MACROGENICS INC

Previous wording

Our operations to date have concentrated on developing our technology platforms, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, developing collaborations, operating manufacturing facilities, business planning and raising capital. We only began generating revenues from the sale of products in 2021. We have financed our operations primarily through the public and private offerings of our securities, and collaborations with other biopharmaceutical companies. Although it is difficult to predict our funding requirements, we anticipate that our cash, cash equivalents and marketable securities as of June 30, 2024, combined with the $100.0 million payment we received from Incyte in August 2024 related to certain milestones deemed to have been met under the Incyte License Agreement (see Note 10, Subsequent Events, of the Notes to Consolidated Financial Statements, for additional information), anticipated and potential collaboration payments, product revenue, contract manufacturing revenue, and royalties, should enable us to fund our operations into 2026. Our expected funding requirements reflect anticipated expenditures related to the ongoing Phase 2 TAMARACK clinical trial of vobramitamab duocarmazine (vobra duo) in metastatic castration-resistant prostate cancer (mCRPC), our ongoing Phase 2 LORIKEET study of lorigerlimab in mCRPC as well as our other clinical and preclinical studies currently ongoing.

Current wording

Our operations to date have concentrated on developing our technology platforms, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, developing collaborations, operating manufacturing facilities, business planning and raising capital. We only began generating revenues from the sale of products in 2021. We have financed our operations primarily through the public and private offerings of our securities, and collaborations with other biopharmaceutical companies. Although it is difficult to predict our funding requirements, we anticipate that our cash, cash equivalents and marketable securities as of September 30, 2024, combined with the $40.0 million expected at closing of the TerSera transaction for the sale of MARGENZA (see Note 11, Subsequent Event, of the notes to Consolidated Financial Statements, for additional information), less an $8.0 million amendment fee to be paid to our current commercialization partner, plus anticipated and potential collaboration payments, contract manufacturing revenue, and royalties, should enable us to fund our operations into 2026. Our expected funding requirements reflect anticipated expenditures related to the ongoing Phase 2 TAMARACK clinical trial of vobramitamab duocarmazine (vobra duo) in metastatic castration-resistant prostate cancer (mCRPC), our ongoing Phase 2 LORIKEET study of lorigerlimab in mCRPC as well as our other clinical and preclinical studies currently ongoing.

Previous wording

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of significant worldwide events, including adverse events involving financial institutions or the financial services industry, inflation and rising interest rates and geopolitical upheaval (collectively, the Macroeconomic Conditions). These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. Prolonged uncertainty with respect to Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

Current wording

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of significant worldwide events, including adverse events involving financial institutions or the financial services industry, inflation and geopolitical upheaval (collectively, the Macroeconomic Conditions). These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. Prolonged uncertainty with respect to Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

Previous wording

•Incyte. We have an exclusive global collaboration and license agreement with Incyte for retifanlimab, an investigational monoclonal antibody that inhibits PD-1. Under this agreement, as amended, Incyte has obtained exclusive worldwide rights for the development and commercialization of retifanlimab in all indications, while we retain the right to develop our pipeline assets in combination with retifanlimab. We received an upfront payment of $150.0 million and milestone payments totaling $115.0 million from Incyte through June 30, 2024, including $15.0 million upon the FDA approval of ZYNYZ (retifanlimab-dlwr) in March 2023. In July 2024, we entered into an amendment to the Incyte License Agreement, pursuant to which certain milestones were deemed to have been met, resulting in $100.0 million in milestone payments received subsequent to June 30, 2024. We are eligible to receive an additional $210.0 million in development and regulatory milestones and $330.0 million in commercial milestones. We receive tiered royalties of 15% to 24% on any global net sales and we have the option to co-promote retifanlimab with Incyte. We retain the right to develop our pipeline assets in combination with retifanlimab, with Incyte commercializing retifanlimab and us commercializing our asset(s), if any such potential combinations are approved. We also have an agreement with Incyte under which we are to perform development and manufacturing services for Incyte's clinical needs of retifanlimab (Incyte Clinical Supply Agreement) and another agreement under which we are entitled to manufacture a portion of Incyte’s global commercial supply of retifanlimab (Incyte Commercial Supply Agreement).

