MacroGenics, Inc., a biopharmaceutical company, discovers and develops antibody-based therapeutics for the treatment of cancer in the United States. Its pipeline of immuno-oncology product candidates includes Margetuximab, a monoclonal antibody, which is in Phase III clinical trial that targets HER2-expressing tumors, such as various breast and gastroesophageal cancers. The company is also developing Flotetuzumab, a DART molecule that recognizes CD123 and CD3 for treating acute myeloid leukemia; MGA012, an investigational monoclonal antibody targeting PD-1; MGD013, a monoclonal antibody that targets the PD-1 and lymphocyte-activation gene 3; MGD019, a monoclonal antibody that targets the immune checkpoints PD-1 and cytotoxic T-lymphocyte-associated protein 4; and Enoblituzumab, a monoclonal antibody that targets B7-H3. In addition, the company is developing combination of MGD009 and MGA012; MGC018, an antibody drug conjugate, which targets solid tumors expressing B7-H3; and MGD014, a DART molecule that targets envelope protein of human immunodeficiency virus infected cells and T cells. It has strategic collaborations with Incyte Corporation; Zai Lab Limited; and I-Mab Biopharma. MacroGenics, Inc. was founded in 2000 and is headquartered in Rockville, Maryland. SectorHealth CareIndustryBiotechnologyEmployees384Founded2000Address (view map)9704 Medical Center Drive Rockville, MD, 20850 United StatesPhone Number301 251 5172Websitewww.macrogenics.comGraphic Source: MacroGenics, Inc.

Introduction: What is MacroGenics?

MacroGenics (MGNX) is a clinical-stage biopharmaceutical company focused on developing antibody-based therapeutics (monotherapy and combination) for immune-response modulation for treating cancer primarily based on MacroGenics’s three platforms: Fc Optimization (antibody Fc region mutator), DART (bi-specific monoclonals), and TRIDENT (Tri-specific).

Founded in 2000 with headquarters in Maryland-USA, MacroGenics has grown to 384 employees with a market cap of $1.25B. 2019 FYE revenues were $64M with a net loss of -$152M on top of the current stock price slightly above average for the 52w stock range of $4.04-$32.18.

Pipeline/partnerships

MacroGenics’s pipeline consists of 7 therapeutics with all 7 in clinical phases covering various cancers. Margetuximab, MacroGenics’s lead candidate, is completing its Pivotal phase (like phase 3) targeting the widely popular HER2 (human epidermal growth factor receptor 2) for treating breast cancer with approval expected Dec 18th, 2020 and possesses a second target in Phase 2 targeting Gastric/GEJ cancer. In support of the thesis regarding a promising pipeline, MacroGenics maintains many promising partnerships including China’s Zai Lab (ZLAB), Incyte (INCY), and I-Mab Biopharma (IMAB).

Customers/market

MacroGenics’s clinical pipeline targets a combined market of $221.8B (2022) with its three latest stage therapeutics (pivotal phase, post-Phase 2) targeting markets as follows: Margetuximab targeting HER2+ Breast Cancer (Market Size (2022): $8.65B | CAGR: 4.4%) and phase 2 application for Gastric/GEJ Cancer (Market Size (2022): $2.1B | CAGR: 11.1%); Flotetuzumab for Acute Myeloid Leukemia (Market: $1.2B | 14%); and Retifanlimab (Incyte owned for non-combination use) for Solid Tumors (Market: $144B | 8.1%).

Management

Management seems professional and protective of its stable financial position (cash: +$200M and much partnership-based support). Management seems globally focused and well-connected while maintaining a competitive scientific edge.

CEO: Scott Koenig, M.D., Ph.D., has been the CEO since 2001 starting as one of MacroGenics’s co-founders and bringing 30+ years of experience. Prior to this, he was Senior VP of Research at MedImmune Inc. where he was primarily focused on product pipeline developments, and from 1984-1990 he worked in the immunoregulation lab at the NIAID-NIH covering immune response to retroviruses and the pathogenesis of AIDS. He also serves as Chairman of Applied Genetic Technologies Corporation (AGTC), and a member of GlycoMimetics’s board (GLYC) and various other research organizations.

Share price change under his leadership (Since inception | IPO in 2013): -10%

Strategy/COVID Impact

MacroGenics’s primary business is developing its antibody-based therapeutics pipeline which is quite extensive. As of Q3 2020, MacroGenics is preparing to commercialize margetuximab, the HER2+ therapeutic for breast cancer with its second possible indication of Gastric/GEJ cancer. Margetuximab has a PDUFA target action date for the Biologics License Application (BLA) on December 18, 2020, which would then bring an approval decision within 10 months. MacroGenics’s current plans don’t include developing an internal sales force, but rather develop third-party agreements for all sales-related processes or partner with a biopharmaceutical firm, an interesting strategy if it’s the former. MacroGenics is also quite cost-conscious asserting their cash and equivalents (+$15M Incyte cash received) alongside planned milestones will fund their operations into 2023 (if all goes as planned).

