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Based in Rockville, MD, MacroGenics (NASDAQ:MGNX) scheduled a $60 million IPO with a market capitalization of $365 million at a price range mid-point of $15 for Thursday, October 10, 2013.

Seven IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.

S-1 filed October 1, 2013

Manager, Joint Managers: BofA Merrill, Leerink Swann, Stifel
Co Managers: Lazard, Wedbush PacGrow

Summary

MGNX is a clinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonal antibody-based therapeutics for the treatment of cancer and autoimmune diseases.

MGNX uses a proprietary suite of next-generation antibody technology platforms to generate product candidates.

MGNX has major collaboration programs, see below, and has a number of clinical trials in process.

Valuation

annualizing June 6 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

MacroGenics

$345

7.5

-66.3

8.0

7.7

17%

MGNX has $179 million in accumulated deficits.

Glossary

Conclusion

Buy MGNX on the IPO because of its technology development platform, its collaborations and because of multiple clinical trials. The price-to-book is relatively high but the market capitalization is relatively low for a company with such major positive attributes.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business

MGNX is a clinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonal antibody-based therapeutics for the treatment of cancer and autoimmune diseases.

MGNX generates its pipeline of product candidates from a proprietary suite of next-generation antibody technology platforms, which MGNX believes improve the performance of monoclonal antibodies and antibody-derived molecules.

Product candidates may address disease-specific challenges which are not currently being met by existing therapies. MGNX creates both differentiated molecules that are directed to novel cancer targets, as well as "bio-betters," which are drugs designed to improve upon marketed medicines.

The combination of MGNX's technology platforms and antibody engineering expertise has allowed MGNX to generate promising product candidates and enter into several strategic collaborations with global pharmaceutical and biotechnology companies.

Strategic collaborations

MGNX has entered into strategic collaborations with Les Laboratoires Servier and Institut de Recherches Servier (Servier), Gilead Sciences, Inc. (NASDAQ:GILD), Boehringer Ingelheim International GmbH (Boehringer), and Pfizer (NYSE:PFE), which has a market cap of $192 billion.

Under current strategic collaborations, MGNX has received $106 million in non-equity funding during the three-year period ended June 30, 2013. Under these agreements MGNX is entitled to receive substantial milestone and other payments, including over $100 million of potential payments that MGNX believes are likely to be received by the end of 2015, assuming all collaboration programs advance as currently contemplated. As of June 30, 2013, MGNX had $33.8 million in cash and cash equivalents. Subsequently, MGNX received a $10 million milestone payment in August 2013.

Product Candidates

MGNX currently has two oncology product candidates in clinical development. Additionally, MGNX has several proprietary product candidates in pre-clinical development and expects to commence Phase 1 clinical trials on two of these product candidates in 2014.

Margetuximab, also known as MGAH22, is a monoclonal antibody that targets HER2-expressing tumors, including breast, gastroesophageal, bladder and other cancers. HER2, or human epidermal growth factor receptor 2, is critical for the growth of many types of tumors. MGNX is currently enrolling a Phase 2a clinical trial in metastatic breast cancer and anticipates commencing a Phase 3 potential registration clinical trial in advanced gastroesophageal cancer in the second half of 2014.

MGA271 is an Fc-optimized monoclonal antibody that targets B7-H3, a member of the B7 family of molecules and is over-expressed on a wide variety of solid tumor types. MGNX initiated a Phase 1 clinical trial that it expects to complete by the end of 2014. MGNX plans to initiate a Phase 2 clinical trial no later than early 2015.

MGD006 is a humanized DART molecule that recognizes CD123, the Interleukin-3 receptor, or IL3R, alpha chain which is expressed on leukemia and leukemic stem cells, but not on normal hematopoietic stem cells, and CD3, which is expressed on T cells. MGNX expects to commence a Phase 1 clinical trial in the first half of 2014.

MGD007 is a humanized DART molecule that recognizes both the glycoprotein gpA33, expressed on gastrointestinal tumors, including more than 95% of human colon cancers, and CD3, which is expressed on T cells. MGNX expects to commence a Phase 1 clinical trial in the second half of 2014.

Strategic Collaborations and Licenses

Servier
In November 2011, MGNX entered into a collaboration agreement with Servier under which MGNX granted Servier an option to obtain an exclusive license to develop and commercialize MGA271 in all countries other than the United States, Canada, Mexico, Japan, South Korea and India.

