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Edited Transcript of MGNX earnings conference call or presentation 31-Jul-19 8:30pm GMT

Q2 2019 MacroGenics Inc Earnings Call

Rockville Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of MacroGenics Inc earnings conference call or presentation Wednesday, July 31, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anna Krassowska

MacroGenics, Inc. - VP of IR & Corporate Communications

* James Karrels

MacroGenics, Inc. - Senior VP, CFO & Secretary

* Scott Koenig

MacroGenics, Inc. - CEO, President & Director

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Conference Call Participants

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* Aaron Welch; H.C. Wainwright & Co., LLC;Equity Research Associate

* Christopher N. Marai

Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology

* Ellen Sands

Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst

* Jonathan Miller

Evercore ISI Institutional Equities, Research Division - Associate

* Michael Vincent Morabito

Crédit Suisse AG, Research Division - Research Analyst

* Peter Richard Lawson

SunTrust Robinson Humphrey, Inc., Research Division - Director

* Wei Ji Chang

SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst

* Yigal Dov Nochomovitz

Citigroup Inc, Research Division - Director

* Yue-Wen Zhu

Guggenheim Securities, LLC, Research Division - Associate

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Presentation

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Operator [1]

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Good afternoon. We will begin the MacroGenics 2019 Second Quarter Corporate Progress and Financial Results Conference Call in just a moment. (Operator Instructions) At this point, I will turn the call over to Anna Krassowska, Vice President, Investor Relations and Corporate Communications of MacroGenics.

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Anna Krassowska, MacroGenics, Inc. - VP of IR & Corporate Communications [2]

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Thank you. Good afternoon and welcome to MacroGenics' conference call to discuss our second quarter 2019 financial and operational results. For anyone who has not had a chance to review our results, we issued a press release this afternoon outlining today's announcement, which is available under the Investor tab on our website at www.macrogenics.com. You can also listen to this conference call via webcast on our website, where it will be archived for 30 days, beginning approximately 2 hours after the call is completed.

I would like to alert listeners that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual, quarterly and current reports filed with the SEC.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change, except to the extent required by applicable law.

And now I'd like to turn the call over to Dr. Scott Koenig, MacroGenics's President and Chief Executive Officer.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [3]

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Thank you, Anna. I'd like to welcome everyone participating via conference call and webcast today. Thank you for joining us. We made significant progress during the first half of the year across our pipeline of non-clinical immuno-oncology product candidates, and I will be providing a review of recent accomplishments, as well as some upcoming events. But before I do so, let me first turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer, who will review our financial results for the quarter.

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James Karrels, MacroGenics, Inc. - Senior VP, CFO & Secretary [4]

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Thank you, Scott. This afternoon MacroGenics reported financial results for the quarter ended June 30, 2019, which highlight our financial position, as well as the progress we've made over the quarter. As described in our release, MacroGenics had research and development expense of $51.4 million for the quarter ended June 30, 2019, compared to $52 million for the quarter ended June 30, 2018. This decrease was due to decreased clinical trial costs, as a result of completing enrollment of the margetuximab Phase 3 SOPHIA study, as well as decreased manufacturing and development costs for flotetuzumab. These decreases were partially offset by increased clinical trial costs for MGD013 in addition to increased development and manufacturing cost related to MGA012.

We had general and administrative expenses of $12.1 million for the quarter ended June 30, 2019 compared to $11.1 million for the quarter ended June 30, 2018. This increase was primarily due to higher consulting expenses and other professional service fees. We recorded total revenue, consisting primarily of revenue from collaborative agreements of $10.6 million for the quarter ended June 30, 2019 compared to $18.8 million for the quarter ended June 30, 2018.

This decrease was primarily due to decreased revenue recognized under the collaboration and license agreement with Incyte during the second quarter of 2019 versus 2018, as well as a decrease of $6.1 million in revenue recognized under the license agreement and asset purchase agreement with Provention Bio during the second quarter of 2019 versus 2018. These decreases were partially offset by the recognition of $4 million of deferred revenue related to the upfront payment under the collaboration and license agreement with Zai Lab.

We had a net loss of $31.8 million for the quarter ended June 30, 2019 compared to a net loss of $43.2 million for the quarter ended June 30, 2018. I will note that our net loss for the quarter ended June 30, 2019 included other income of $21.2 million, most of which related to the revaluation of warrants received from Provention Bio under the previously-mentioned agreements.

And finally, our cash, cash equivalents and marketable securities as of June 30, 2019 or $272.1 million compared to $232.9 million as of December 31, 2018. Our cash as of June 30, 2019 excludes $15 million from I-Mab Pharma, which we expect to receive during the third quarter.

And now I'll turn the call back to Scott.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [5]

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Thank you, Jim. Let's begin with margetuximab, our novel investigational immune optimized anti-HER2 antibody, which has an Fc domain engineered to enhance engagement and activation of the immune system. We present the results from SOPHIA, our pivotal Phase 3 trial in HER2-positive metastatic breast cancer at ASCO in June. SOPHIA was designed to compare margetuximab plus chemotherapy against trastuzumab and chemotherapy. We have reported that progression-free survival in the margetuximab arm was prolonged compared to the trastuzumab arm meeting the study's first sequential primary endpoint.