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COVID’s impact was managed well in the company’s eyes with negative outcomes being the delay of their planned Phase-2 study of enoblituzumab for SCCHN until 1Q 2021 and stopping enrollment (outside the USA) for the flotetuzumab+retifanlimab Phase 1/2 study with a pending resumption date to be announced.

Financial position

MacroGenics derives a majority of its revenues (88% in 9M 2020) from collaboration agreements ($46M) and the rest from government agreements ($6M). Analyst revenue estimates conservatively average to $70.3M (+10% y/y) for 2020 and $152.4M (+117%) for 2021, highlighting payouts from MacroGenics’s various partnerships due to efficient clinical progress and Margetuximab commercialization. MacroGenics is sitting on impressive cash and short-term investments stockpile reaching $281M at 9M 2020 on top of $29M in total debt ($25M of Capital Leases), noting the fact that MacroGenics’s FYE cash hasn’t dipped below $200M in 5-years. All in all, with sufficient milestone payments to be received, it seems MacroGenics is ready to get its therapeutics through the last mile and into large returns double-digit post-commercialization royalties within the next 2-3 years.

Risk discussion

MacroGenics’s investment play, as with most biotechnology speculation, is a high-risk opportunity. Oftentimes a critical therapeutic, such as Margetuximab could receive a negative ruling or a delay, both critical to the stock price. Investors would be wise to consider both sides of the argument with a 2019 bear case citing clinical data concerns laid out by WunderKind Research. Investors would also be wise to understand that just the 52W low alone would outline $4.04/share (-82% downside) and though unlikely, possible in the very extreme case of negative results for Margetuximab and should be monitored closely. The author’s analysis below does outline the unlikely, but the potential for a pessimistic scenario under below-performance results indicating -10% downside in 2020 and -43% downside in 2021, citing some analyst expectations. For more extensive analyses on downside risks, see MacroGenics’s 2019 10k – item 1a (risk factors).

Investment thesis

MacroGenics is primed for a critical year in 2021, but with $281M in cash and global support, the upside is likely. 7 therapeutics define MacroGenics with one therapeutic aiming for final-approval/commercialization in 2021 on top of 2 other promising therapeutics not far behind. Milestone payments are abundant with this biotech making their cash position even more solidified allowing the company to confidently state they’re capitalized to 2023, far reducing the risk for MacroGenics’s investors. Essentially, the company shouldn’t have to sacrifice promising therapeutics to ease potential liquidity issues. With partnerships bringing in capital and critical global support, MacroGenics’s global outlook and paired government/private funding, Margetuximab’s 2020 estimated approval, and MacroGenics’s various other late-stage promising therapeutics, it becomes clear that MacroGenics, Inc. is a “buy” at a 1.5-year price target of $36.55 (+64% upside).

Pipeline & partnerships (expanded)

MacroGenics has a diverse portfolio of proprietary product candidates with several clinical trials currently underway or planned for the near future. Set forth below is the companyGraphic Source: MacroGenics, Inc.

Lead Candidate (1)

Margetuximab is an investigational monoclonal antibody targeting HER2- tumors currently being studied as treatments for positive metastatic breast cancer (Phase 3) and advanced gastric cancers (Phase 2/3). Margetuximab’s Breast Cancer PDUFA target date is set for Dec 18th, 2020, and will mark a massive transition from clinical to commercial in 2021.

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For HER2+ Metastatic Breast Cancer, the Phase 3 clinical trial known as SOPHIA is utilizing margetuximab+chemo compared against trastuzumab+chemo. The results of this trial were presented in June 2019 and again in Dec. 2019 at two separate events. FDA fast track designation was given for treating patients with metastatic or locally advanced HER2 positive breast cancer who previously were treated with anti-HER2-targeted therapy. For more information see the clinical trial study.

  • Market Size (2022): $8.65B | CAGR: 4.4%
  • Estimated Primary/Study Completion Date: December 2021
  • PDUFA target date: Dec 18th, 2020.

For Advanced Gastric Cancer, MacroGenics is running two trials, a phase 2 trial for ER2-positive gastric/GEJ in combination with an anti-PD-1 monoclonal antibody and another Phase 2/3 MAHOGANY study using margetuximab plus a checkpoint inhibitor with or without chemotherapy (currently enrolling). For the Phase 2 trial, Margetuximab enrolled patients with r/r advanced HER2-positive gastric/GEJ cancer who still had disease progression/resistance to trastuzumab+chemo. The last updated data were presented in September 2019. For more information on the science, see MacroGenics’s Fc Optimization Platform or the clinical study.

