte continues to pursue other studies; future milestone and royalty revenue remains contingent on successful development and commercialization.
A securities class action concerning statements about the SOPHIA trial was dismissed with prejudice in September 2021, but the lead plaintiff appealed; the appeal was pending in the Fourth Circuit. The company said it could not reasonably estimate a possible loss and had not accrued a liability. Management reported no material change in risk factors and concluded disclosure controls were effective at a reasonable assurance level.
Most important facts for investors to verify
- Whether the cash runway assumptions remain achievable, especially after including the planned MGC018 Phase 2/3 costs and any expansion of other trials.
- MARGENZA sales trajectory and the extent to which reported product margins depend on previously expensed inventory.
- Clinical progress, costs and timing for MGC018 and other priority programs, alongside the expected increase in R&D spending.
- Incyte’s next steps for retifanlimab after the FDA response and the resulting implications for potential collaboration payments.
- Progress on deferred-revenue manufacturing agreements, future collaboration receipts, and the pending securities-litigation appeal.