MacroGenics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated financial statements. MacroGenics is a clinical-stage biopharmaceutical company that launched MARGENZA in March 2021 following FDA approval in December 2020.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $30.8 million | $20.3 million | $47.6 million | $33.9 million |
| Operating loss | $40.3 million | $47.3 million | $91.6 million | $92.8 million |
| Net loss | $39.9 million | $46.9 million | $91.2 million | $91.6 million |
| Net loss per share, diluted | $0.66 | $0.94 | $1.56 | $1.85 |
| Operating cash used | Not separately provided | Not separately provided | $74.7 million | $80.7 million |
- Q2 revenue included $27.2 million from collaborations and other agreements, $3.2 million of MARGENZA product revenue, and $0.4 million from government agreements. For the first half, the corresponding amounts were $42.4 million, $4.1 million, and $1.2 million.
- R&D expense was $55.8 million in Q2 and $108.9 million for the first half. SG&A was $15.2 million and $30.3 million, respectively. SG&A rose year over year primarily due to MARGENZA launch costs.
- Product cost of sales was only $22,000 in Q2 and $39,000 for the first half; the filing says sales largely used inventory costs expensed as R&D before approval, boosting reported product gross margins. These margins may change as post-approval inventory is sold.
- Cash and cash equivalents were $189.0 million and marketable securities $108.3 million at June 30, totaling $297.3 million, versus $272.5 million at December 31, 2020. Current assets were $367.0 million; current liabilities were $69.9 million.
- Six-month investing cash outflow was $20.4 million; financing cash inflow was $103.0 million, including $98.2 million net proceeds from an ATM equity offering. Cash and cash equivalents increased $7.8 million over the period.
- Total liabilities were $106.9 million, including $27.6 million of lease liabilities and $30.0 million of deferred revenue. The balance sheet does not show a conventional borrowing or debt balance.
Changes versus prior comparable period
- Q2 revenue increased 52% and first-half revenue increased 41% year over year. Drivers included a new $14.4 million contribution from the June 2021 Zai Lab agreement, Incyte retifanlimab milestones, Incyte commercial supply work, and MARGENZA sales. Lower NIAID revenue and the absence of a $12.0 million Boehringer Ingelheim payment recognized in 2020 partly offset growth.
- Q2 net loss narrowed by $7.0 million; first-half net loss was nearly unchanged. First-half operating cash use improved by $6.0 million year over year.
- First-half R&D increased $2.7 million, with higher spending on MGC018, flotetuzumab, and MGD019 partly offset by lower spending on other programs. First-half SG&A increased $9.8 million, largely reflecting commercialization costs.
- Common shares outstanding at June 30 were 60.1 million, up from 56.2 million at year-end, principally reflecting the first-quarter ATM issuance.
Outlook, developments, and risks
- Management said cash, cash equivalents and marketable securities at June 30, plus Zai Lab consideration received in July and anticipated or potential collaboration and product revenue, were expected to fund operations through 2023, assuming programs and collaborations advance as planned. A separate liquidity note states existing liquidity is sufficient for at least 12 months from filing. Funding needs and future capital availability remain uncertain.
- In June, MacroGenics signed a four-molecule Zai Lab collaboration. It recognized $14.4 million of revenue in Q2 and reported $21.0 million of deferred revenue at June 30. The agreement includes potential development, regulatory and commercial milestones totaling up to approximately $1.4 billion, plus royalties; these are contingent and not assured. Zai Lab also paid a $25.0 million upfront payment in July and purchased approximately $30.0 million of shares in a July private placement.
- On July 23, 2021, after the quarter-end, Incyte disclosed that FDA issued a Complete Response Letter for retifanlimab’s anal cancer application, indicating additional data were needed to demonstrate clinical benefit. Incyte was reviewing next steps. This could delay approval and potential milestone, royalty, and commercial supply revenue.
- Management expects R&D spending to increase as the pipeline advances and SG&A to rise as MARGENZA commercialization continues. COVID-19 had slowed some clinical enrollment; management anticipated continued near-term effects on new study initiation and enrollment, with uncertain duration and severity.
- A securities class action concerning statements about the SOPHIA trial is pending. The company intends to defend the case, but says the outcome and any loss cannot be reasonably estimated; no liability was accrued.
- The filing reports no material change in the risk factors from the 2020 Form 10-K, no off-balance-sheet arrangements, and effective disclosure controls as of June 30, 2021.
Investor facts to verify
- Whether MARGENZA prescriptions, net sales, channel inventory, returns, rebates, and commercial adoption develop as expected; first-half product revenue was $4.1 million.
- How the retifanlimab CRL affects the timing and likelihood of approval, further development, and potential collaboration economics.
- Whether the Zai Lab programs meet development milestones and generate the contingent payments, royalties, and cost reimbursements described; distinguish potential amounts from received or recognized revenue.
- Cash burn, operating runway, and future financing or dilution needs, particularly given management’s runway estimate depends on programs and collaborations progressing as planned.
- Clinical-trial progress and spending across the pipeline, including the potential effects of COVID-19, and the status and possible financial consequences of the securities litigation.