MGNX has received a $20 million option grant fee and a $10 million milestone payment, and may be eligible to receive up to $415 million in license grant fees, and clinical, development, regulatory and sales milestone payments. In the event Servier exercises its option, Servier must pay a license grant fee, estimated to be $30 million, based on the number of different indications represented within the planned Phase 1 patient population. MGNX and Servier will share Phase 2 and Phase 3 development costs.

In September 2012, MGNX entered into a second agreement with Servier and granted it options to obtain three separate exclusive licenses to develop and commercialize DART-based molecules, consisting of those designated by MGNX as MGD006 and MGD007, as well as a third DART molecule, in all countries other than the United States, Canada, Mexico, Japan, South Korea and India. It received a $20 million option grant fee.

In addition, MGNX will be eligible to receive up to $1 billion in additional license grant fees and clinical, development, regulatory and sales milestone payments if Servier exercises all three of its options and successfully develops, obtains regulatory approval for, and commercializes a product under each license, including $5 million upon IND acceptance for each of MGD006, MGD007 and a third DART molecule. In addition to these milestone payments, MGNX and Servier will share Phase 2 and Phase 3 development costs.

Additionally, under both agreements, Servier would be obligated to pay MGNX low double digit to mid-teen royalties on product sales in its territories.

Gilead
In January 2013, MGNX entered into an agreement with Gilead to grant it an exclusive worldwide license to research, develop and commercialize up to four DART-based molecules. Gilead has exclusive worldwide rights for three of the programs. For one program, MGNX retains development and commercialization rights outside of North America, the European Union, Norway, Iceland, Turkey, Australia and New Zealand.

MGNX received an initial $7.5 million license grant fee for the first DART-based molecule, and are eligible to receive up to an additional $22.5 million in grant fees on the remaining three DART-based molecules.

MGNX is further eligible to receive up to an additional $85 million in pre-clinical milestones across the four DART programs and up to $1 billion in additional clinical, regulatory and sales milestone payments if Gilead exercises all four of the options and achieves all of the requisite milestones under each option and license. Gilead also provides funding for internal and external research costs under the agreement. MGNX is also eligible to receive tiered royalties on the net sales at percentages ranging from the high-single digits to the low double digits, but less than teens, subject to reductions in specified circumstances.

Boehringer
In October 2010, MGNX entered into an agreement with Boehringer to discover, develop and commercialize up to ten DART-based molecules which may span multiple therapeutic areas. MGNX granted Boehringer an exclusive worldwide, royalty-bearing, license and received an upfront payment of $15 million.

MGNX subsequently received two annual maintenance payments and anticipates receiving a third annual maintenance payment in the fourth quarter of 2013. MGNX has the potential to earn development, regulatory and sales milestone payments that can reach up to $210 million for each of the DART programs under this agreement.

Boehringer provides funding for internal and external research costs and is required to pay MGNX mid-single digit royalties on product sales. From the commencement of the collaboration through June 30, 2013, MGNX has received $37.9 million under this agreement, including upfront, annual maintenance and milestone payments as well as research funding. In addition, Boehringer purchased $10 million of Series D-2 Preferred Stock in January 2011.

Pfizer
In October 2010, MGNX entered into a three year agreement with Pfizer to discover, develop and commercialize up to two DART-based molecules. MGNX granted Pfizer a non-exclusive worldwide, royalty-bearing license and received an upfront payment of $5 million and also received milestone payments and funding for internal and external research costs under the agreement.

MGNX is eligible to receive technical, development and sales milestone payments that can reach up to approximately $210 million for each DART program under this agreement. Pfizer is responsible for all pre-clinical and clinical development costs for the program. In addition, Pfizer is required to pay MGNX mid-single digit to low-teen royalties on product sales.

Under this collaboration, one DART program is currently being pursued and complete research obligations under this program in January 2014.

Green Cross
In June 2010, MGNX entered into a collaboration agreement with Green Cross for the development of margetuximab. MGNX received an upfront, non-refundable payment of $1.0 million and is eligible to receive clinical, development and commercial milestone payments up to $4.5 million as well as royalties ranging from the low-single digits to the low-twenties on net sales of margetuximab in South Korea. In addition, Green Cross purchased $2.0 million of Series D-2 Preferred Stock in January 2011.

Intellectual property

Margetuximab
MGNX's issued patent relates to the composition of or methods of making or using margetuximab and covers Fc engineered HER2 binding antibodies. This patent will expire in 2025.

A current pending U.S. application relates to the composition of margetuximab. If issued, this patent will expire in 2029.

Certain issued patents and pending U.S. patent applications for the Fc Optimization platform portfolio provide additional intellectual property protection for margetuximab. MGNX owns three issued patents in this portfolio, two that relate to compositions of matter and one that covers methods of use. In addition, MGNX has four current pending U.S. patent applications relating to compositions of matter, methods of using, and methods of making.

