Macrogenics Inc. landed Incyte Corp. as an immuno-oncology (I-O) partner, securing $150 million up front for a collaboration and license agreement covering MGA-012, its phase I monoclonal antibody (MAb) that inhibits programmed cell death protein 1 (PD-1). Incyte gained exclusive global rights to develop and commercialize MGA-012 in all indications, although Macrogenics held on to the right to develop the asset in combination with other candidates in its pipeline. Should any of these combinations gain approval, Incyte will commercialize MGA-012 and Macrogenics will commercialize its internal assets.

If all milestones are met, Rockville, Md.-based Macrogenics stands to pocket $900 million from the deal, including up to $420 million for meeting development and regulatory objectives and up to $330 million for commercial goals. Macrogenics also is eligible to receive royalties, rising in tiers from 15 percent to 24 percent, on sales of any Incyte products that include MGA-012.

From a business development strategy, Macrogenics didn't approach potential partners with the intention of out-licensing, but "we think this deal enables us to move forward in many ways," Scott Koenig, president and CEO, told BioWorld.

Macrogenics initially engaged in conversations with a number of companies throughout biopharma to consider a "consortium model" where it could supply MGA-012 for various combinations, with economics derived from each relationship. The approach didn't gain much traction, but Incyte expressed interest in an exclusive relationship.

"We indicated that the economics would have to be sizable," Koenig said.

For its part, Incyte had made no secret of seeking to bring a PD-1 into its portfolio to simplify its combination I-O drug development efforts.

"The reason for having a PD-1 in our portfolio was very transparent," Hervé Hoppenot, the company's president and CEO, conceded.

In addition to the company's large epacadostat program advancing across multiple oncology indications – all currently in combination with pembrolizumab (Keytruda, Merck and Co. Inc.) or nivolumab (Opdivo, Bristol-Myers Squibb Co.) – Incyte is developing the OX-40 receptor agonist INCAGN-1949, the arginase inhibitor INCB-001158, its follow-on JAK1 inhibitor itacitinib and the PI3K delta inhibitor INCB-50465. And the list doesn't stop there.

Despite agreements with Merck and BMS, "it's obvious to everybody that if we had our own PD-1, we could do this in a way that's faster, more practical, cheaper and more flexible so that we don't have to ask permission from the partner each time we want to try something new," Hoppenot told BioWorld.

'We have a shared vision'

The search for an available phase I/II-ready PD-1 asset with response rates at least equal to pembrolizumab and nivolumab led to Macrogenics.

"From there, we had a very 'make a wish' discussion about why we needed a PD-1 and why they also needed access to the PD-1," Hoppenot said.

He called the result a "wide agreement," adding, "We were inventing it as we went."

The collaboration, which took months to hammer out, calls for Incyte, of Wilmington, Del., to assume global development of MGA-012, beginning with a transition in leadership of the ongoing phase I program. That move made sense strategically, given Incyte's experience in the I-O field. Enrollment in the dose escalation portion of the study is complete, and the molecule is being evaluated as monotherapy across four solid tumor types in the dose expansion portion of the study. Data from the dose escalation portion of the study have been accepted for poster presentation at next month's Society for Immunotherapy of Cancer 32nd Annual Meeting in National Harbor, Md.

Macrogenics stands to benefit not only from combinations of MGA-012 and its pipeline assets, but also from additional Incyte deals involving MGA-012.

"PD-1 therapy as a backbone has become standard not only for immuno-active molecules like we are pursuing but also for small molecules and other molecules," Koenig said. "We have full latitude to develop this going forward, and that was the original intent. The opportunity to combine this with Incyte's molecules and other future partners opens up the commercial potential."

The resulting partnership offered favorable up-front economics, downstream milestones with "very nice size amounts compared to what the market is giving for phase I programs," Koenig said, and the opportunity to take advantage of the company's nearly complete manufacturing facility. Macrogenics will use the commercial-scale GMP facility, expected to be fully operational next year, to provide material to Incyte for clinical trials and, in the future, commercial products.

Although Macrogenics will advance combos of its agents with MGA-012 and Incyte will do the same for other combinations, the companies "have a shared vision of how we want to develop the molecule," Koenig maintained.

In a broader context, the up-front payment enables Macrogenics to increase its trajectory in the clinic, where the company now has 10 programs, including the Fc-optimized MAb, margetuximab, which targets the human epidermal growth factor receptor 2, or HER2, and is in phase III development in metastatic breast cancer and a phase II study in advanced gastric cancer. Macrogenics holds global rights to the MAb outside Korea, where it is partnered with Green Cross Corp.

Macrogenics, which previously guided that its financial runway extended into 2019, now has additional room to explore "lots of molecules in earlier stages," Koenig said.

For Incyte, the agreement represents shared risk – since each company has access to the PD-1 for its own development purposes on its own dime – yet Incyte gains the potential for an entirely new product line. Hoppenot isn't put off by the shared rights or lack of a non-compete clause.

"I'm a big believer in cooperation between pharma and biotech," he said. "To say that all companies are competing with all companies all the time is just wrong. There is competition, but at the same time there is an enormous potential for cooperation that is not used because people tend to have difficulties creating bridges. This deal is based on the idea that two companies can contribute to the success of this PD-1 and can do so in harmony."

Shares of Incyte (NASDAQ:INCY) closed at $114.55 Wednesday for a gain of 51 cents while Macrogenics (NASDAQ:MGNX) climbed $2.81, or 17.4 percent, to close at $19.00.