Good afternoon. We will begin the MacroGenics 2023 Second Quarter Corporate Progress and Financial Results Conference Call in just a moment. All participants are in a listen-only mode at the moment and we will conduct a question-and-answer session at the conclusion of the call. At this point, I will turn the call over to Jim Karrels, Senior Vice President, Chief Financial Officer of MacroGenics.

Thank you, operator. Good afternoon and welcome to MacroGenics' conference call to discuss our second quarter 2023 financial and operational results. For anyone who's not had the chance to review these results, we issued a press release this afternoon outlining today's announcements, which is available under the Investors tab on our website at macrogenics.com. You may also listen to this conference call via webcast on our website, where it will be archived for 30 days getting approximately two hours after the call is completed. I would like to alert listeners that today's discussion will include statements about the company's future expectations, plans, and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual, quarterly and current reports filed with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change, except to the extent required by applicable law. And now I'd like to turn the call over to Dr. Scott Koenig, President and Chief Executive Officer of MacroGenics.

Thank you, Jim. I'd like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key updates on our clinical programs. But before I do so, let me first turn the call back to Jim, who will review our financial results.

Thank you, Scott. This afternoon, MacroGenics reported financial results for the quarter ended June 30, 2023, which highlight our financial position. As described in our release this afternoon, MacroGenics' total revenue was $13.1 million for the quarter ended June 30, 2023, compared to total revenue of $26 million for the quarter ended June 30, 2022. Revenue for the quarter ended June 30, 2023, included recognition of $1.6 million in contract manufacturing revenue and MARGENZA net sales of $5.1 million compared to net sales of $4.7 million for the quarter ended June 30, 2022. Our research and development expenses were $43.2 million for the quarter ended June 30, 2023, compared to $51.7 million for the quarter ended June 30, 2022. The decrease was primarily due to decreased costs related to discontinued studies, partially offset by increased expenses related to preclinical antibody drug conjugate or ADC molecules and increased clinical expenses related to lorigerlimab and vobra duo. Our selling, general, and administrative expenses were $13.7 million for each of the quarters ended June 30, 2023 and 2022. You'll notice approximately $100 million as a component of other income on our income statement. Let me take a moment to explain. Under GAAP guidelines and pursuant to FASB's ASC 470 in March 2023, we recorded the $100 million proceeds received from the sale of our royalty interest on global net sales of TZIELD to DRI Healthcare Acquisitions LP, or DRI, as they "Liability related to future royalties." This liability was to be amortized over the term of the arrangement using the effective interest rate method. Sanofi subsequently acquired both Prevention Bio and the TZIELD royalty interest and milestone obligations from DRI in April 27, 2023, obviating the need for MacroGenics involvement in the transfer of royalty payments to DRI. This resulted in a change…

Thank you, Jim. We continue to believe our proprietary pipeline of product candidates has great promise and I will walk you through each of our key programs momentarily as well as tell you about our plans for upcoming clinical programs. But before I do that, I'll quickly remind you that over the past year, through our business development efforts as well as milestone achievement, we have generated $320 million of non-dilutive capital. lorigerlimab, duocarmazine or vobra duo is our ADC designed to deliver DNA-alkylating duocarmazine cytotoxic payload to tumors expressing B7-H3. B7-H3 is a member of the B7 family of molecules involved in immune regulation. Vobra duo was designed to take advantage of this antigen's broad expression across multiple solid tumor types. We began enrolling the TAMARACK Phase 2 study of vobra duo in patients with metastatic castration-resistant prostate cancer under a modified study protocol during the second quarter. You may recall that we made this modification to address the changing treatment landscape for patients with mCRPC and enrollment has been proceeding nicely. We hope to enroll a majority of the 100 patients across the two experiment alarms of 2 mg/kg or 2.7 mg/kg every four weeks in 2023 and provide a clinical update in 2024. Next, I'll update you on lorigerlimab, our bispecific tetravalent PD-1 x CTLA-4 DART molecule. We designed lorigerlimab to have preferential blockade on dual PD-1, CTLA-4 expressing cells, such as tumor infastrating lipocytes or TILs, which are most abundant in the tumor microenvironment. You may recall that we presented encouraging preliminary clinical results from a single-arm dose expansion study of lorigerlimab in patients with advanced solid tumors in a poster session at the ASCO General Urinary Cancer Symposium in February 2023. Based on the strength of the mCRPC data presented, we plan to commence enrollment…