The study's second sequential primary endpoint is overall survival or OS. At ASCO, we reported early OS data from the first pre-specified interim analysis conducted after 158 events have been reached in October 2018, showing a preliminary trend in OS in favor of margetuximab. Given the molecules mechanism of action of enhancing anti-tumor immune responses, as well as insight gained from our earlier Phase 1 study, we remain hopeful that the preliminary survival trend in favor of margetuximab will continue. Although subsequent results could fluctuate as additional OS events accrue.

We expect to conduct the second pre-specified interim analysis based on 270 OS events in the second half of this year. The final OS analysis is planned after 385 events have accrued and is projected to be completed in 2020. Notably, we believe that this is the first randomized Phase 3 study designed to examine the potential benefit of Fc modification and the role where Fc gamma receptor genotypes on anti-body efficacy. As you will recall, patients carrying the CD16A 158F allele, which represents approximately 85% of the human population have been reported to show diminished clinical responses to certain therapeutic antibodies, including trastuzumab.

The optimized Fc region of margetuximab binds with increased affinity to CD16A, including the 158F low-affinity allele. In an exploratory subpopulation of patients in SOPHIA, carrying the 158F allele for PFS and preliminary OS outcomes for margetuximab were prolonged compared to the trastuzumab arm.

As we have previously reported, we held a pre-BLA meeting with the FDA in the second quarter. We plan to submit a Biologics License Application to the FDA to support registration of margetuximab in third and later lines of HER-2 positive metastatic breast cancer patients in the fourth quarter of 2019.

In our data package, we intend to include results from the second pre-specified interim OS analysis in addition to the result of the primary PFS analysis and secondary and exploratory analyses. With no FDA approved therapies after progression on margetuximab, pertuzumab and adult trastuzumab emtansine, patients with HER2-positive metastatic breast cancer continue to need new treatment options.

If approved by regulators, based on SOPHIA data, we believe margetuximab could become valuable treatment option for patients living with this devastating disease. In this regard, we're continuing to explore potential partnerships around margetuximab.

Regardless of whether we or another party lead the commercialization of margetuximab, we have ongoing efforts to prepare for successful launch. We're also seeking to address unmet needs of HER-2 positive cancers beyond breast cancer. In an ongoing Phase 2 study, we are currently evaluating margetuximab in combination with an anti-PD-1 mAb in patients with HER-2 positive gastric or gastroesophageal junction cancer in the second-line setting. These patients had received prior treatment with chemotherapy and trastuzumab, but were naive to anti-PD-1 immunotherapy.

In ASCO GI in January, we presented safety overall response rate and progression-free survival data from the Phase 2 study that benchmarked favorably in comparison to other prior studies of standard care of treatment in the second-line setting. Subsequently, during our margetuximab conference call at ASCO in June, the lead investigator for the study reported updated overall survival of 16.8 months in the HER-2, IHC 3+ positive, gastric cancer population regardless of PD-L1 status.

Median OS has still not been reached in the subpopulation of double-positive patients. An abstract representing these updated data as well as 2 other abstracts related to the Phase 2 study have been accepted for post the presentation at the ESMO Congress in September.

Encouraged by these results, in the third quarter, we plan to initiate MAHOGANY, a Phase 2/3 registration study of margetuximab in patients with gastric or gastroesophageal cancer in the front-line setting. The MAHOGANY study is planned to be in 2 modules. Module A is designed as a single-arm study of margetuximab in combination with MGA012 and anti-PD-1 mAb in HER-2 positive and PD-L1 positive patients.

This combination approach is designed to quarterly engage both innate and adaptive immunity and a chemotherapy-free regimen. Module B of MAHOGANY is designed as a randomized controlled Phase 2/3 trial to evaluate the combination of margetuximab with chemotherapy, plus either MGA012 or MGD013 our PD-1 x LAG-3 DART molecule compared to trastuzumab with chemotherapy.

In Module B, HER-2 positive patients will be eligible regardless of PD-L1 status. After approximately 50 patients per arm have been treated in the first stage of Module B, we will conduct an interim analysis on safety and overall response rate as an efficacy measure to select either MGA012 or MGD013 based combination regimen for the experimental arm in the second stage.

The primary efficacy endpoint for Module B is designed to be overall survival. We plan to coordinate these global efforts with our partner in Greater China, Zai Lab.

Now I'd like to turn out to our franchise of B7-H3 directed product candidates. Enoblituzumab, our lead molecule is an investigational mab targeting B7-H3 into which we have incorporated the same Fc mutations that have been clinically validated in margetuximab. Enoblituzumab is currently in development in combination with an anti-PD-1. With this approach, we are again seeking to engage both innate and adaptive immunity in a coordinated manner for cancer immunotherapy.

Encouraged by our Phase 1 results, which were presented as SITC last year, we are planning a Phase 2/3 study of enoblituzumab in combination with MGA012 in patients with head and neck cancer. We recently met with the FDA to discuss our proposed trial and anticipate initiating the study in the fourth quarter of 2019. We look forward to sharing the design in more detail in the future.