MGA271
This portfolio includes two pending U.S. patent applications. One of these pending patent applications claims MGA271 variable domains that bind to the B7-H3 receptor. Both pending patent applications cover the composition of or methods of making or using MGA271.

MGD006
This portfolio includes one U.S. pending provisional patent application that claims general composition of or methods of making or using MGD006.

Three pending U.S. patent applications are for the DART platform portfolio claiming compositions of matter, methods of using, methods of making and also cover MGD006.

MGD010
This portfolio includes four pending U.S. patent applications. Each patent application claims compositions of matter, methods of using, and methods of making.

DART Platform
This portfolio includes seven pending U.S. patent applications, each of which claims compositions of matter, methods of using, and methods of making. Patents resulting from six of these U.S. patent applications, if issued, will expire between 2026 and 2031.

Fc Optimization Platform
This portfolio includes three issued U.S. patents that cover the compositions of antibody Fc regions with certain mutations that affect their binding to Fc receptors. These patents expire in 2024.

Cancer Stem-like Cell Platform
This portfolio consists of one issued U.S. patent that will expire in 2028. Related national patents have been issued in a number of other countries and will expire on the same date. In addition to patent protection, the company will also rely on the use of trade secrets to protect the cancer stem-like cell platform.

Competition for lead products

Margetuximab
Irrespective of HER2 status, metastatic breast cancers are often treated with cytotoxic chemotherapies such as anthracyclines and taxanes, as well as capecitabine. Advanced and metastatic cancers are treated with chemotherapy and radiation therapy. In addition, there are several approved therapies specifically indicated for the treatment of early and advanced stage breast cancer and advanced gastroesophageal cancer that are HER2+, including Herceptin, Kadcyla, Tykerb and Perjeta, and each of those drugs targets HER2+ tumors.

MGA271
The most common treatments for solid tumors are various chemotherapeutic agents, radiation therapy and certain targeted therapies including monoclonal antibodies such as Herceptin, Avastin, Erbitux and Vectibix, as well as small molecule agents, including, Tarceva, Sunitinib and Sorafenib. No therapies are approved specifically for the treatment of tumors associated with the expression of B7-H3. Yervoy, which targets CTLA4, an inhibitory molecule on T cells, is currently indicated for the treatment of melanoma.

Bristol-Myers
In addition, there are several antibodies in development that target other members of the B7 family or their associated checkpoint receptors. These include anti-PD1 molecules by Merck and Bristol-Myers, and anti-PD-L1 molecules by Bristol-Myers and Roche and a PD-L1 Fc fusion protein by GSK and Amplimmune.

MGD006
The most common treatments for AML are various chemotherapeutic agents, radiation and stem cell transplants. No therapies are approved specifically for the treatment of AML associated with the expression of CD123. MGNX is aware of a monoclonal antibody currently being developed by CSL Limited which targets CD123. In addition, StemLine Therapeutics, Inc. has treated patients in a clinical trial with a recombinant protein composed of IL-3 linked to a truncated diphtheria toxin payload.

MGD007
The most common treatments for gastroesophageal tumors are various chemotherapeutic agents, radiation therapy, monoclonal antibodies including Herceptin, Avastin, Erbitux, Vectibix, as well as small molecule agents. No therapies are approved specifically for the treatment of tumors associated with the expression of gpA33.

MGD010
Current B cell targeted therapies for autoimmune diseases include Rituxan and Arzerra for the treatment of rheumatoid arthritis and Benlysta for the treatment of SLE. In addition, several other therapies are available to reduce inflammation, including nonsteroidal anti-inflammatory drugs such as Advil and Aleve; corticosteroids such as prednisone; disease-modifying antirheumatic drugs such as methotrexate and hydroxychloroquine; immunosuppressants such as cyclosporine; and other drugs which target a variety of processes involved with inflammation such as Actemra, Kineret, Enbrel, Remicade, Humira, Simponi, Cimzia, Orencia and Xeljanz.

Use of proceeds

MGNX expects to net $56 million from its IPO. Proceeds together with existing cash and cash:

$50 million and $20 million to fund clinical development expenses for margetuximab and MGA271, respectively;

$5 million, $15 million and $10 million to fund research and development expenses to advance remaining product candidates, including MGD006, MGD007 and MGD010, respectively; and

The remainder for working capital and general corporate purposes.

Disclaimer: This MGNX IPO report is based on a reading and analysis of MGNX's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: MacroGenics