Thank you. [Operator Instructions] Our first question comes from Jonathan Chang with Leerink Partners. Your line is open.

Hi guys. Thanks for taking my questions. First question, can you give us a sense of how enrollment in the Phase 2 TAMARACK study has progressed? Just trying to get a sense of when in 2024 might see data?

Thank you, Jonathan. I'm very encouraged by the rapidity of enrollment at this point now as -- and many of these sites have incorporated the amendments to the protocol. We still have additional site initiation visits to complete on additional sites but based on what we've been seeing in this group of sites, I stick with what I have said that the majority of patients should be enrolled in the study this year, and we should complete it in the first part of 2024.

Got it. Thank you. And second question, what do you need to see from the -- either the Phase 2 prostate cancer studies to support advancing these programs into the next stage of development?

So, with regard to TAMARACK, as you know, we had seen a very encouraging data with regard to late-stage mCRPC patients with regard to a PSA50 reductions as well as objective responses. The goal of this study, in fact, is to achieve responses in terms of efficacy that were similar to that observed at the doses that we had treated before, as you recall, 3 mg/kg on a Q3 weekly basis, but which most of those patients had dose reductions during those course. What is more important at this point is to see some improvement in the side effect profile. In particular, the most disconcerting side effect was hand-foot syndrome in these patients who developed Grade 2 with pain. So, we would like to see a reduction, obviously, in that grade and obviously the incidence as well. With regard to the efficacy parameters, again, just to refresh everybody's memory, we saw approximately half of those patients have PSA50 reductions, so of course, we would like to see in the order of around 40% to 60% or even better, obviously, if that is achievable in that population with concomitant tumor control and continued treatment. With regard to the lorigerlimab study in terms of outcomes. Obviously, we were looking for an acceptable safety profile in terms of efficacy, if you look at the historical data in terms of control groups, which we obviously include here of patients treating with docetaxel, historical data says RPFF of eight months is what you would like to exceed. So, we'll have to see if we're able to achieve that by certainly several months.

Got it. Thanks for taking the questions.

Thank you. Our next question comes from Peter Lawson with Barclays. Your line is open.

Thanks. I guess initially, just as a follow-up to Jonathan's question. The data that we could see for your B7-H3 for the Phase 3 -- sorry, the Phase 2 data, could we see that in the second half of 2024. And for the Phase 1 combination data, is that something like a first half 2024 data sets go?

So, Peter, as things go now, as I said, it's Jonathan, I'm the encouragement about where we are enrolling if this continues at this pace, I think the second half in presentation of data is certainly possible for the TAMARACK study. So, obviously, we'll have to monitor that the rest of the year in terms of enrollment. I should also point out that this is an open study. So, we will take interim looks at that data along the way and may be able to come to some conclusions earlier before we even have the full body of data from that study. So, again, I would be consistent with targeting the second half of the year at this point. With regard to the combination study, as we pointed out, we are sort of trying to fine-tune the combination of vobra with lorigerlimab right now individually in combination. Once we settle on what that dose to use -- the doses to use moving forward in combination in expansion studies we expect that to occur by the end of the year. So, again, could it be the first half of the year possible. But right now, let me bring you up to date once we have picked that those doses and started those expansions, I'll be able to give you a little bit more definition when that will happen.

Got you. Thank you. And then [Indiscernible] and I know there's an update this year. Kind of what kind of update will that be? Will we see data? Is it kind of a go no-go decision? And will the data involve the lung cancer data?

