mgnx-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36112

MACROGENICS, INC.

(Exact name of registrant as specified in its charter)


Delaware			06-1591613
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

9704 Medical Center Drive Rockville, Maryland			20850
(Address of principal executive offices)			(Zip code)

301-251-5172

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MGNX	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "accelerated filer," "large accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 26, 2021, 61,107,288 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS


PART I.			FINANCIAL INFORMATION

Item 1.			Financial Statements

			Consolidated Balance Sheets at June 30, 2021 (unaudited) and December 31, 2020

			Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and June 30, 2020 (unaudited)

			Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2021 and June 30, 2020 (unaudited)

			Consolidated Statements of Cash Flows for the si x months ended June 30, 2021 and June 30, 2020 (unaudited)

			Notes to Consolidated Financial Statements (unaudited)

Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.			Quantitative and Qualitative Disclosures about Market Risk

Item 4.			Controls and Procedures

PART II.			OTHER INFORMATION

Item 1.			Legal Proceedings

Item 1A.			Risk Factors

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.			Exhibits

			Signatures

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q. Forward-looking statements can often be identified by the use of terminology such as "subject to", "believe", "anticipate", "plan", "expect", "intend", "estimate", "project", "may", "will", "should", "would", "could", "can", the negatives thereof, variations thereon and similar expressions, or by discussions of strategy.

All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain. We may not realize our expectations, and our beliefs may not prove correct. Actual results could differ materially from those described or implied by such forward-looking statements. The following uncertainties and factors, among others (including those set forth under "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020), could affect future performance and cause actual results to differ materially from those matters expressed in or implied by forward-looking statements:

•the severity and duration of the impact of the COVID-19 global pandemic on our business, operations, clinical programs, manufacturing, financial results and other aspects of our business;

•our ability to commercialize MARGENZA and our plans to develop and commercialize our product candidates;

•the outcomes of our ongoing and planned clinical trials and the timing of those outcomes, including when clinical trials will be initiated or completed, and when data will be reported or regulatory filings will be made;

•the timing of and our ability to obtain and maintain regulatory approvals for MARGENZA and our product candidates and the labeling for any approved products;

•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our ability to raise additional capital through the capital markets or through one or more corporate partnerships, equity offerings, debt financings, collaborations, licensing arrangements or asset sales;

•our expectations regarding product candidates currently being developed by our collaborators;

•our ability to enter into new collaborations or to identify additional products or product candidates with significant commercial potential that are consistent with our commercial objectives;

•the potential benefits and future operation of our existing collaborations;

•our ability to recover the investment in our manufacturing capabilities;

•the rate and degree of market acceptance and clinical utility of our products;

•our commercialization, marketing and manufacturing capabilities and strategy;

•significant competition in our industry;

•costs of litigation and the failure to successfully defend lawsuits and other claims against us and our expectations regarding the outcome of any regulatory or legal proceedings;

•economic, political and other risks associated with our international operations;

•our ability to receive research funding and achieve anticipated milestones under our collaborations;

•our ability to protect and enforce patents and other intellectual property;

•costs of compliance and our failure to comply with new and existing governmental regulations including, but not limited to, tax regulations;

•loss or retirement of key members of management;

•failure to successfully execute our growth strategy, including any delays in our planned future growth; and

•our failure to maintain effective internal controls.

Consequently, forward-looking statements speak only as of the date that they are made and should be regarded solely as our current plans, estimates and beliefs. You should not place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance or achievements. Except as required by law, we do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MACROGENICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2021		December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	188,970	$	181,131
Marketable securities	108,346		91,400
Accounts receivable	45,248		23,081
Inventory	6,476		—
Prepaid expenses and other current assets	17,956		16,982

Total current assets	366,996		312,594
Property, equipment and software, net	39,395		42,225

Other assets	19,520		23,924
Total assets	$	425,911	$	378,743

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	9,818	$	8,031
Accrued expenses and other current liabilities	39,174		34,198
Deferred revenue	16,565		4,456
Lease liabilities	4,367		3,988

Total current liabilities	69,924		50,673
Deferred revenue, net of current portion	13,476		6,926
Lease liabilities, net of current portion	23,208		25,260
Other non current liabilities	258		—
Total liabilities	106,866		82,859
Stockholders' equity:
Common stock, $0.01 par value -- 125,000,000 shares authorized, 60,133,447 and 56,244,771 shares outstanding at June 30, 2021 and December 31, 2020, respectively	601		562
Additional paid-in capital	1,181,471		1,067,150
Accumulated other comprehensive income (loss)	1		(7)
Accumulated deficit	(863,028)		(771,821)
Total stockholders' equity	319,045		295,884
Total liabilities and stockholders' equity	$	425,911	$	378,743

See notes to consolidated financial statements.

MACROGENICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Revenue from collaborative and other agreements	$	27,168	$	15,636	$	42,352	$	28,603
Product revenue, net	3,203		—		4,090		—
Revenue from government agreements	386		4,621		1,196		5,336
Total revenues	30,757		20,257		47,638		33,939
Costs and expenses:
Cost of product sales	22		—		39		—
Research and development	55,780		57,351		108,901		106,245
Selling, general and administrative	15,234		10,216		30,270		20,449
Total costs and expenses	71,036		67,567		139,210		126,694
Loss from operations	(40,279)		(47,310)		(91,572)		(92,755)
Other income	344		425		365		1,146
Net loss	(39,935)		(46,885)		(91,207)		(91,609)
Other comprehensive income (loss):
Unrealized gain (loss) on investments	(10)		(55)		8		1
Comprehensive loss	$	(39,945)	$	(46,940)	$	(91,199)	$	(91,608)

Basic and diluted net loss per common share	$	(0.66)	$	(0.94)	$	(1.56)	$	(1.85)
Basic and diluted weighted average common shares outstanding	60,068,315		50,018,462		58,643,496		49,515,562

See notes to consolidated financial statements.

MACROGENICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except share amounts)


	Common Stock			Additional Paid-In Capital	Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2020	56,244,771	$	562		$	1,067,150	$	(771,821)	$	(7)	$	295,884
Share-based compensation	—	—			5,243		—		—		5,243
Issuance of common stock, net of offering costs	3,622,186	36			98,164		—		—		98,200
Stock plan related activity	144,249	2			2,456		—		—		2,458
Unrealized gain on investments	—	—			—		—		18		18
Net loss	—	—			—		(51,272)		—		(51,272)
Balance, March 31, 2021	60,011,206	600			1,173,013		(823,093)		11		350,531
Share-based compensation	—	—			6,113		—		—		6,113
Stock plan related activity	122,241	1			2,345		—		—		2,346
Unrealized loss on investments	—	—			—		—		(10)		(10)
Net loss	—	—			—		(39,935)		—		(39,935)
Balance, June 30, 2021	60,133,447	$	601		$	1,181,471	$	(863,028)	$	1	$	319,045


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2019	48,958,763	$	490	$	872,204	$	(642,082)	$	16	$	230,628
Share-based compensation	—	—		4,451		—		—		4,451
Stock plan related activity	172,387	2		160		—		—		162
Unrealized gain on investments	—	—		—		—		56		56
Net loss	—	—		—		(44,724)		—		(44,724)
Balance, March 31, 2020	49,131,150	492		876,815		(686,806)		72		190,573
Share-based compensation	—	—		5,136		—		—		5,136
Issuance of common stock, net of offering costs	4,060,482	40		96,472		—		—		96,512
Stock plan related activity	173,371	2		2,501		—		—		2,503
Unrealized loss on investments	—	—		—		—		(55)		(55)
Net loss	—	—		—		(46,885)		—		(46,885)
Balance, June 30, 2020	53,365,003	$	534	$	980,924	$	(733,691)	$	17	$	247,784

See notes to consolidated financial statements.

MACROGENICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(91,207)	$	(91,609)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	5,510		6,105
Amortization of premiums and discounts on marketable securities	808		(401)
Stock-based compensation	11,356		9,587
Changes in operating assets and liabilities:
Accounts receivable	(22,166)		(6,461)
Inventory	(6,476)		—
Prepaid expenses and other current assets	(974)		3,093
Other assets	4,404		995
Accounts payable	1,668		(1,476)
Accrued expenses and other current liabilities	5,365		3,337
Lease liabilities	(1,673)		(1,534)
Deferred revenue	18,659		(3,767)
Other non current liabilities	—		1,443
Net cash used in operating activities	(74,726)		(80,688)
Cash flows from investing activities
Purchases of marketable securities	(117,546)		(72,199)
Proceeds from sale and maturities of marketable securities	99,800		125,617
Purchases of property, equipment and software	(2,693)		(1,847)
Net cash provided by (used in) investing activities	(20,439)		51,571
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs	98,200		96,512
Proceeds from stock option exercises and ESPP purchases	4,910		2,665
Taxes paid related to net share settlement of equity awards	(106)		—
Net cash provided by financing activities	103,004		99,177
Net change in cash and cash equivalents	7,839		70,060
Cash and cash equivalents at beginning of period	181,131		126,472
Cash and cash equivalents at end of period	$	188,970	$	196,532

Supplemental Cash Flow Information
Property, equipment and software included in accounts payable or accruals	$	118	$	—

See notes to consolidated financial statements.

MACROGENICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Nature of Operations

Description of the business

MacroGenics, Inc. (the Company) is incorporated in the state of Delaware. The Company is a biopharmaceutical company focused on developing and commercializing innovative antibody-based therapeutics designed to modulate the human immune response for the treatment of cancer. In December 2020, the U.S. Food and Drug Administration (FDA) approved MARGENZA (margetuximab-cmkb) 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. The Company launched MARGENZA in collaboration with our commercialization partner, Eversana Life Science Services, LLC (Eversana), in March 2021. In addition, the Company has a pipeline of product candidates in human clinical testing that have been created primarily using its proprietary, antibody-based technology platforms. The Company believes its product candidates have the potential to have a meaningful effect on treating patients' unmet medical needs as monotherapy or, in some cases, in combination with other therapeutic agents.

Liquidity

The Company’s multiple product candidates currently under development will require significant additional research and development efforts that include extensive preclinical studies and clinical testing, and regulatory approval prior to commercial use.

As a biotechnology company, the Company has primarily funded its operations with proceeds from the sale of its common stock in equity offerings, revenue from its multiple collaboration agreements, and contracts and grants from the National Institute of Allergy and Infectious Diseases (NIAID). Management regularly reviews the Company’s available liquidity relative to its operating budget and forecast to monitor the sufficiency of the Company’s working capital, and anticipates continuing to draw upon available sources of capital, including equity and debt instruments, to support its product development activities. Based on the Company’s most recent cash flow forecast, the Company believes its current cash, cash equivalents and marketable securities is sufficient to fund its operating plans for a minimum of twelve months from the date that this Quarterly Report was filed. The Company plans to meet its near-term operating requirements primarily through cash and marketable securities on hand, and a combination of product sales and current and future strategic collaborations and alliances and marketing, distribution or licensing arrangements. In the longer term, the Company plans to meet its operating requirements by generating revenue from product sales to the extent its other product candidates receive marketing approval and can be commercialized, or by potential future equity or debt issuances. There can be no assurances that new sources of capital will be available to the Company on commercially acceptable terms, if at all. Also, any future collaborations, strategic alliances and marketing, distribution or licensing arrangements may require the Company to give up some or all rights to a product or technology at less than its full potential value. If the Company is unable to enter into new arrangements or to perform under current or future agreements or obtain additional capital, the Company will assess its capital resources and may be required to delay, reduce the scope of, or eliminate one or more of its product research and development programs or clinical studies, and/or downsize its organization.

Similar to the other risk factors pertinent to the Company's business, the COVID-19 pandemic might unfavorably impact the Company's ability to generate such additional funding. Given the uncertainty in the rapidly changing market and economic conditions related to the COVID-19 pandemic, the Company will continue to evaluate the nature and extent of the impact of the pandemic on its business and financial position.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of the Company believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

The accompanying unaudited interim consolidated financial statements include the accounts of MacroGenics, Inc. and its wholly owned subsidiaries, MacroGenics UK Limited and MacroGenics Limited. All intercompany accounts and transactions have been eliminated in consolidation. These consolidated financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 25, 2021.

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2021, the Company adopted the following significant accounting policies in addition to those previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Inventory

The Company outsources the manufacturing of MARGENZA. Prior to FDA approval of MARGENZA in December 2020, the cost of materials and expenses associated with the manufacturing of MARGENZA were recorded as research and development expense. Subsequent to regulatory approval, the Company began capitalizing MARGENZA inventory costs. The Company values its inventories at the lower of cost and estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and third-party contract manufacturing costs, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such write downs, should they occur, are recorded within the cost of sales in the statement of operations.

As of June 30, 2021, the Company’s inventory balance consisted primarily of raw materials purchased and work in progress manufactured after the FDA approval of MARGENZA.

Product Revenue, Net

The Company entered into a limited number of arrangements with specialty distributors in the United States to distribute MARGENZA. These arrangements are considered to be contracts with customers and are in the scope of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606). The Company has written contracts with each of its customers that have a single performance obligation - to deliver products upon receipt of a customer order - and these obligations are satisfied when delivery occurs and the customer receives the product. The specialty distributors subsequently resell the Company’s product to healthcare providers. Product revenue is recorded net of applicable reserves for variable consideration, including discounts and other allowances. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of sales. For the three and six months ended June 30, 2021, the shipping costs incurred were immaterial.

Reserves for Variable Consideration

Revenue from product sales is recorded at the net sales price, which includes estimates of variable consideration. Components of variable consideration typically include discounts, product returns, provider chargebacks and discounts and government rebates. Variable consideration is estimated following the expected value method in accordance with ASC 606 and includes such factors as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Estimates of the variable consideration were not deemed constrained during the six months ended June 30, 2021.

