MacroGenics (M55) Risk Analysis

We plan to develop, or engage third parties to develop, companion diagnostics for our product candidates where appropriate. At least in some cases, the FDA and similar regulatory authorities outside the United States may request or require the development and regulatory approval of a companion diagnostic as a condition to approving one or more of our product candidates. We do not have experience or capabilities in developing or commercializing diagnostics and are relying, and in the future plan to continue to rely, in large part on third parties to perform these functions. In most cases, we will likely outsource the development, production and commercialization of companion diagnostics to third parties. By outsourcing these companion diagnostics to third parties, we become dependent on the efforts of our third party contractors to successfully develop and commercialize these companion diagnostics. Our contractors: - may not perform their obligations as expected;- may encounter production difficulties that could constrain the supply of the companion diagnostic;- may have difficulties gaining acceptance of the use of the companion diagnostic in the clinical community;- may not commit sufficient resources to the marketing and distribution of such product; and - may terminate their relationship with us. If any companion diagnostic for use with one of our product candidates fails to gain market acceptance, our ability to derive revenues from sales of such product candidate could be harmed. If our third-party contractors fail to commercialize such companion diagnostic, we may not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use in connection with such product candidate or do so on commercially reasonable terms, which could adversely affect and delay the development or commercialization of such product candidate.

In December 2020, the FDA approved MARGENZA, in combination with chemotherapy, for the treatment of adult patients with metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 regimens, at least one of which was for metastatic disease. We launched MARGENZA in March 2021. In conjunction with Eversana, we continue to support commercialization of MARGENZA in the United States in a manner we believe to be appropriate in light of the limited size of the market opportunity. We have limited internal commercialization capabilities, and any additional products or product candidates that we may develop or in-license, will require significant capital expenditures, management resources and time. We have limited experience in commercializing our products. For example, we have limited experience in building and managing a commercial team, conducting a comprehensive market analysis or managing distributors and a field force for our products. We compete with many companies that currently have extensive and well-funded sales and marketing operations. For commercialization of any or all of our product candidates, we will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. If we are unable to, or decide not to, further develop internal sales, marketing, and commercial distribution capabilities for any or all of our products, we will likely pursue additional collaborative arrangements regarding the sales and marketing of our products. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will be effective. Any revenue we receive will depend upon the efforts of such third parties. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our products ourselves. We also face competition in our search for third parties to assist us with the commercialization of our products. There can be no assurance that we will be able to further develop or successfully maintain internal sales and commercial capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product, and as a result, we may not be able to generate substantial product sales revenue.

Although all of our product candidates have undergone or will undergo safety testing, not all adverse effects of drugs can be predicted or anticipated. Unforeseen side effects from any of our product candidates could arise either during clinical development or after the approved product has been marketed. Ongoing or future trials of our product candidates may not support the conclusion that one or more of these product candidates have acceptable safety profiles. The results of future clinical or nonclinical trials may show undesirable or unacceptable side effects, which could interrupt, delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatory authorities with restrictive label warnings, risk management measures, or potential product liability claims. For example, in July 2022 we announced the discontinuation of our Phase 2 trial of enoblituzumab in combination with either retifanlimab or tebotelimab in the treatment of patients with recurrent or metastatic SCCHN, based on an internal review of safety data. If we or others later identify undesirable or unacceptable side effects potentially caused by such products: - regulatory authorities may require us to take our approved product off the market;- regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;- we may be required to change the way the product is administered, impose other risk-management measures, conduct additional clinical trials or change the labeling of the product;- we may be subject to limitations on how we may promote the product;- sales of the product may decrease significantly;- we may be subject to litigation or product liability claims; and - our reputation may suffer. For example, the prescribing information for MARGENZA include warnings and precautions for infusion-related reactions, as well as a boxed warning related to left ventricular dysfunction and embryo-fetal toxicity. Based on the possible identification of future adverse events, we may be required to further revise the prescribing information, including MARGENZA's boxed warning, which could negatively impact sales of MARGENZA or adversely affect MARGENZA's acceptance in the market. Any of these events could prevent us, our collaborators or our potential future partners from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our products

A key element of our strategy is to use and expand our technology platforms to continue to build a pipeline of product candidates and progress several of these product candidates through clinical development for the treatment of a variety of different types of diseases. Although our research and development efforts to date have resulted in a pipeline of product candidates directed at various cancers, as well as autoimmune disorders and infectious diseases, we may not be able to develop product candidates that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for initial or continued clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and begin to commercialize product candidates, we will face difficulty in obtaining product revenues in future periods, which could result in significant harm to our financial position and adversely affect our stock price. Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

Our products in development are based on our technology platforms, including Fc Optimization, DART and TRIDENT technologies. Given the novelty of these technologies, we intend to work closely with the FDA and other regulatory authorities to perform the requisite scientific analyses and evaluation of our methods to obtain regulatory approval for our product candidates. Even though MARGENZA, which incorporates an Fc variation created using our Fc Optimization platform, was approved by the FDA, there is no assurance that the FDA will approve future product candidates using such technology. The validation process takes time and resources, may require independent third-party analyses, and may not be accepted by the FDA and other regulatory authorities. For some of our product candidates that are based on these technology platforms, the regulatory approval path and requirements may not be clear or evolve as more data becomes available for this product candidates, which could add significant delay and expense. Delays or failure to obtain regulatory approval of any of the product candidates that we develop would adversely affect our business.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any of our current and future collaborators may decide, or regulators may require us, to conduct additional clinical or nonclinical testing. Success in early clinical trials does not mean that future larger registration clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and non-U.S. regulatory authorities despite having progressed through initial clinical trials. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials. We may publicly disclose top line or interim data from time to time, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial or continued progress of the study or trial. The top line or interim results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top line and interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. In addition, the achievement of one primary endpoint for a trial does not guarantee that additional co-primary endpoints or secondary endpoints will be achieved, which may have an adverse effect on our ability to obtain or retain additional regulatory approval of products or product candidates in the U.S. or in other jurisdictions.