So, as you know, and we discussed this before, ImmunoGen is conducting a clinical studies. The following through on the patients with lung cancer to identify an appropriate, they're making decisions about go forward. We have not discussed with them the specifics about what would be discussed and presented, we should be doing that soon. So, again, updates later this year, the nature of what will be contained. I don't have an answer to you at this time.

Okay. Thanks so much Scott.

Thank you. Our next question comes from Charles Zhu with Guggenheim. Your line is open.

Hi guys. This is Rosy [ph] on for Charles Zhu. Thanks for taking our question. So, first question is with regard to the change in landscape and mCRPC. How are you changing or selling expectations with regards to the valid positioning of vobra duo and lorigerlimab next to something like PLUVICTO?

So, if I understand your question, how are we anticipating the use of these drugs in face of where PLUVICTO is at this point and in the future. Is that correct?

Yes.

Okay. So, clearly, PLUVICTO is -- has changed the landscape treatment. It is being used currently right now in major medical centers that have PET scanning capabilities for PSMA. There has been, as you know, some limitation in its distribution in terms of supply, which is being addressed by Novartis. So, there will be increased use with time I think at this point, we have to wait to see the data on the results of PLUVICTO in earlier lines of therapy. So right now, it's more in a later line of therapy. When we have completed our study results, we will evaluate where the appropriate line of therapy will be in which populations. But right now, it's just too early. Also, mechanistically, we're talking about completely different mechanisms and also the toxicity profiles are quite different. And so I think that this is an opportunity where different mechanisms of action give greater number of choices for treating physicians and their patients. So, I think it's a good story for patients that new modalities will be available very soon.

Thank you. And if I can ask the second real quick on this one is regarding the vobra duo combo. Are there specific histologies that you potentially want to focus on for the dose expansion?

Well, as we pointed out in today's call and previously, we are looking at six different solid tumor types right now. we have not selected which ones to do yet for the expansion. Certainly, prostate cancer will be one of them which additional others we will select, we have yet to make that decision. And we'll again, in the near-term, we'll be able to provide that information.

Thank you. Our next question comes from Etzer Darout with BMO Capital Markets. Your line is open.

Great. Thanks for taking the question. First one, just wondered if you plan to disclose any of the data from the dose escalation of vobra duo plus lorigerlimab prior to moving into expansion studies? And then secondly, if you maybe could comment on the progress of any of the kind of other tumor types, Lori sort of monotherapy, maybe any progress there with other tumor types when we could get an update there or any other tumor types that you would look to explore with Lori or either monotherapy or combinations? Thank you.

Yes. So, Etzer, we'll have to again, as you know, as I've said just earlier today, we're honing in on the specific doses for the individual components of the vobra duo combo. Ultimately, it will be determined of how many patients we have available at that time to assess. My inclination right now is to start and move forward in expansions in particular types, which I alluded to before, prostate and probably one or two others. And probably at that time, once we have that data, we would be in, I think, a better position to present the total data but again, this is subject to further discussions later this year. With regard to other tumor types of Lori besides the data we presented at ASCO GU, as you know, we have previously said that we've had objective responses in three other cohorts that we were testing, including MS stable colorectal cancer melanoma and lung cancer. What I've also indicated on previous calls is that for us to move forward into a more wholesome Phase 2 study, I'd like to see some additional patients being treated as monotherapy to get -- to better determine the activity in particular tumors. I pointed out, for example, in the lung cancer cohort that we had, we lost a lot of that data because of patients that were treated in Ukraine for the case of the stable colorectal cancer patients. I pointed out we had very few patients without liver metastasis, which has being pursued by others, so I'd like to see additional patients being treated as monotherapy before making the decisions going forward. The melanoma data, we're very encouraged by. As you know, historically, we've had we have noted that we've had very significant responses in with vobra duo and melanoma as well. And that is one of the tumor types where potentially enrolling in the combination study going forward.

Great. Thank you.