Current wording

•Incyte. We have an exclusive global collaboration and license agreement with Incyte for retifanlimab, an investigational monoclonal antibody that inhibits PD-1. Under this agreement, as amended, Incyte has obtained exclusive worldwide rights for the development and commercialization of retifanlimab in all indications, while we retain the right to develop our pipeline assets in combination with retifanlimab. We received an upfront payment of $150.0 million and milestone payments totaling $215.0 million from Incyte through September 30, 2024, including $100.0 million received in August 2024. We are eligible to receive up to an additional $210.0 million in development and regulatory milestones and $330.0 million in commercial milestones. We receive tiered royalties of 15% to 24% on any global net sales and we have the option to co-promote retifanlimab with Incyte. We retain the right to develop our pipeline assets in combination with retifanlimab, with Incyte commercializing retifanlimab and us commercializing our asset(s), if any such potential combinations are approved. We also have an agreement with Incyte under which we are to perform development and manufacturing services for Incyte's clinical needs of retifanlimab (Incyte Clinical Supply Agreement) and another agreement under which we are entitled to manufacture a portion of Incyte’s global commercial supply of retifanlimab (Incyte Commercial Supply Agreement).

Previous wording

•Gilead. In 2022, we and Gilead Sciences, Inc. (Gilead) entered into an exclusive option and collaboration agreement (Gilead Agreement) to develop and commercialize MGD024 and create bispecific cancer antibodies using our DART platform and undertake their early development under a maximum of two separate bispecific cancer target research programs. Under the Gilead Agreement, we will continue the ongoing phase 1 trial for MGD024 according to a development plan, during which Gilead will have the right to exercise an option granted to Gilead to obtain an exclusive license to develop and commercialize MGD024 and other bispecific antibodies of ours that bind CD123 and CD3 (CD123 Option). The agreement also grants Gilead the right, within its first two years, to nominate a bispecific cancer target set for up to two research programs conducted by us and to exercise separate options to obtain an exclusive license for the development, commercialization and exploitation of molecules created under each research program (Research Program Option). As part of the Gilead Agreement, Gilead paid us a non-refundable upfront payment of $60.0 million and we will be eligible to receive up to $1.7 billion in target nomination, option fees, and development, regulatory and commercial milestones, assuming Gilead exercises the CD123 Option and Research Program Option, successfully develops and commercializes MGD024 or other CD123 products developed under the agreement, and products result from the two additional research programs. Assuming exercise of the CD123 Option, we will also be eligible to receive tiered, low double-digit royalties on worldwide net sales of MGD024 (or other CD123 products developed under the agreement) and assuming exercise of the Research Program Option, a flat royalty on worldwide net sales of any products resulting from the two research programs. In 2023, Gilead nominated the first of the two research programs contemplated in the Gilead Agreement (First Research Program) and paid us a $15.7 million nomination fee. We granted Gilead a research license, and the parties agreed on a research plan for the First Research Program under which we will provide research and development services. In January 2024, the parties amended the Gilead Agreement to revise certain matters related to intellectual property in the performance of the research plans under the agreement. In June 2024, Gilead paid us variable consideration totaling $3.3 million upon achievement of a research plan milestone.

Current wording

•Gilead. In 2022, we and Gilead Sciences, Inc. (Gilead) entered into an exclusive option and collaboration agreement (Gilead Agreement) to develop and commercialize MGD024 and create bispecific cancer antibodies using our DART platform and undertake their early development under a maximum of two separate bispecific cancer target research programs. Under the Gilead Agreement, we will continue the ongoing phase 1 trial for MGD024 according to a development plan, during which Gilead will have the right to exercise an option granted to Gilead to obtain an exclusive license to develop and commercialize MGD024 and other bispecific antibodies of ours that bind CD123 and CD3 (CD123 Option). The agreement also granted Gilead the right, within its first two years, to nominate a bispecific cancer target set for up to two research programs conducted by us and to exercise separate options to obtain an exclusive license for the development, commercialization and exploitation of molecules created under each research program (Research Program Option). As part of the Gilead Agreement, Gilead paid us a non-refundable upfront payment of $60.0 million and we will be eligible to receive up to $1.7 billion in target nomination, option fees, and development, regulatory and commercial milestones, assuming Gilead exercises the CD123 Option and Research Program Option, successfully develops and commercializes MGD024 or other CD123 products developed under the agreement, and products result from the two additional research programs. Assuming exercise of the CD123 Option, we will also be eligible to receive tiered, low double-digit royalties on worldwide net sales of MGD024 (or other CD123 products developed under the agreement) and assuming exercise of the Research Program Option, a flat royalty on worldwide net sales of any products resulting from the two research programs. In 2023, Gilead nominated the first of the two research programs contemplated in the Gilead Agreement (First Research Program) and paid us a $15.7 million nomination fee. We granted Gilead a research license, and the parties agreed on a research plan for the First Research Program under which we will provide research and development services. In January 2024, the parties amended the Gilead Agreement to revise certain matters related to intellectual property in the performance of the research plans under the agreement. In June 2024, Gilead paid us variable consideration totaling $3.3 million upon achievement of a research plan milestone. On August 30, 2024, the parties entered into a second letter agreement under which Gilead will pay us to conduct certain research and which extends the period for Gilead to select its second research target combination.