We also recently announced an exclusive collaboration and license agreement with I-Mab Biopharma to develop and commercialize enoblituzumab in China, Hong Kong, Macau and Taiwan.

As Jim mentioned, we expect to receive an upfront payment of $15 million in connection with the collaboration and we'll also be eligible to receive additional development and regulatory milestones of up to $135 million. In addition, I-Mab will pay tiered royalties ranging from the mid-teens to 20%, based on annual net sales in its territories.

Our second drug candidate in our B7-H3 franchise is MGD009, a bispecific DART molecule that is designed to target both B7-H3 expressed on tumor cells as well as CD3, which is expressed on normal T cell. We are no longer recruiting patients to the monotherapy study and we are instead prioritizing the combination and MGD009 with MGA012. We are planning to submit an amendment to the combination study clinical protocol, including initiation of a dose expansion cohort in patients with melanoma who have previously been treated with a checkpoint inhibitor.

MGC018, our third B7-H3 directed investigational candidate is an antibody drug conjugate that targets solid tumors expressing B7-H3. The Phase 1 dose escalation study of MGC018 is ongoing.

The next program I will discuss is flotetuzumab, our investigational bispecific DART molecule that recognizes both CD123 and CD3. Flotetuzumab is currently being evaluated in a Phase 1 study in patients with relapsed or refractory acute myeloid leukemia or AML. We have now completed enrollment of a total of 50 patients at the recommended Phase 2 dose in the Phase 1 monotherapy study. This includes 30 patients with primary refractory AML, an extremely challenging population to treat. Recall that in our initial dose expansion that we reported at the Annual Meeting of the American Society for Hematology or ASH last year, we observed a higher response rate in the primary refractory patients.

We intend to submit updated data from the trial for presentation at ASH in December. We have also requested an end of Phase 1 meeting with the FDA to discuss future development of flotetuzumab and to define a potential registration path for this molecule as monotherapy. We would anticipate that meeting could occur this quarter.

As I had said previously, once we completed enrollment of this latest monotherapy expansion cohort, we would plan to initiate a combination study of flotetuzumab and MGA012 in relapsed or refractory AML as a potential means to both broaden and lengthen the duration of response of AML patients on flotetuzumab. The combination is supported by a strong scientific rationale, based on data that we have previously reported. We are well positioned to initiate this combination study in the third quarter of this year.

As we announced a few weeks ago, Servier notified us of their intention to terminate the collaboration and license agreement with us. As a result, MacroGenics will regain full global rights to develop and commercialize flotetuzumab. We have made significant progress to advance flotetuzumab during our collaboration with Servier and we thank them for their participation. However, as MacroGenics has been leading the ongoing multi-national clinical effort, we anticipate no disruption or impact to our continued development of flotetuzumab and are excited about the potential of the program going forward.

Turning to our PD-1 franchise, we have 3 PD-1 directed programs in the clinic; MGA012, our anti-PD-1; MGD013 our anti-PD-1 x LAG-3 and MGD019, our anti-PD-1 x CTLA-4. We believe that these programs give us tremendous flexibility to clinically target key checkpoint pathways with these multi-specific molecules either alone or in combination with other immunotherapeutic agents in our portfolio. We believe these molecules can provide us the opportunity to clinically target both checkpoint naive and checkpoint experience patient populations.

The first and most advanced MGA012 was exclusively licensed to Incyte Corporation globally although we retained the rights to develop our pipeline molecules in combination with 012.

Incyte is initially pursuing development of MGA012 monotherapy through 3 potentially registration-directed clinical trials. One in MSI-high endometrial cancer and one in Merkel cell carcinoma with initial data anticipated in 2020 and the study in anal cancer with initial data expected in 2021.

In addition both Incyte and MacroGenics are each studying MGA012 in multiple combination trials. In total the expanding development program for MGA012 includes approximately a dozen clinical studies. As a reminder, under the terms of our agreement with Incyte, MacroGenics is eligible to receive up to $420 million in potential development and regulatory milestones and up to $330 million in potential commercial milestone. If MGA012 is approved and commercialized, MacroGenics would be eligible to receive royalties tiered from 15% to 24% on future sales of MGA012 by Incyte.

Our second checkpoint molecule is MGD013, a first-in-class investigational DART molecule that is designed to provide co-blockade of 2 immune checkpoint molecules expressed on T cells, PD-1 and LAG-3, for the potential treatment of a range of solid tumors and hematological malignancies. We have now enrolled approximately 100 patients in the Phase 1 dose expansion study in up to 9 tumor types.

As we mentioned during our conference call at ASCO, we observed some early signals of clinical activity, including a patient with gastric cancer who is refractory to prior treatment with nivolumab and who has achieved a partial response with complete resolution of target lesions after receiving MGD013 monotherapy. We plan to submit data from this study for presentation at a scientific conference in the second half of 2019.

Another investigational dual checkpoint DART molecule MGD019 is designed to provide co-blockade of PD-1 and CTLA-4 on T cells. Our Phase 1 study of MGD019 is ongoing in dose escalation. Finally, MGD007, our investigational bispecific DART molecule designed to redirect T cells to target gpA33 expressed on colon cancer is being evaluated in combination with MGA012.