Thank you. Our next question comes from Kaveri Pohlman with BTIG. Your line is open.

Yes, good evening. Thank you. Thanks for the update and for taking my questions. Sorry if I missed this, but for lorigerlimab and docetaxel combination study, it's a randomized trial for 150 patients, can you give us a sense on how long it will take to enroll the study and to get RPFS? Also, do you think that you can just expand it to a free trial if the interim data looks good. Just want to know how you're thinking about it?

Yes, Kaveri, thank you very much. So, we're very close to enrolling the first patients. We've initiated sites. Patients are being screened now. So, we're really on target for what we have said with regard to the start-up of this trial. Right now, until you start enrolling, you won't know the rate of enrollment. But right now, the anticipation will take us through this year and through a good part of 2024. And so at this point, it would be just too early to predict when we'd be able to do the readout at the study, most likely in early 2025, but that's all conjecture at this point.

Got it. That's very helpful. And then for MGD-024, can you tell us how is the enrollment going? Any feedback you have received from the physicians so far? And can you accelerate dosing based on your previous clinical experience with lorigerlimab here?

So, as you know, irrespective of what the product is, any CD3-based bispecific molecule when interacting with the regulatory agencies. There is a lot of prudence in terms of the dose escalation speeds in which these things can be conducted despite the fact that we had very significant data showing dramatic reductions in cytokine production in primate model systems and anticipate that we could move this faster. But having said that, we are following what was discussed with the FDA. We are right in the middle of dose escalation. The study is going well, and that's all I can say at this point. My sense is that once the dose has been picked from that dose escalation and we go into a more Phase 2 like study, there may be greater opportunities to accelerate development. But again, that will be with either with Gilead, if they opt into the program after the Phase 1 or during Phase 1 or by ourselves if it warrants it. So, it's still too early to tell.

Makes sense. Thank you.

Thank you. Our next question comes from Yigal Nochomovitz with Citigroup. Your line is open.

Hi Scott. Thanks for taking the questions. On the TAMARACK study in metastatic CRPC and then the Phase 1/2 dose escalation with the combo, and I think you mentioned CRPC there as well and you want to do an expansion. Can you just comment -- are those patients -- those prostate patients are relatively similar in their degree of pretreatment? You mentioned advanced solid tumors for CRPC. So, it wasn't clear if it was similar or if the ones in the Phase 1/2 were more significantly pretreated versus TAMARACK? Thanks.

So, there are some slight differences in eligibility, we have a little bit wider in TAMARACK, but the majority of the patients will be quite similar. So, we obviously wanted to compare apples-to-apples with the modification of those. We obviously wanted to get this enrolled quickly. So, there was some minor changes, but I would say they will be very easily comparable to the previous data. And then the same story with the combo for whatever prostate patients come in very late-stage patients as well, typically have advanced on engine receptor targeting agents on a taxane and often experimental agents as well. So, we think the data set will be -- we will be able to compare each one.

The reason I ask is because, I mean, if you do the prostate expansion in the Phase 1/2 with the vobra and lorigerlimab, and that looks really good. I'm just curious how you're thinking about pivotal study and how you would register the product because whether you'd want to register with the monotherapy with vobra duo or if the lorigerlimab, vobra duo looks really good in prostate, if that would be the way to go forward to take the drug to the combo to market, that's more of a strategic question, but just curious how you're thinking about that?

Yes. So, obviously, we -- this is a constant discussion. Obviously, we with the data on a lorigerlimab mono story being so encouraging, we decided to move a little bit up line with now going into chemo-naive patients but with androgen reset their experienced patients. So, that right now, there is no other checkpoint that is vying for that population. So, this is a great opportunity when we can demonstrate in that line of therapy success. With regard to the vobra story, either as monotherapy or potentially combination with Lori, that's a nice problem to have. It both look very successful, both the results from TAMARACK and then the combo. So, we'll address that as the data comes out next year.

Thank you. Our next question comes from Stephen Willey with Stifel. Your line is open.