Customer Discounts and Service Fees

The Company may provide customers with discounts which are explicitly stated in the contracts. These discounts are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, these contracts may include written service arrangements whereby the Company pays fees to customers who provide services such as sales order management, data, contract administration and distribution services, at rates which we believe to be consistent with fair market value. The Company has determined such services received to date are not distinct from the Company’s sale of products to its customers and, therefore, these payments have been recorded as a reduction of revenue within the statement of operations.

Product Returns

Consistent with industry practice, the Company offers the specialty distributors product return rights pursuant to written contracts and/or Company returned goods policies. The Company estimates the amount of its product sales that may be returned by its customers and records an estimated liability and a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product returns using industry benchmarking as well as other information available, such as visibility into the inventory remaining in the distribution channel, since the Company does not have its own

returns experience. The Company's estimates of product returns may be adjusted in the future based on actual returns experience, known or expected changes in the marketplace, or other factors.

Provider Chargebacks and Discounts

Chargebacks for fees and discounts to healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who directly purchase the product from the Company. In such cases, customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. The reserve for chargebacks is established in the same period that the related revenue is recognized, resulting in a reduction of product revenue. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by customers, and the Company generally issues credits for such amounts within a few weeks of the customer’s notification to the Company of the resale. Chargebacks consist of credits the Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company expects will be sold to qualified healthcare providers and chargebacks that customers have claimed, but for which the Company has not yet issued a credit.

Government Rebates

The Company is subject to discount and/or rebate obligations under state Medicaid programs, Medicare and contractual agreements with and statutory obligations to certain Federal and State entities. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimates of future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period.

Customer discounts are recorded as a reduction of accounts receivable on the consolidated balance sheets. Allowance for product returns, provider chargebacks, government and other rebates and service fees are recorded as a component of accrued expenses and other current liabilities on the consolidated balance sheets.

Cost of product sales

Cost of product sales relates to sales of MARGENZA. These costs include material, manufacturing and shipping costs, as well as royalties payable on net sales of MARGENZA. All product costs incurred prior to FDA approval of MARGENZA in December 2020 were expensed as research and development expense. The Company expects cost of product sales to continue to be positively impacted as the Company sells through inventory that was expensed prior to FDA approval of MARGENZA in December 2020. The Company is currently unable to estimate how long it will be until it begins selling product manufactured post FDA approval.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 is part of the FASB’s overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. The updated guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The adoption of this standard as of January 1, 2021 had no impact on the Company's consolidated financial statements and related disclosures.

The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that the adoption of these ASUs will not have a material impact on the Company's consolidated financial statements.

3. Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. The carrying amount of accounts receivable, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of their short-term nature. The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosures about fair value measurements. The ASC 820 hierarchy ranks the quality of reliability of inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

•Level 1 - Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.

•Level 2 - Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated by observable market data.

•Level 3 - Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgments to be made by a reporting entity - e.g., determining an appropriate adjustment to a discount factor for illiquidity associated with a given security.

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the ASC 820 hierarchy.

Financial assets measured at fair value on a recurring basis were as follows (in thousands):


	Fair Value Measurements at June 30, 2021
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
	Total		Level 1		Level 2
Assets:
Money market funds	$	16,606	$	16,606	$	—
U.S. Treasury securities	79,249		—		79,249
Government-sponsored enterprises	4,537		—		4,537
Corporate debt securities	42,809		—		42,809

Total assets measured at fair value(a)	$	143,201	$	16,606	$	126,595


	Fair Value Measurements at December 31, 2020
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
	Total		Level 1		Level 2
Assets:
Money market funds	$	49,004	$	49,004	$	—
U.S. Treasury securities	60,623		—		60,623

Corporate debt securities	33,776		—		33,776

Total assets measured at fair value(b)	$	143,403	$	49,004	$	94,399

(a) Total assets measured at fair value at June 30, 2021 includes approximately $34.9 million reported in cash and cash equivalents on the consolidated balance sheet.

(b) Total assets measured at fair value at December 31, 2020 includes approximately $52.0 million reported in cash and cash equivalents on the consolidated balance sheet.

The fair value of Level 2 securities is determined from market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data. There were no transfers between levels during the periods presented, and the Company has no Level 3 securities in its portfolio.

4. Marketable Securities

The following tables summarize the Company's marketable debt securities (in thousands):


	June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	79,244	$	5	$	—	$	79,249
Government-sponsored enterprises	4,537		—		—		4,537
Corporate debt securities	24,564		—		(4)		24,560
Total	$	108,345	$	5	$	(4)	$	108,346

December 31, 2020

Amortized
Cost

SEC Form 10-Q filed by MacroGenics, Inc.