MacroGenics, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual report, not a standalone fourth-quarter filing; quarterly figures below are unaudited.
Business context
MacroGenics is a clinical-stage biopharmaceutical company developing antibody-based therapies, primarily for cancer and autoimmune diseases. It had no approved products and generated no product-sales revenue. Reported revenue came from collaborations and grants. Its two clinical-stage oncology candidates were margetuximab and MGA271; MGD006 and MGD007 were preclinical at year-end.
Financial performance and position
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| Total revenue | $58.0 million | $63.8 million | Down 9% |
| Research and development expense | $46.6 million | $45.4 million | Up 3% |
| General and administrative expense | $11.1 million | $10.2 million | Up 9% |
| Operating income | $0.4 million | $8.2 million | Down $7.8 million |
| Net income (loss) | $(0.3) million | $8.4 million | Turned to loss |
| Net cash used in operating activities | $14.2 million | $6.6 million | Use increased |
Revenue consisted of $56.8 million in collaborative research revenue and $1.3 million in grant revenue. Approximate operating and net margins were 0.6% and (0.4%), respectively. Fourth-quarter revenue was $14.9 million and net loss was $3.2 million.
At year-end, cash and cash equivalents were $116.5 million, total assets $125.8 million, and stockholders’ equity $78.9 million. Total liabilities were $46.9 million, including deferred revenue and lease-related liabilities; the filing does not report interest-bearing debt. Operating cash use and $3.0 million of capital expenditures were offset by $85.9 million of financing cash inflows, principally the IPO. Total operating lease payments were $16.7 million.
The October 2013 IPO generated $83.8 million in net proceeds. After year-end, the February 2014 follow-on offering generated $76.7 million net, and Servier paid $20.0 million for MGD006 license and milestone events. Management estimated available cash, anticipated collaboration payments, and follow-on proceeds could fund specified programs into 2017, assuming collaborations progress as planned.
Material changes versus prior periods
- Revenue fell as Eli Lilly-related teplizumab trial reimbursements wound down; Servier and Boehringer milestones and the new Gilead collaboration partly offset the decline.
- DART-program R&D spending rose from $12.0 million to $25.7 million, while teplizumab R&D spending fell from $14.6 million to $2.0 million as trial enrollment ended and studies were closed.
- Operating cash use increased, primarily reflecting reduced Lilly reimbursement and higher G&A, partly offset by collaboration milestones.
- The IPO converted preferred stock to common stock and substantially increased cash and stockholders’ equity. The reported 2013 loss also reflected a $0.6 million expense from the preferred-stock warrant fair-value adjustment, with the warrant liability settled in connection with the IPO.
Outlook, commentary, and risks
- Management planned to begin a margetuximab Phase 3 gastroesophageal cancer trial in the second half of 2014 and expected late-2014 results from its exploratory metastatic breast cancer study. MGA271 Phase 1 expansion work was expected to continue through 2014.
- After FDA review clearance of the MGD006 IND in February 2014, the company expected to start its Phase 1 trial in the second quarter of 2014; it planned to begin MGD007 Phase 1 testing in the second half of 2014. It also intended to advance two further DART oncology candidates toward clinical testing in 2015.
- Servier exercised its MGD006 option in February 2014 for territories outside the United States, Canada, Mexico, Japan, South Korea, and India. The company remains dependent on collaborators for funding, development, and potential commercialization; milestone and royalty receipts are uncertain and partner-controlled.
- Teplizumab’s Phase 3 Protégé trial did not meet its primary endpoint. A separate prevention/delay study was ongoing under NIDDK sponsorship, and MacroGenics was seeking a development collaborator.
- Key risks include clinical and regulatory failure or delay, unproven technologies, manufacturing capacity and compliance, reliance on third parties, competition and reimbursement pressure, and patent challenges. The filing highlights third-party Fc-engineering patents that could affect margetuximab or MGA271 if not invalidated or licensed on acceptable terms.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls and internal control over financial reporting. It reported an accumulated deficit of $175.7 million and expected continued losses. Federal and state tax attributes may be limited by ownership-change rules.
Important facts for investors to verify
- Current trial status, enrollment, efficacy, safety, and timing for margetuximab, MGA271, MGD006, and MGD007, including whether management’s stated milestones were achieved.
- Cash burn, remaining runway, and the assumptions behind the forecast into 2017, including collaboration funding and program costs.
- Servier’s exercised MGD006 license economics and the status of its remaining options; progress and funding terms under other collaborations.
- Manufacturing capacity and third-party supply plans needed for later-stage antibody trials and potential commercialization.
- Patent ownership, validity, and licensing exposure concerning Fc engineering and other core technologies.