Yes, good afternoon. Thanks for taking the questions. I guess now that you've remove the control arm from TAMARACK? I'm guessing there's going to be more of an emphasis on response rate versus, I guess, any kind of event-driven efficacy data. So, I guess I'm just curious based upon the eligibility criteria of TAMARACK? What percentage of patients you're expecting to actually have soft tissue disease that is resist valuable?

With that from that parameter, I think our experience in many of -- in the trials to date have at least half those patients, and I would not be surprised given this is an international study based on actually the results from the Lori trial that we presented almost all of the majority of those patients had visceral involvement that was not only involvement. So, I'm not at this point, I am not concerned that we will be seeing a tissue limited population. I think there will be enough data to that. And then clearly, we'll monitor that going forward, and we certainly can add more patients if necessary, but I don't think that's going to be a problem.

Okay. And I guess just a question on vobra duo. So, you've pressed the pause button here on single-agent dose expansion in other tumor types. I think that's despite some of the early signs of efficacy that you talked about earlier. Are you thinking of reinitiating any of those development efforts again once you get confirmation on dosing and scheduling from TAMARACK or does this next-gen ADC effort now kind of get prioritized in front of vobra duo?

Yes, I mean my answer to you is we certainly are interested given the broad expression of B7-H3 across a large number of solid tumors and our experience with them that additional tumor types will be pursued. Clearly, we would like to see with vobra duo, that improvement in safety, which I discussed earlier. And one -- and I mean I can guess at this point, or we could forge ahead and just move that, but I think it's more prudent given, as I said earlier today, that enrollment is going well, and we'll have the answer soon to initiate other types at that point. We feel very strongly that we are building a great opportunity and franchise within prostate cancer with the Lori, with vobra potential combination. And then as we said today, the plans to start with academic collaborators, a neoadjuvant study with enoblituzumab in prostate cancer. So, we're trying to really cover the entire landscape for treatment of patients with prostate, but that does not interfere with our enthusiasm for pursuing this in other tumors as well.

All right. thanks for taking the questions.

Thank you. Our next question comes from Jon Miller with Evercore ISI. Your line is open.

Hi guys. Thanks for taking the questions. I would look to ask more about the financials and the runway guidance. So, obviously, you mentioned that covers TAMARACK and Lori Phase 2 an ongoing trial. How much does that cover of a new ADC? How much does that cover four trials that aren't currently running our anticipated start? And does that count any new indications, either for vobra duo or for Lori in expansion?

Yes. Thanks Jon. Very good question. Obviously, with today's announcement, we're very excited about getting that additional $50 million milestone from achieving it through the results of the PROTECT study. And so obviously, just again to put in context, as we said earlier, with the 320 million in the past, you have non-diluted capital, the likelihood of additional milestones goes up because of the -- hitting the primary endpoint. Of course, it's dependent on the opportunity to get TZIELD approved in the new indication as well as different regions for the original indication that has been already approved in the US FDA, but that increase is likelihood there, which means potential increased opportunities for more milestones and as well as royalties. I should also point out that inside announced last week that they completed enrollment in the two registration studies for the anti-PD-1 sinus in lung cancer and anal cancer. So, again, with those readouts as results accrue if those are successful. What we have on the table are a potential $320 million of regulatory clinical milestones, another 330 in commercial. So, over $600 million there. And we still have the potential for another $380 million from Sanofi. So, that's over $1 billion of potential milestones from two approved products. So, getting back to the essence of your question, just with this additional 50 and the studies are ongoing, that does include the new antibody drug conjugate that we will file an IND in the fourth quarter this year. It does include the opportunity to do additional studies, whether it be for new tumor indications or additional studies in different lines of prostate cancer. Those are under discussion right now. And it doesn't take away from any of the work preclinically for a second ADC from the Synaptics that we said is ongoing right now, which we're hoping to target for an IND in 2024, plus a lot of other preclinical development activity that we have not discussed to date. So, we're very, very encouraged, both with our cash runway and the opportunity to pursue a very robust clinical and preclinical pipeline.