We, or our collaborators, are either currently enrolling patients in clinical trials or anticipate initiating, continuing, or designing, or supporting clinical trials for molecules that include vobra duo, lorigerlimab, retifanlimab, enoblituzumab, MGD024, and MGC026 or other molecules, as monotherapies or in combination with other product candidates. For example, in 2024 academic collaborators have initiated or will initiate an investigator sponsored trial for enoblituzuumab. We anticipate in the future collaborators will initiate or continue clinical trials of one or more our product candidates. The continuation, modification, or commencement of existing or new clinical trials could be substantially delayed or prevented by several factors, including: - further discussions with the FDA or other regulatory agencies regarding the scope or design of our clinical trials;- the limited number of, and competition for, suitable sites to conduct our clinical trials, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication as our product candidates;- any delay or failure in patient recruitment or enrollment in our or our collaborators' trials for any reason;- any delay or failure to obtain regulatory approval or agreement to commence a clinical trial in any of the countries where enrollment is planned;- inability to obtain sufficient funds required for a clinical trial;- clinical holds on, or other regulatory objections to, a new or ongoing clinical trial;- delay or failure to manufacture sufficient supplies of the product candidate for our clinical trials;- delay or failure to reach agreement on acceptable clinical trial terms or clinical trial protocols with prospective sites or CROs the terms of which can be subject to extensive negotiation and may vary significantly among different sites or CROs;- delay or failure to obtain IRB approval to conduct a clinical trial at a prospective site;- significant competition of product candidates that are expected to be more effective or have a more favorable safety profile;- approval of potential therapies by competitors; The progress or completion of our, or our collaborators', clinical trials have been and could also be substantially delayed or prevented by many factors, including: - unforeseen safety issues, including severe or unexpected drug-related adverse effects experienced by patients, including actual and possible deaths;- delays in expected site initiation, patient recruitment and enrollment, for any reason;- failure of patients to complete the clinical trial;- lack of efficacy during clinical trials;- termination of our clinical trials by one or more clinical trial sites;- inability or unwillingness of patients or clinical investigators to follow our clinical trial protocols;- economic and political instability in countries where our trial sites are located, including terrorist attacks, civil unrest and actual or threatened armed conflict;- inability to monitor patients adequately during or after treatment by us, our collaboration partners and/or our CROs; and - the need to repeat or terminate clinical trials as a result of inconclusive or negative results or unforeseen complications in testing. Changes in regulatory requirements and guidance may also occur and we may need to significantly amend clinical trial protocols to reflect these changes with appropriate regulatory authorities. Amendments may require us to renegotiate terms with CROs or resubmit clinical trial protocols to IRBs for re-examination, which may impact the costs, timing or successful completion of a clinical trial. Our clinical trials may be suspended or terminated at any time by the FDA, other regulatory authorities, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or us, due to a number of factors, including: - failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;- unforeseen safety issues or any determination that a clinical trial presents unacceptable health risks;- lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions; and - upon a breach or pursuant to the terms of any agreement with, or for any other reason by, current or future collaborators that have responsibility for the clinical development of any of our product candidates. Clinical trials of our product candidates are subject to partial or full clinical holds from time to time. A clinical hold received in the midst of conducting a trial may delay the progress of a clinical trial, or may require us to modify or discontinue such trial. Any failure or significant delay in completing clinical trials for our product candidates would adversely affect our ability to obtain regulatory approval and our commercial prospects and ability to generate product revenue will be diminished.

The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA and non-U.S. regulatory authorities, which regulations differ from country to country. We are not permitted to market our product candidates in the United States or in other countries until we receive approval of a Biologics License Application (BLA) from the FDA or marketing approval from applicable regulatory authorities outside the United States. Our product candidates are in various stages of development and are subject to the risks of failure inherent in drug development. For example, in July 2022 we announced the closure of our Phase 2 study evaluating the investigational regimen of enoblituzumab in combination with either retifanlimab or tebotelimab in the first-line treatment of patients with recurrent or metastatic SCCHN. The decision to discontinue the study was based on an internal review of safety data. The approval of a BLA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and non-U.S. regulatory requirements may, either before or after product approval, subject our company or our collaborators to administrative or judicially imposed sanctions, including: - restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;- restrictions on the products, manufacturers, manufacturing facilities or manufacturing process;- fines, warning letters or untitled letters;- civil and criminal penalties;- injunctions;- suspension or withdrawal of regulatory approvals;- product seizures, detentions or import bans;- voluntary or mandatory product recalls;- the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product;- total or partial suspension of production;- consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;- imposition of restrictions on marketing or operations, including costly new manufacturing requirements; and - refusal to approve pending BLAs or supplements to approved BLAs or analogous marketing approvals outside the United States. The FDA and foreign regulatory authorities also have substantial discretion in the drug approval process. The number of nonclinical studies and clinical trials that will be required for regulatory approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular drug candidate. Regulatory agencies can delay, limit or deny approval of a product candidate for many reasons, including: - a product candidate may not be deemed safe or effective;- the results may not confirm the positive results from earlier nonclinical studies or clinical trials;- regulatory agencies may not find the data from nonclinical studies and clinical trials sufficient or meaningful;- regulatory agencies might not approve or might require changes to our manufacturing processes or facilities; or - regulatory agencies may change their approval policies or adopt new regulations. Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price. Furthermore, any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size of the potential market for a product candidate, if approved.