MacroGenics (MGNX) IPO Develops Treatment For Cancer

Oct.10.13 | About: MacroGenics, Inc. (MGNX)

MacroGenics Inc (NASDAQ:MGNX), a biopharmaceutical firm focused on the development of antibody-based treatments for cancer and autoimmune diseases, plans to raise $80 million in its upcoming IPO. The firm plans to offer five million shares at $16.00.

MGNX filed on September 4, 2013
Joint Bookrunners: BofA Merrill Lynch, Leerink Swann
Lead Manager: Stifel
Co-managers: Lazard Capital Markets, Wedbush PacGrow

MGNX is a clinical-stage biopharmaceutical company that develops monoclonal antibody-based therapeutics for the treatment of cancer and autoimmune diseases. The firm uses a trio of proprietary technologies to create treatments customized to fight particular diseases.

These technologies include Dual Affinity Re-Targeting (DART), which allows single molecules to target of multiple antigens or cells and to recruit any T cell in a patient's body to destroy targeted cancer cells; the Fc Optimization Platform, which allows antibodies and immune cells cooperate to destroy cancer cells through a mechanism called antibody-dependent cellular cytotoxicity, or ADCC; and the Cancer Stem-like Cell platform, which identifies cancer targets shared both by tumor-initiating cells and the differentiated cancer cells derived from them.

The firm has numerous oncology and autoimmune treatments based on these technologies in the clinical and pre-clinical stages of development.

MGNX offers the following figures in its S-1 balance sheet for the six months ended June 30, 2013:

Revenue: $22,896,000
Net Loss: ($3,586,000)
Total Assets: $42,183,000
Total Stockholders' Equity: ($10,930,000)

Although MGNX posted a loss for the first half of 2013, it has already proven a recent ability to generate positive income in calendar 2012 and 2011, during which it posted income of $8.4 million and $6.7 million, respectively. Moreover, the firm received a $10 million milestone payment in August of 2013, two months after the above loss of $3.6 million was posted.

Though there is inherent risk in investing in pharmaceutical developers due to the all-or-nothing nature of treatment development, MGNX looks to be a good bet and we would be a buyer today at $16.

The firm is developing numerous treatments concurrently, increasing its likelihood of eventually creating a profitable product. The firm's proprietary technologies are also encouraging for investors, since MGNX is able to begin the development of new products based on its existing platforms with relative ease.

MGNX has demonstrated an ability to generate revenue through partnerships with other firms that have purchased the rights to develop and commercialize its treatments for specific parts of the world; these partners include Servier Laboratories Limited, Gilead Sciences (NASDAQ:GILD), Boehringer Ingelheim Pharmaceuticals, and Pfizer (NYSE:PFE).

MGNX faces potent competition in the development of both cancer and autoimmune treatments, its two major categories of clinical and pre-clinical treatments. Major competitors developing similar treatments include Amgen Inc (NASDAQ:AMGN), F. Hoffman-La Roche Ltd., and Xencor Ltd.

Some of these competitors are better capitalized or have access to superior resources than MGNX. Competition is of particular concern in the biopharmaceutical industry, as the success of a competitor in developing a similar product could instantly undercut the majority of revenues that MGNX might have generated from a product that it had already placed significant funding towards. MGNX has yet to gain approval for any of its products for commercial sale.

President, CEO and co-founder Scott Koenig, M.D., Ph.D. has extensive experience in research medicine, having previously served as Senior Vice President of Research with MedImmune, Inc and having worked in the Laboratory of Immunoregulation at the National Institute of Allergy and Infectious Diseases at the National Institutes of Health. Vice President and CFO James Karrels has over 20 years of experience in finance, including 15 years with life sciences companies. Mr. Karrels previously served as Executive Director of Finance with Jazz Pharmaceuticals (NASDAQ:JAZZ).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MGNX over 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.

Additional disclosure: This article is neither a recommendation to buy or sell shares, and investors should always do their own research including reviewing the S-1.