  • Market Size (2022): $2.1B | CAGR: 11.1%
  • Estimated Primary Completion Date: May 2024
  • Estimated Study Completion Date: May 2026

MacroGenics is currently collaborating with Green Cross Corp. (South Korea) and Zai Lab (Greater China) and retains the rights to full development and commercialization rights in territories excluding those above.

Candidate(2)

Retifanlimab is a humanized anti-PD-1 monoclonal antibody licensed to Incyte in 2017 as monotherapy and open-license for rights as a combination therapy for treating solid tumors.

Incyte is currently running retifanlimab as a monotherapy in 3 registration-directed studies (similar to Phase 3/pivotal studies) in MSI-high endometrial cancer, Merkel cell carcinoma, and anal cancer. Incyte and MacroGenics are also developing retifanlimab with their own pipeline candidates as combination therapies.

Under the global collaboration agreement, est Oct. 2017, MacroGenics retained the rights to develop retifanlimab as a combination therapy while allowing Incyte the rights to monotherapy commercialization or in combination with their own products. Additionally, MacroGenics retained some manufacturing rights for both companies’ clinical and commercial needs through its commercial-ready GMP facility (fully operational since 2018).

Candidate(3)

Flotetuzumab is a humanized dual-affinity retargeting therapeutic utilizing a bispecific antibody platform designed to redirect T lymphocytes to eliminate CD123-expressing cells. It recognizes both CD123 (IL-3 alpha receptor proven to be widely overexpressed in cancer cells) and CD3 (T-Cell activated molecule). Flotetuzumab is currently being evaluated in a Phase 1/2 dose-expansion study for r/r Acute Myeloid Leukemia which has already shown encouraging results. Updated data was provided in December 2019.

Flotetuzumab is fully owned by MacroGenics.

Other therapeutic updates

  • MGC018, MacroGenics’s Phase 1 fully-owned therapeutic for solid-tumors in September showed encouraging results.
  • MGD019, MacroGenics’s other Phase 1 fully-owned therapeutic for solid tumors announced dose-escalation data in September showing promising anti-tumor activity.
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For more information on updates regarding science and priorities of the therapeutic line, please see MacroGenics’s 3Q 2020 November Corporate Presentation.

Financial position (expanded)

MacroGenics equity research report for financial analysis, should i buy macrogenics? macrogenicis financial analysis, macrogenics stock analysis MGNXTable Source: Self Created | Data Source: Seeking Alpha – MGNX

Revenue/costs

MacroGenics is at a key inflection point with its late-stage pipeline and Margetuximab’s Breast Cancer approval upcoming. Financially, revenues have been volatile due to the nature of milestone payments exhibiting a -26% CAGR since 2017, but 2020 is expected to change this. With Margetuximab expected to complete its clinical trials in 2020-2021, analysts have already begun to incorporate with 2021 revenue expected to increase to $152M (+117% y/y) on top of net losses of -$147M due to a continuing expansive pipeline.

Balance sheet composition

Balance Sheet analysis of MacroGenics Inc. <span class=Table Source: Self Created | Data Source: Seeking Alpha – MGNX

As can be seen above, MacroGenics is a stable company with consistent cash positions ($281M in 9M 2020) above the 3-year average reflecting financial stability. With minimal debt and promising milestone payments underway, MacroGenics seems ready to develop its pipeline without solubility issues or the need for excessive capital raising. Stability seems to be the factor here with few interesting results to tell.

Valuation: Clear weighted-upside in 2021, 64% likely

Valuation of MacroGenics Inc. 2020, and 2021 for 89% upside in equity returnsTable Source: Self Created | Data Source: Seeking Alpha – MGNX

As can be seen above, due to Margetuximab’s promising commercial advancements in 2021 and a large milestone outlook amongst MacroGenics’s other therapeutics, analysts have outlined various scenarios to which the author acknowledges that an optimistic scenario in 2021 is likely with +64% 1.5-year upside reaching a stock price of $36.55.

ChartData by YCharts

Upcoming Catalysts (1-12 months)

  • Dec 18th, 2020: Margetuximab – Breast Cancer PDUFA date
  • 2H 2021: Margetuximab – OS events for final analysis

Conclusion

Overall, MacroGenics’s seems to be witnessing a critical inflection point with regards to the late-stage pipeline, Margetuximab’s commercializing-preparations beginning in 2021, and partnerships infusing sufficient milestone payments to reward investors in the short term. The $281M in cash makes it likely investors will receive a healthy return from MacroGenics’s 7 clinical phase therapeutics and their associated partnerships. It’s not every day an investor stumbles across underfollowed late-stage biotechs with a stable cash position and huge milestone upsides. With a 4Q 2020 breast-cancer therapeutic approval expected, revenue growth anticipated at 116% y/y in 2021, and $281M in cash lasting until 2023, the short-term 64% upside seems conservative.

In summary, the author projects MacroGenics, Inc. as a “buy” at a 1.5-year price target of $36.55 (+64% upside).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



Via SeekingAlpha.com

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