We have completed enrollment of 26 patients in our Phase 1 expansion cohort, and I expect to provide a clinical update and determine next steps for this program in the first quarter of 2020.

In summary, in the first half of the year through SOPHIA, we achieve clinical validation of our proprietary Fc optimization technology that is incorporated in 2 of our investigational monoclonal antibodies margetuximab and enoblituzumab. These Fc engineered antibodies can engage both innate and adaptive immunity as mediators of their anti-tumor activity, an emerging paradigm in immuno-oncology.

We are also advancing several bispecific antibodies from our DART platform as well as combining several of our pipeline molecules with MGA012 leveraging [complementary] mechanisms and building competitive advantage. During the second half of the year, we remain focused on execution. We expect to initiate 2 additional registration directed clinical trials, submit the BLA for margetuximab in metastatic HER2 positive breast cancer and provide clinical updates for several other programs.

We would now be happy to address any questions for call -- that callers may have. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Christopher Marai with Nomura.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [2]

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I guess, I was wondering, Scott, if you could help us understand a little bit about the plan for the B7-H3 bispecific development. It looks like you're deprioritizing monotherapy development, but now, looking at it in combination with your anti-PD-1, is that because you couldn't find a tolerable dose at higher doses? I know you had some problems earlier with that or 2. Could you maybe explain how far you got along in dosing and are you seeing maybe up regulation of PD-L1 on the tumor, like you did with the, I guess, flotetuzumab?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [3]

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Christopher, Thanks so much for the questions. We're very excited about the prospects of our B7-H3 programs. #1, let's start off with enoblituzumab. The fact of the matter though we saw exceptionally encouraging data in head and neck cancers and lung cancers with enoblituzumab combined with an anti-PD-1. In that case, we were using pembrolizumab, which we reported at SITC meeting led to our plans to move that program forward frontline setting in head and neck cancer.

And as I discussed today, we had a very successful meeting with the FDA quite recently for the design of the Phase 2/3 study in head and neck cancer in frontline, where we will combine it with, in part, our own anti-PD-1 and look at potential combinations with chemotherapy. As I said, I will provide more detail about the design later this year, but we expect to have that study starting off early this year. So as a target, we think B7-H3 is a very important one and a valuable one to pursue.

The specifics with regard to the question on the DART price specific, as you know, early this year, we had a partial hold on our monotherapy MGD009 molecule. We had a -- we did a very lengthy dose escalation study and had observed -- as we previously reported, (inaudible) abnormality that we reported to the FDA, in which we were put on partial hold and results what we believe the main causes for that elevation of LFTs being associated with metastatic disease of the liver and cytokine release associated with that.

We put forward a plan that would look at monotherapy, where we would prophylaxis patients initially with molecules to mitigate cytokine release. And we initiate those studies to enroll several of those patients and simultaneously we continued on the combination study of enoblituzumab with our anti-PD-1 MGA012.

What we have said, #1 is that the enrollment rate for the combination study has been much more rapid and much more -- and patients at clinical sites often have the choice to go on to monotherapy or the combination studies and they have selected large part to go on to combination studies with the anti-PD-1, so #1.

So we saw a very slow enrollment there. We got some initial results that were very favorable in our view, but it wasn't giving us any more insight than we were getting from the combination study with the MGA012 anti-PD-1. Given the fact that historically, we have seen in the case, for instance with margetuximab and anti-PD-1 is gastric cancer, the synergy in terms of the therapeutic value there, our recognition both in the case of treatment with the Fc engineered margetuximab and enoblituzumab that we can prime T cell responses in combination with our anti-PD-1 seems quite logical to us and so therefore that coupled with some very encouraging initial responses we have seen in the combination therapy -- fortunate to make some prioritization decisions given that we have such an extensive portfolio across this company. And so we said, let's take a look, primarily at the combination going forward. And essentially just put the monotherapy program on hold at this point, (inaudible) back to if we think that there is further development. Now I hope that answers your question?

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [4]

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Yeah, that was helpful. I guess a follow-up --

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [5]

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Chris, let me introduce I didn't make the point as we reiterate that the MGC018, our ADC for B7-H3 is moving on quite nicely as well. And we're sort of in the middle dose range right now. We expect to complete the dose escalation (inaudible) next year or so. Again, we'll have more data on that as well.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [6]

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Okay. You read my mind on that question. But just to follow-up maybe on some of the comments you made with respect to the combination and the prior CRs and metastatic lung disease to intox, one might suspect that the combination of anti-PD-1 would make it potentially the CRS or liver toxicity even worse. Could you comment on the safety that you've seen so far in that combination study, given your new prophylaxis? And that's all I got. Thank you.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [7]

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Excellent question. Very encouraged. Safety is looking good. Obviously limited dataset will continue to dose more patients. We will also potentially explore even step-ups in the dosing going forward. But we certainly are in a dose range that where we're seeing clinical activity in the combination. So as I said, let's take a look at this current dose potentially slightly higher doses and we'll make some decisions going forward. But as and now we're very encouraged with the data so far.

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Operator [8]

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The next question comes from Jonathan Miller with Evercore.

