MacroGenics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based therapeutics. It has not generated product sales; revenue is primarily from collaborations and government agreements. Amounts below are in millions of dollars unless noted.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $20.3 | $10.6 | $33.9 | $20.3 |
| Research and development expense | $57.4 | $51.4 | $106.2 | $98.5 |
| General and administrative expense | $10.2 | $12.1 | $20.4 | $22.3 |
| Operating loss | $(47.3) | $(53.0) | $(92.8) | $(100.6) |
| Other income | $0.4 | $21.2 | $1.1 | $23.8 |
| Net loss | $(46.9) | $(31.8) | $(91.6) | $(76.8) |
| Basic and diluted loss per share | $(0.94) | $(0.65) | $(1.85) | $(1.63) |
Q2 revenue rose 91% and first-half revenue rose 67% year over year. The increase included a $12.0 million payment from Boehringer Ingelheim (BII) for retention of rights to two DART molecules, higher NIAID contract revenue, and I-Mab revenue. First-half revenue also included $3.6 million of Zai Lab milestone revenue. These gains were partly offset by lower recognition of previously deferred Zai Lab and Roche upfront payments and lower Incyte clinical supply activity.
R&D expense increased 12% in Q2 and 8% in the first half, reflecting increased activity for MGD013 and flotetuzumab, among other programs. G&A expense declined. Gross profit and gross margin are not separately presented. Other income fell sharply versus 2019, primarily because the prior-year period included revaluation gains on Provention warrants; those warrants were exercised and the shares sold in 2019.
Cash, liquidity and capital
- At June 30, 2020, cash and cash equivalents were $196.5 million and marketable securities were $36.3 million, totaling $232.8 million. Current assets were $260.2 million versus current liabilities of $45.9 million.
- First-half operating cash use was $80.7 million, compared with $78.8 million in 2019. Investing activities provided $51.6 million, principally from net maturities of marketable securities; financing activities provided $99.2 million, principally from the ATM stock offering.
- Cash and cash equivalents increased $70.1 million during the first half to $196.5 million. The company sold 4.06 million shares under its ATM offering in Q2 for net proceeds of $96.5 million; it increased the ATM authorization to $175 million.
- Subsequent to quarter-end, MacroGenics reported $21.3 million of additional ATM proceeds and receipt of the $12.0 million BII payment. It estimated existing liquidity, these receipts, and anticipated and potential collaboration payments would fund operations into 2023, assuming programs and collaborations advance as contemplated.
- The filing reports no borrowings or conventional debt balance. Lease liabilities totaled $29.0 million, including $3.4 million current. Liquidity runway is an estimate and depends on spending, program progress, and future collaboration or financing proceeds.
Material developments, outlook and risks
- Clinical pipeline and COVID-19: Management reported slower clinical-trial enrollment but said it had mitigated more severe impacts to date. The planned Phase 2 enoblituzumab study in advanced head and neck cancer was delayed until Q1 2021. Enrollment in an ex-U.S. Phase 1/2 flotetuzumab-retifanlimab study in relapsed or refractory AML was stopped, with resumption and U.S. site activity anticipated later. Further delays, supply-chain disruption, or collaborator impacts could affect development timelines and financial results.
- Research spending: MGD013, flotetuzumab and other programs contributed to higher R&D spending; margetuximab spending declined. MGD007 and MGD009 had been discontinued.
- Collaboration potential: The company retains potential development and commercial milestones and royalties under agreements including Incyte, Zai Lab and I-Mab, but these depend on development, regulatory and commercial success. The filing does not present these contingent amounts as assured future revenue.
- Litigation: A securities class action relating to alleged statements about the SOPHIA trial remained pending. The company intends to defend the case, could not reasonably estimate a loss range, and recorded no liability.
- Other: Management stated disclosure controls were effective and there were no material changes in internal control over financial reporting during the quarter. The company said there were no material changes to previously disclosed risk factors other than COVID-19 risks.
Key facts for investors to verify
- Whether the stated runway into 2023 remains supported by actual cash burn, updated program plans, and collaboration receipts.
- Clinical-trial enrollment and timing, especially the delayed enoblituzumab study and paused flotetuzumab-retifanlimab enrollment.
- Future R&D spending and the timing or certainty of collaboration milestones, royalties, and other payments.
- Additional dilution and proceeds under the expanded ATM offering; shares outstanding were 53.4 million at quarter-end and 54.1 million as of July 24, 2020.
- Developments and potential financial exposure in the SOPHIA-related securities litigation, which the filing says cannot currently be estimated.