Great. That makes sense. I guess, I know you sometimes include risk-adjusted future milestones and your cash runway. Can you talk a little bit about how much of that potential $1 billion in milestones you're counting on when you give that runway into 2026?

Yes, we haven't broken that down. Clearly, we make those adjustments based on real-time results. And certainly, we have the opportunity to adjust a probability based on the fact that Sanofi has said that they are going for regulatory approval. Obviously, we'd like to see the data. We have not seen the data on the results of the new study. But we are -- at this point, we're not in a position to break out the specifics there.

I would -- this is Jim, Jonathan. I would just add to that, that historically, if we look back at the probabilities that we use for risk adjustment, we've been very conservative.

Okay, makes sense. Thanks so much.

Thank you.

Thank you. Our next question comes from Silvan Tuerkcan with JMP Securities. Your line is open.

Yes, hi. Thanks for taking my question. A couple of questions on TAMARACK here. The patients group that you're expecting to enroll by the end of the year or maybe early next year, will that have sufficient chemo-naive patients that, that could be also an option may be better than the chemo-experienced patients for a registrational study? Or what are your options after in terms of patient population that you have in the Phase II to go on?

No. Well, no, actually, that is one of the -- one of the several hard fast enrollment criteria. They have to have been exposed to a chemotherapeutic most likely docetaxel. So, in this particular study, we're not -- we want to really compare the results, as I described earlier, of our previous experiences with vobra in a late-line population that is a chemo experience. So, not in this study, we are certainly interested in looking at opportunities in earlier lines of therapy, including hormone-sensitive populations, but nothing is on the table right now.

Great. Thanks. That's very helpful. And then at ASCO, we saw first in human data from [Indiscernible], ADC, as directed B7-H3, are there any learnings from that, that we can apply to vobra duo?

Yes, I mean, I would say the most encouraging data was obviously a small data set, and they were talking about expansion in other tumor types is that of the nine patients with small cell lung cancer, seven had an objective responses, which fits the data that [Indiscernible] has discussed also in the small cell population. So clearly, this is a histological type that we are certainly considering adding to the types being tested. We -- as you may recall, we have only had one patient with small cell cancer in our dose escalation, who actually did very well on vobra at a lower dose that patient was on treatment for over six months with tumor shrinkage. I didn't have an objective response, but really responded well to the therapy. So, clearly, that opens up for us a confirmation that a small cell may be an indication we should also pursue.

Great. Well, thanks for taking my question.

Thank you.

Thank you. Our next question comes from Boris Peaker with TD Cowen. Your line is open.

Hi. My name is [Indiscernible] for Boris Peaker. I would like to ask. How confident for vobra duo, how confident are you that the two doses that you're testing will give you the idea of those moving forward? And you think about the registrational trial do you expect a further dose modification is needed? Thank you.

So, as any experiment being conducted, you go with the data you have and you have a hypothesis and we feel that the doses we selected were the right ones. This was based on a full analysis of the data and all the expansion cohorts with regard to side effect profiles, tumor responses, pharmacokinetics. And so we tried to book end based on what the real exposure was in patients as commented on earlier, the majority of patients had dose reductions. So, we feel that we've picked the two doses that should give us more clarity with regard to an improved safety profile and activity profile. So, as much as that can guide us -- we're hoping that was the right selection and the right answer. And if we have to make modifications in some ways, subsequently once we get the data, we'll do it if the drug looks both active as well as relatively safe.

Got it. Thank you for taking my question.

Thank you. [Operator Instructions] There are no further questions. I'd like to turn the call back over to Dr. Koenig for closing remarks.

Well, thank you very much, operator and thank you everyone for participating in our call today. We look forward to providing further updates both on our clinical and preclinical pipeline in the coming months. Have a good day.

Thank you for your participation. This does conclude the program and you may now disconnect. Everyone, enjoy the rest of your day.