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Jonathan Miller, Evercore ISI Institutional Equities, Research Division - Associate [9]

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Congrats on a whole bunch of updates this quarter. It's very nice to hear. I guess a couple of rapid-fire ones for the enoblituzumab registrational trial, you mentioned you're not going to give any details now, that's fine. Do you have an FDA or agreement with the FDA in place on the design and then I guess on MGD013 where you say you're going to try and get Phase 1 data to us in the second half. Is that possible that we'll see that at ESMO? I noticed it's not in the titles that have been released already as a possible late-breaker?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [10]

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With regard to the registration trial, the Phase 2/3 and a design, yes, we have the agreement with the FDA on our plans moving forward. And as I said, we'll provide more updates later this year.

And as I pointed out, we expect that to begin enrolling by the fourth quarter. With regard to 013, the expectation is that data will be presented later in the year, not at ESMO. So, but I can tell you that we're very excited from many advantage points with regard to 013, the rapidity in which this is enrolling.

We are enrolling patients around the world who is excited about this program and we are seeing activity as I noted on the call earlier in multiple tumor types. Early anecdotal at this juncture, lot of the patients are in the early phases of their treatment, but we're quite encouraged by what we're seeing so far.

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Jonathan Miller, Evercore ISI Institutional Equities, Research Division - Associate [11]

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Great. And then I guess on margetuximab, you mentioned that you're making some preparations for a solo launch in the event that you're not able to put together a collaboration for commercialization. What is the cost to keep those options open and how long can you go before making decisions that are expensive to reverse? And then the related comment is, I understand that with SOPHIA running down your R&D, OpEx got a little bit of a reprieve there. But as you're advancing more and more patients to late-stage trials with a bunch of different assets, how should we expect to think about OpEx going forward over the next year and what does that means to your cash balance?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [12]

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Let's tap into those questions. I'm sorry I didn't -- if you thought I was intimating that we were definitely going forward with solo, that was not intended at all. We are engaged with several parties in fairly late-stage discussions on the opportunity to commercialize this with us. And I think those prospects are very good going forward obviously until then, you never know, but my expectation is by the time we submit the BLA, we'll have a very clear understanding on what the plans are for commercializing with a partner.

Clearly, there is also additional interest coming from other parties at earlier stages. So we are evaluating with the best way going forward. In that vein, we've been very judicious in terms of the use of capital going forward in preparing for commercialization, but we have been very diligent to prepare. So for example, we have been building out our medical affairs and field team. We, at the ASCO, if you had a chance to see, we launched an awareness campaign describing the mechanism of action of monoclonal antibodies and treatment of cancer. And then obviously the commercial team we have on site, again slow dedicated group is looking at ways to understand the market overall, as well as strategic approaches to market access. So I would say that we -- in summary, we've been very judicious in the expenses to date and anticipate not advancing too much spend on that over the next few months as we get ready for the submission of the BLA and identify our partner to work with us.

With regard to the late-stage trials and other indications, obviously gastric cancer foremost, we expect obviously expenses to go down, now that SOPHIA is winding down. Obviously, there are so many patients on trial, but recall that we have a unique opportunity here to offset some of these expenses with our partners, our labs as they have recently met with the Chinese authorities with regard to starting a trial of margetuximab not only with breast cancer, but also in gastric cancer and they are making plans going forward. And so, they will bear the expenses for recruiting patients in Greater China for this study conducted.

Obviously there will be opportunities, if we develop a commercial partnership for others to participate in supporting things like ISTs and again depending on the partner other indications as well. I hope that answers your questions?

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Jonathan Miller, Evercore ISI Institutional Equities, Research Division - Associate [13]

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Yes.

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Operator [14]

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The next question comes from Yigal Nochomovitz with Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [15]

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Scott, could you talk a bit more about the statistical analysis for the SOPHIA trial on the OS endpoint and specifically are you planning to share the interim OS results for the epithelial subgroup at the point where you reach the 270 events or will we just be learning the ITT result?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [16]

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As you know, we've provided the statistics around this previously. This -- we were powering this study, well, let's for instance on the whole analysis, #1 remember this is a sequential analysis where we met the first primary endpoint of PFS and as a result that allowed us to now analyze the second sequential analysis of OS. We had 3 planned analyses to look at the OS. The first one occurred at the time of completion of enrollment in the study. As I have indicated, we spent very little on p value to take that initial look, but while not statistically significant, very early and 158 events, we were seeing particularly F allele population at the median OS median point.

We were seeing savoring of margetuximab over trastuzumab in that study. Right now, the next event as you pointed out, and as I said, 270 events, we expect to occur in the second half of this year. What I can say is, we have not achieved the 270 events to-date and team is well prepared to update the database as soon as those events are recorded.