Previous wording

Our critical accounting estimates are policies which require the most significant judgments and estimates in the preparation of our consolidated financial statements. A summary of our critical accounting estimates is presented in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes with respect to our critical accounting estimates during the six months ended June 30, 2024.

Current wording

Our critical accounting estimates are policies which require the most significant judgments and estimates in the preparation of our consolidated financial statements. A summary of our critical accounting estimates is presented in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes with respect to our critical accounting estimates during the nine months ended September 30, 2024.

Previous wording

The following represents a comparison of our revenue for the three and six months ended June 30, 2024 and 2023 (dollars in millions):

Current wording

The following represents a comparison of our revenue for the three and nine months ended September 30, 2024 and 2023 (dollars in millions):

Previous wording

The decrease in revenue of $2.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to:

Current wording

The increase in revenue of $100.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to the $100.0 million milestone recognized under the Incyte License Agreement.

Previous wording

The decrease in revenue of $17.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to:

Current wording

The increase in revenue of $82.6 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due toa net increase of $85.0 million in revenue recognized due to milestone payments received under the Incyte License Agreement.

Previous wording

Revenue from collaborative and other agreements may vary substantially from period to period depending on the progress made by our collaborators with their product candidates and the timing of milestones achieved under current agreements, and whether we enter into additional collaboration agreements.

Current wording

Revenue from collaborative and other agreements may vary substantially from period to period depending on the progress made by our collaborators with their product candidates and the timing of milestones achieved under current agreements, and whether we enter into additional collaboration agreements. Following the sale of MARGENZA to TerSera, we will no longer receive revenue from MARGENZA net product sales.

Previous wording

For the three months ended June 30, 2024 and 2023, cost of product sales was $0.2 million and $0.3 million, respectively. Cost of product sales was $0.4 million, for both the six months ended June 30, 2024 and 2023. Cost of product sales consists primarily of product royalties and fill finish costs. Product sold during both periods consisted of drug product that was previously charged to research and development expense prior to FDA approval of MARGENZA, which favorably impacted our gross margin. We expect cost of product sales to continue to be positively impacted as we sell through this drug product.

Current wording

For the three months ended September 30, 2024 and 2023, cost of product sales was $0.2 million and $0.1 million, respectively. Cost of product sales was $0.6 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively. Cost of product sales consists primarily of product royalties and fill finish costs. Product sold during both periods consisted of drug product that was previously charged to research and development expense prior to FDA approval of MARGENZA, which favorably impacted our gross margin.

Previous wording

For the three months ended June 30, 2024 and 2023, cost of manufacturing services was $2.6 million and $0.9 million, respectively. Cost of manufacturing services was $4.5 million and $4.3 million for the six months ended June 30, 2024 and 2023, respectively. Cost of manufacturing services includes the costs to provide manufacturing services to produce certain Incyte bulk drug substance under the Incyte Manufacturing and Clinical Supply Agreement during both 2023 and 2024. Cost of manufacturing services includes the costs incurred under the Emergent Manufacturing Agreements in 2024. We expect cost of manufacturing services to vary from period to period based on the agreed-upon manufacturing schedule.

Current wording

For the three months ended September 30, 2024 and 2023, cost of manufacturing services was $1.7 million and $3.3 million, respectively. Cost of manufacturing services was $6.2 million and $7.6 million for the nine months ended September 30, 2024 and 2023, respectively. Cost of manufacturing services includes process development costs and costs to produce bulk drug substance for our contract development and manufacturing customers. We expect cost of manufacturing services to vary from period to period based on the agreed-upon manufacturing schedule.

Previous wording

The following represents a comparison of our research and development expense for the three and six months ended June 30, 2024 and 2023 (dollars in millions):

Current wording

The following represents a comparison of our research and development expense for the three and nine months ended September 30, 2024 and 2023 (dollars in millions):

Previous wording

Our research and development expense for the three months ended June 30, 2024 increased by $8.5 million compared to the three months ended June 30, 2023 primarily due to:

Current wording

Our research and development expense for the three months ended September 30, 2024 increased by $10.4 million compared to the three months ended September 30, 2023 primarily due to:

Previous wording

•increased development costs for other ADCs; and

Current wording

•increased development costs for preclinical ADCs; and

Previous wording

•decreased development and clinical trial costs related to margetuximab;

Current wording

These increases were offset by decreased development and clinical trial costs related to margetuximab.

Previous wording

Our research and development expense for the six months ended June 30, 2024 increased by $8.7 million compared to the six months ended June 30, 2023 primarily due to:

Current wording

Our research and development expense for the nine months ended September 30, 2024 increased by $19.1 million compared to the nine months ended September 30, 2023 primarily due to:

Previous wording

•increased development costs for other ADCs; and

Current wording

•increased development costs for preclinical ADCs;

Previous wording

•decreased development costs related to MGC026;

Current wording

•decreased development costs related to MGC026; and

Previous wording

•decreased clinical trial costs related to enoblituzumab; and

Current wording

•decreased clinical trial costs related to enoblituzumab.

Previous wording

Selling, general and administrative expenses were $14.4 million and $13.7 million for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, selling, general and administrative expenses were $29.1 million and $27.2 million, respectively. The increase for both periods is primarily due to increased stock-based compensation expense.

Current wording

Selling, general and administrative expenses were $14.1 million and $12.4 million for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, selling, general and administrative expenses were $43.2 million and $39.6 million, respectively. The increase for both periods is primarily due to increased stock-based compensation expense and professional fees.

Previous wording

During the three and six months ended June 30, 2023, we entered into a tripartite agreement with DRI Healthcare Acquisitions LP (DRI) and Sanofi S.A. (Sanofi), whereby we consented to the sale of DRI’s royalty interest in TZIELD and the related milestone payment obligations to Sanofi. The execution of the tripartite agreement resulted in a modification to the liability related to future royalties, and we recognized a $100.9 million gain on royalty monetization arrangement.

Current wording

During the nine months ended September 30, 2023, we entered into a tripartite agreement with DRI Healthcare Acquisitions LP (DRI) and Sanofi S.A. (Sanofi), whereby we consented to the sale of DRI’s royalty interest in TZIELD and the related milestone payment obligations to Sanofi. The execution of the tripartite agreement resulted in a modification to the liability related to future royalties, and we recognized a $100.9 million gain on royalty monetization arrangement. Sanofi then reported achievement of the primary endpoint milestone event related to a $50.0 million milestone, which resulted in an additional $50.0 million gain on royalty monetization arrangement. In connection with the tripartite agreement, we amended the Provention APA and terminated the Royalty Purchase Agreement with DRI.

Previous wording

The following table represents a summary of our cash flows for the six months ended June 30, 2024 and 2023:

Current wording

The following table represents a summary of our cash flows for the nine months ended September 30, 2024 and 2023:

Previous wording

Net cash used in operating activities consists of our net loss adjusted for non-cash items such as depreciation and amortization expense and stock-based compensation and changes in working capital. Net cash used in operating activities for the six months ended June 30, 2023 benefited from $15.0 million in milestones received from Incyte under the Incyte License Agreement.

Current wording

Net cash used in operating activities consists of our net income (loss) adjusted for non-cash items such as depreciation and amortization expense and stock-based compensation and changes in working capital. Net cash used in operating activities for the nine months ended September 30, 2024 benefited from $100.0 million in milestones received from Incyte under the Incyte License Agreement. Net cash used in operating activities for the nine months ended September 30, 2023 benefited from $15.0 million in milestones received from Incyte under the Incyte License Agreement.