With regard to the timing and the event, well I can't give you exact thing where we're going to get the 270 event given that San Antonio is occurring later this year. This event will come late this year. My expectation is that it is likely we will report out the results of the 270 events around that time frame. And again, it depends on when it comes in. Just to remind everyone, the 385 events, which is the last final OS time when is likely to occur sometime in middle of next year, but we will be submitting the BLA with the interim to set the events.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [17]

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Okay, thank you. Maybe I could just follow-up and ask the as the following. Do you think that with -- just with the epithelial subgroup, which is obviously the majority of the population. Just by power alone just because you're going to have more events, do you think you can cross the threshold and go from -- to become statistically significant, just by adding more events or do you believe that you need a little bit of a better separation as well for the sixth the epithelial subgroup?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [18]

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My answer to that is that I'm very encouraged by the response in the epithelial population. Given that the overall 385 events in the intent to treat population with power at 80%, could we region with the enriched F it's possible, but let the data speak for itself. But as I said, given the mechanism of action, how does -- have the patients have been performing, what we're seeing immunologically, very encouraged with the data so far and we'll have an answer to you hopefully later this year.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [19]

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Okay. Okay. Thanks, Scott. And then switching over to MGC018. I don't think you've commented in tremendous detail yet, have you been able -- could you tell us what the starting doses and sort of what cohort you are on, as well as what dose Iran now which I guess is the cohort question relative to the highest non-severely toxic dose in the primary. So if you could just give us some additional color there.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [20]

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The best I can give you at this point is, and I hate to say, I don't remember the exact starting dose. But it was obviously a very small dose because it's a toxin conjugate. There were approximately 6 or 7 cohorts that were included in this study and we're right in the middle of the -- right in the middle study. So, the performance has been as expected and it's doing well. So that's why I was sort of guiding you that with this rate and not having achieved any dose toxicity today that we expect to finish out this by late this year or early next year and somebody just pointed out to me, we have 5 cohorts. So, excuse me, instead of 6 of them.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [21]

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All right. And regarding the -- have you commented on the drug antibody ratio for this asset as well as the how good internalization rate it has?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [22]

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So we had, I think the TAR is about 2.7 in terms of the internalization. I mean all I can say is that we specifically pick a different epitope for this then the -- enoblituzumab or MGD009 to actually get better uptake into the cells. And so that looks like it's turning out quite as you know in our pre-clinical studies, in many of the models, a single dose was sufficient to wipe out xenograft. So again, I'm very encouraged by the way, this has performed to date clinically as well as obviously the pre-clinical data and in vitro data that we've generated to date.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [23]

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And just 1 final question, I'm just curious if you could provide any thoughts on why you decided to go with I-Mab Biopharma for enoblituzumab in the Asian territories as opposed to dial-up?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [24]

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So we have seen that they've done a very good job in their commitments in this program. They're interested in this program. That's not to say that Zai Lab would not be an excellent partner as well. It was a combination of what we saw that I-Mab was willing to commit to this program, their timelines. Obviously, some economic components to this. So you should understand that we had actually multiple parties at the table looking at that and not only decide that I-Mab for this particular program would be the -- that's one can serve us.

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Operator [25]

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Your next question comes from Jonathan Chang with SVB Leerink.

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Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [26]

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First question on the business development front for margetuximab. You indicated earlier that you're in the late stages of those discussions. From a timing perspective with potential partners exceed more mature survival data?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [27]

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So the answer is, for the parties that I sort of alluded to on sort of late stage, they are not waiting for any additional data, we are in good shape in terms of those discussions. As I also indicated, there are other parties in earlier stage discussion that has actually asked us for additional data on the 270 event. So it's sort of a mixed group, but we are very happy with the interest of the number of parties and then we used to move forward with the current data.

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Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [28]

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Got it. And then on flotetuzumab, how are you thinking about potential registration path forward? And are you in discussions to re-partner the asset currently?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [29]

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So let's start with the registration study. As I pointed out in the call, we have reached out to the FDA for a meeting. We hope to have that meeting this quarter. Ideally a single-arm study would be obviously one that in terms of response rate and duration of response would be a preferred design for the trial, not so different than what was used for approval of the IH targeted molecules. Obviously as I pointed out, we're particularly looking at refractory population to go after here.

Clearly, we will need FDA feedback here and there may be requirements for a controlled study under that. It'd be very hard to figure out what the control arm would be in this case because we're talking about refractory patients that have failed in most cases at least 2 lines of therapy. And if you look at historical data, the response rate of this population is close to zero. So I would almost argue that the ethics involved here will be difficult to defend. But again, I never know what the regulatory agencies will ask of us, so that's sort of our thinking at this point.

With regard to re-partnering, I can tell you that while we still partner with Servier, we had interest from parties in the territories that we own. So the opportunity now obviously opens up for us as we move these program -- this program forward to reengage with these and other parties for opportunities to re-partner.

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Operator [30]

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Our next question comes from the line of Debjit Chattopadhyay with H.C. Wainwright.

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Aaron Welch; H.C. Wainwright & Co., LLC;Equity Research Associate, [31]

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This is Aaron Welch for Debjit. So I just had a question on the MGD013 PD-1 LAG-3 asset. So you had mentioned that you seen compelling activity in some tumor types beyond gastric. So are you able to tell us what any of these would be and what kind of internal hurdles might MGD013 face prior to expanding into other indications or combinations besides margetuximab?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [32]

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Too early to disclose both in terms of particular tumor types at this point is stayed tuned for later this year, but as I alluded to against multiple tumor types where we're seeing objective responses, what hurdles as in any drug here you are always -- at the win of the size of the population you are treating, the type of patients you're treating, as I pointed out in the call, we treated 100 or so patients already with this drug. Some of them only for short periods of time.

And until we get a sizable database on safety to meet them, obviously, the needs of this drug, we can never be certain, but it has not gone with the drug we've applied is performing well both from a safety as well as a activity perspective, obviously as we get better understanding mechanistically and the way we are dosing the populations and what to combine this with, I mean that's one of the number of big objectives of MacroGenics is to look at complementary mechanisms of action to enhance both innate and specific community and I think that we've already outlined the possibilities of -- and with March, obviously, enoblituzumab opportunities to present itself in the future and one should not rule out the opportunity to combine this with an ADC.

In fact in our MGC018 in the protocol, we have a cohort that will at anti-PD-1 is a possibility, obviously heading anti-PD-1 LAG-3 as well later on. And the same thing goes for the combinations without the checkpoint. So everything is at least at this point based on the data to date is open to us for this molecule.

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Aaron Welch; H.C. Wainwright & Co., LLC;Equity Research Associate, [33]

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And a real quick on MGD019, have the dosing and schedule been worked out yet?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [34]

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As I was saying on the call, we were in the middle of dosing and like I commented on MGC018, multiple cohorts, we have 7 cohorts and we're right in the middle of the dosing right now and so we are getting into a nice range of where we should be having appropriate engagement of receptors in these patients. So states into that.

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Operator [35]

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The next question comes from Peter Lawson with SunTrust.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [36]

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Just thinking about margetuximab and partners, what are the gating factors for the partners?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [37]

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Well, #1 Peter is their experiences and commitments of margetuximab sales force to the program, what else is in there. Pipeline, what else are they detailing then, that's obviously #1. Clearly economics and this is a picture on for us as was pointed earlier in the call with such a extensive pipeline and many of these programs move into later line, our goal here is to defray at least within the next couple of years any significant cost on the commercialization side.

I've kind of alluded to is that for us to build out a full-fledged commercial marketing and sales team, I feel that it would be best to do a time when we have 2 products that we can market and sell. And so given where I think many of our programs are in its development, I would say in the next couple of years, we'll be in a pretty good shape if market makes it over the finish line with the regulatory agencies to now add a second or maybe even a third molecule for marketing.

So that's kind of really the strategy where we are sticking to them.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [38]

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Great, thank you. And then just on flotetuzumab, what was -- is there any color you can provide around what led to Servier terminate that collaboration?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [39]

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I've been answering that question a number of times now and I frankly don't have full insight into the rationale. Just to put this in perspective, they had recently start funding or co-funding our studies. We had obviously anticipated starting this combination study, which was -- they were not funding as well. And so with no commitment to the program, financially and they knew that we were meeting with the FDA very shortly, it is a little bit surprising to me that they would exit. So again, it would be something that we would have done it if we were in that position, but I can't speak --

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Operator [40]

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The next question comes from Michael Morabito with Credit Suisse.

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Michael Vincent Morabito, Crédit Suisse AG, Research Division - Research Analyst [41]

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I had a multi-part question on MAHOGANY. Trying to just get a feel for what would be your expectations for when we could see data from that the first year with the data? What would it take for, what kind of result would be necessary to make module A potentially registrational for accelerated approval and finally, what do you anticipate the mix being in the trial of patients from the US, from China and from the rest of the world?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [42]

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So with regard to given that we haven't started the trial, and we are about to start the trial, it would be foolish to give you specifics on that. Having said that, given the -- what we're seeing is very strong interest in this based on the activity of OS in the second line setting that beats standard of care there. And we're actually beating the historical numbers front line and we had an over 50% response rate in the patients in the second line setting. Now moving up the quarter line setting, there are probably twice as many patients that are PD-L1 Positive.

We have expectations that this could enroll quite quickly. As we have designed the study, I'm sure you've looked at, Michael, we're doing this sort of in 2 parts and we want to take a look at the first 40 patients that are HER2 [ICB plus positive] and with 1% CPS, PD-L1 positive.

We're looking at -- we're trying to see a response rate that is at least as good or obviously, potentially superior to what the response was in Tobo and if you recall, that was -- that I think 47% -- 47% -- 48% in response rate. So anything north of that. And then clearly the safety profile based on the second line treatment, which was in the mid to high teens will compare quite favorably to a chemo regimen in front line we are in Tobo that we're seeing a great degree of 68% of the patients.

So combination of seeing is good response as Tobo or better. And then a better safety profile. So you know, if I were optimistic, we'll have to see that enrolled by the end of next year, but stay tuned, I certainly will provide you updates, as we get this trial start.

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Michael Vincent Morabito, Crédit Suisse AG, Research Division - Research Analyst [43]

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Okay. And the global breakdown of patients?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [44]

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Oh, yes, I'm sorry. So global break down, as we pointed out, Zai is met with the Chinese authorities. They are preparing now to put it this initiative, work to get that started for the study. Right now they will be participating in module B not in module A. So we will bear the enrollment for module A. Obviously that could change with further discussions. With regard to the mix, we'll just have to see. My estimates is that, I'd like to see at least a third to a half coming from China, but again stay tuned. Let's get started, let's get the sites up and we'll see where we go.