Previous wording

Net cash provided by investing activities during the six months ended June 30, 2024 is primarily due to maturities of marketable securities, partially offset by purchases of marketable securities. Net cash used in investing activities during the six months ended June 30, 2023 is primarily due to purchases of marketable securities, partially offset by maturities of marketable securities.

Current wording

Net cash provided by investing activities during the nine months ended September 30, 2024 is primarily due to maturities of marketable securities, partially offset by purchases of marketable securities. Net cash used in investing activities during the nine months ended September 30, 2023 is primarily due to purchases of marketable securities, partially offset by maturities of marketable securities.

Previous wording

Net cash provided by financing activity for the six months ended June 30, 2024 includes proceeds from stock option exercises and ESPP purchases, offset by taxes paid related to net share settlement of equity awards. Net cash provided by financing activities for the six months ended June 30, 2023 includes net cash proceeds from our Royalty Purchase Agreement with DRI of $99.7 million.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024 includes proceeds from stock option exercises and ESPP purchases, offset by taxes paid related to net share settlement of equity awards. Net cash provided by financing activities for the nine months ended September 30, 2023 includes net cash proceeds from our Royalty Purchase Agreement with DRI of $149.7 million.

Previous wording

As a biotechnology company, we have primarily funded our operations with proceeds from the sale of our common stock in equity offerings and revenue from our multiple collaboration agreements. Management regularly reviews our available liquidity relative to our operating budget and forecast to monitor the sufficiency of our working capital, and anticipates continuing to draw upon available sources of capital, including equity and debt instruments, to support our product development activities. There can be no assurances that new sources of capital will be available to us on commercially acceptable terms, if at all. Also, any future collaborations, strategic alliances and marketing, distribution or licensing arrangements may require us to give up some or all rights to a product or technology at less than its full potential value. If we are unable to enter into new arrangements or to perform under current or future agreements or obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate one or more of our product research and development programs or clinical studies, and/or downsize our organization. Although it is difficult to predict our funding requirements, we anticipate that our cash, cash equivalents and marketable securities as of June 30, 2024, combined with the $100.0 million payment we received from Incyte in August 2024 related to certain milestones deemed to have been met under the Incyte License Agreement, anticipated and potential collaboration payments, product revenue, contract manufacturing revenue, and royalties, should enable us to fund our operations into 2026. Our expected funding requirements reflect anticipated expenditures related to the ongoing Phase 2 TAMARACK clinical trial of vobra duo in mCRPC, our ongoing Phase 2 study of lorigerlimab in mCRPC as well as our other clinical and preclinical studies currently ongoing.

Current wording

As a biotechnology company, we have primarily funded our operations with proceeds from the sale of our common stock in equity offerings and revenue from our multiple collaboration agreements. Management regularly reviews our available liquidity relative to our operating budget and forecast to monitor the sufficiency of our working capital, and anticipates continuing to draw upon available sources of capital, including equity and debt instruments, to support our product development activities. There can be no assurances that new sources of capital will be available to us on commercially acceptable terms, if at all. Also, any future collaborations, strategic alliances and marketing, distribution or licensing arrangements may require us to give up some or all rights to a product or technology at less than its full potential value. If we are unable to enter into new arrangements or to perform under current or future agreements or obtain additional capital, we will assess our capital resources and may be required to delay, reduce the scope of, or eliminate one or more of our product research and development programs or clinical studies, and/or downsize our organization. Although it is difficult to predict our funding requirements, we anticipate that our cash, cash equivalents and marketable securities as of September 30, 2024, combined with $40.0 million expected at closing of the TerSera transaction for the sale of MARGENZA, less an $8.0 million amendment fee to be paid to our current commercialization partner, plus anticipated and potential collaboration payments, contract manufacturing revenue, and royalties, should enable us to fund our operations into 2026. Our expected funding requirements reflect anticipated expenditures related to the ongoing Phase 2 TAMARACK clinical trial of vobra duo in mCRPC, our ongoing Phase 2 LORIKEET study of lorigerlimab in mCRPC as well as our other clinical and preclinical studies currently ongoing.

Previous wording

During the six months ended June 30, 2024, there were no significant changes to our material cash requirements, including contractual and other obligations, as presented in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

During the nine months ended September 30, 2024, there were no significant changes to our material cash requirements, including contractual and other obligations, as presented in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.