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Michael Vincent Morabito, Crédit Suisse AG, Research Division - Research Analyst [45]

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Great and just 1 more question on enoblituzumab. What is your estimated timing for when we could see the first data for the head and neck registrational trial? And do you have any plans to advance enoblituzumab in lung cancer based on the data that you have so far?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [46]

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So again, for the timing, I think we'll start the study in the fourth quarter. Let's get the sites up. We are planning to be multi-national but again, I mean I'm hearing a lot of interest in -- from investigators out there to participate. So it's just too early to give you a timing on enrollment. We are clearly interested along and actually other 2 as well. But given the breadth and depth of our portfolio right now, while we like to get this started like it -- I'm not going to start it because they have plans to move this forward and in fact they may advance this in other indications beyond that net and revisit them to discuss that as well. So there are opportunities even before we start that in other indication that they would pursue this outside of head and neck as well.

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Operator [47]

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The next question comes from Michael Schmidt with Guggenheim Securities.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [48]

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This is Charles Zhu on for Michael Schmidt. I have a few questions on the MAHOGANY trial in gastric cancer, if you don't mind. So starting with the in module B in the MAHOGANY trial, are you only selecting one of the checkpoint inhibitors between the PD-1 and the bispecific for the Phase 3 portion and should you go with the PD-1 likely by specific. How are you thinking about potentially further stratifying patients by LAG 3 expression in context, but some of the historical LAG-3 data from Bristol-Myers Squibb in melanoma and how that might impact eligible patient population and revenue opportunity? Thank you.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [49]

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So with regard to the Phase 3 components, yes, we will only pick 1 checkpoint, we will make the one that performs test both from an efficacy and safety vantage point. So want to lead with MGA012 or the PD-1 LAG-3. With regard to expression patterns, well, I can say, I'm very encouraged by what we've been seeing so far in the 40 or so samples of gastric cancer tumors. We're seeing about 88% positivity. The problem as you may or may not know is that, you can never temporarily know when the LAG-3 is going to get expressed and over time when a patient can go up and down. And so as a result, then select is based on any given level, I think would be fought with a lot of challenges. Having said that, we will monitor, but I doubt that we would select patients or enrollment based on a level of LAG-3 expression at this point.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [50]

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And also on the Phase 3 portion of MAHOGANY module B, it looks like your primary endpoint is OS and I had a couple of questions along that avenue. One, will you allow crossover and 2, given that we have a basket of other drugs in gastric cancer looking at the post trastuzumab, but probably not the post-merger talks in that setting. How would you characterize the potential for post-trial therapies to impact the final OS readout given that control arm, patients might be eligible for a different set of rent regimens for patients coming out the experimental arm?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [51]

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Very good question. I just -- we're not including crossover in that population and clearly that will be something we will monitor going forward and hope that by usual opportunities for either arm patients can gravitate to other experimental treatments. But at this point, we have no one specific plans to preset the conditions for those patients that progress.

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Operator [52]

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The next question comes from Ellen Sands with Stifel.

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Ellen Sands, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [53]

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Hi, this is Ellen on for Steve Willey. So I'm just wondering if you get the sense of the partnering conversations you're having around margetuximab. If there is somehow potentially gated by some of the competitive updates expected in later line HER-2 space that will become available later this year?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [54]

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My answer is, no. As I pointed out, we have enough discussions ongoing now with parties that are satisfied where this molecule is in terms of the opportunity to treat a late-stage patients as I pointed out previously. There is no approved treatments in third-line patients. So I think this is a great opportunity for patients and I think the potential partners recognizes. They also recognize mechanistically that this is quite unique even compared to the other drugs that are out there whether it'd be ADCs or TKI such that it gives us a unique profile than others those share with us.

And clearly the opportunity as we move into early-line therapy with a more intact immune system, the potential magnitude of therapeutic benefit to go up quite dramatically in that population, not just -- last but not least, the ability to combine it with other checkpoint molecules in our program. I think people and potential partners see this is a great opportunity.

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Ellen Sands, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [55]

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And then are you still pursuing CD137 base b-specifics and if so when might we see a lead candidate into the clinic?

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [56]

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We have so much to talk about in our clinical pipeline, we never get to talk about our preclinical pipeline and we are down the hall on our 137 program. We have multiple dark molecules have been made. They are looking very encouraging. Of course, multiple target combination types as you know. We have presented publicly early data preclinical studies with the CE-137 PD-L1. We had that tiered with other tumor models. Our CD137 was HER-2, look orderly good as well. So we're very encouraged.

I would say that we have a couple of these in toxicology studies right now. Stay tuned for guidance with regard to entering the clinic. The next molecule moving forward in the clinic is with ImmunoGen, our partner on (inaudible) so stay tuned for that.

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Operator [57]

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This concludes the question-and-answer session. I'll now turn the call back to Dr. Koenig for closing remarks.

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Scott Koenig, MacroGenics, Inc. - CEO, President & Director [58]

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Thank you, operator. I'd just like to thank everyone today, for joining us this afternoon and let you know that we look forward to continuing to advance our progress in the coming months and providing updates on our progress. Have a good day.

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Operator [59]

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Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.