MacroGenics Inc (MGNX) 2017 Q2 法說會逐字稿

Good afternoon.

We will begin the MacroGenics 2017 Second Quarter Conference Call in just a moment.

(Operator Instructions) At this point, I will turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

Thank you, operator.

Good afternoon, and welcome to MacroGenics' conference call to discuss our second quarter financial and operational results.

For anyone who's had the chance to review our results, we issued a press release this afternoon outlining today's announcement, which is available under the Investors 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 would like to turn the call over to Dr. Scott Koenig, MacroGenics' President and Chief Executive Officer.

Thank you, Jim.

I'd like to welcome everyone participating via conference call and webcast today.

Thank you for joining us.

The second quarter of 2017 was another productive one for MacroGenics.

The Phase I study of flotetuzumab, one of our bispecific DART molecules, is advancing, and we will present updated interim results from that trial in an oral presentation at the European Society for Medical Oncology Annual Congress, or ESMO, in September.

Our investigational new drug application for MGD013, a member of our PD-1 franchise which targets PD-1 and LAG-3, was cleared by the FDA and we expect to enroll the first patient imminently.

Finally, margetuximab, our Phase III anti-HER2 antibody, remains on track for completing an interim futility analysis later this year.

I will provide more detail on our other highlights across our pipeline after Jim has reviewed the financial results for the quarter.

I will now turn the call back over to Jim.

Thank you, Scott.

This afternoon, we reported financial results generally in line with expectations.

As described in our release, MacroGenics had R&D expenses of $34.5 million for the quarter ended June 30, 2017, compared to $33.3 million for the quarter ended June 30, 2016.

This modest increase was primarily due to the initiation of a Phase I clinical trial of MGA012 in late 2016 and continued enrollment in our various clinical trials.

These increases were partially offset by a decrease in duvortuxizumab manufacturing costs, which are reimbursed by our collaborator, Janssen.

We had G&A expenses of $8.4 million for the quarter ended June 30, 2017, compared to $7.2 million for the quarter ended June 30, 2016.

This increase was primarily due to increased professional fees, including consulting expenses, and increased employee compensation and benefit expense to support our overall growth.

On the revenue side, we recorded total revenues consisting primarily of revenues from collaborative agreements of $1.7 million for the quarter ended June 30, 2017, compared to $80.7 million for the quarter ended June 30, 2016.

This decrease was driven by a $75 million upfront payment under the Janssen MGD015 agreement and a $2 million milestone payment from Pfizer, both of which were recognized in the second quarter of 2016.

Revenue from collaborative agreements includes the recognition of deferred revenue from payments received in previous periods as well as payments received during the period.

For the quarter ended June 30, 2017, we had a net loss of $40.6 million compared to a net income of $40.5 million for the quarter ended June 30, 2016.

Our cash, cash equivalents and marketable securities as of June 30, 2017, totaled $243.7 million.

This balance included approximately $33 million in net proceeds from the sale of equity securities and compares with $285 million as of December 31, 2016.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities, combined with anticipated revenue under our current strategic collaborations, can fund our operations into 2019.

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

Thank you, Jim.

Including MGD013, MacroGenics entered the second quarter with 10 proprietary programs in clinical development.

I will now dive into several of our programs and provide some milestone highlights from our productive quarter.

As I mentioned in the introduction, MacroGenics will present data on flotetuzumab, a CD123 x CD3 DART molecule currently in Phase I development for acute myeloid leukemia or myelodysplastic syndrome, in an oral presentation on September 10 at the European Society for Medical Oncology Annual Congress, or ESMO, being held in Madrid, Spain.

The title of our abstract selected by ESMO is "Interim Results from a Phase I First-in-Human study of flotetuzumab, a CD123 x CD3 bispecific DART molecule in AML/MDS." Further, we will submit updated flotetuzumab clinical data for presentation at an additional scientific conference later this year.

In the Phase I study of flotetuzumab, we and our partner, Servier, continue recruiting patients with AML or MDS in the United States and Europe; have established a recommended dose and schedule; and have initiated the expansion cohorts for the study.

I expect to be able to provide an update with regard to this program including future development plans later this year.

Turning to our B7-H3 franchise, let me first address our most advanced candidate, enoblituzumab, which is an Fc-optimized monoclonal antibody that targets B7-H3.

We are completing follow-up of bladder and prostate cancer patients in the monotherapy study of enoblituzumab.

We are also actively enrolling patients in the combination study of enoblituzumab with an anti-PD-1 in 4 different tumor types, and we expect to enroll approximately 2/3 of the approximately 100 patients by the end of this year and plan to report clinical data thereafter.

The second clinical candidate in the B7-H3 franchise portfolio is MGD009, a B7-H3 by CD3 DART molecule that is being evaluated in the Phase I study in patients across several defined solid tumor types.

We are dosing MGD009 on an every-2-week basis and are exploring alternative lead-in dosing and schedule strategies, leveraging what we've learned in our other T cell redirected DART studies.

We expect to establish the dosing schedule for MGD009 administration as well as initiate dose expansion cohorts across 6 different tumor types later this year.

The third and final candidate in our B7-H3 franchise is MGC018, an anti-B7-H3 antibody drug conjugate that has shown potent in vivo anti-tumor activity in animal models.

We are currently completing the recovery period of the in-life portion of the GLP toxicology study, and if acceptable, we would expect to submit an IND and initiate a Phase I study of MGC018 next year.

As we have stated, we believe that our B7-H3 product candidates represent the industry's leading franchise of programs targeting this member of the B7 family of immune regulatory molecules.

The body of scientific literatures supporting the targeting of B7-H3 continues to grow, and we plan to explore the full potential of this antigen's broad expression across multiple solid tumor types.

It is worth noting that MacroGenics fully owns this franchise.

Turning back to our DART molecules, MacroGenics is leading development of MGD007, a gpA33 x CD3 DART molecule, and is being evaluated in a Phase I trial for patients with primary and metastatic colorectal cancers.

As we've indicated before, we were observing on-target side effects that were limited to the GI tract.

As a result, we created dosing strategies and supportive care regimens to mitigate these effects.

We've expanded dosing of patients on a once-every-3-weeks basis and have added other dosing cohorts, for which we expect to complete enrollment later this year.

We anticipate being in a good position to determine future development plans with this molecule later this year and intend to present clinical data at a scientific (inaudible) in early 2018.

I will now turn to MGD013 and the other programs that make up our PD-1-directed immuno-oncology franchise, which we believe will enable a broad set of combination opportunities across our own portfolio of molecules and provide further differentiation from existing PD-1 based treatment options.

To our knowledge, MGD013 is the first bispecific [cohorted] checkpoint blocker in the industry to enter the clinic.

MGD013 is the first of our next-generation PD-1-based bispecific molecules with a potential for enhanced anti-tumor activity and is intended to provide co-blockade of 2 immune checkpoint molecules expressed on T cells, PD-1 and LAG-3, for the potential treatment of both solid tumors and hematologic malignancies.

We have initiated the first site for this Phase I trial and anticipate the commencement of enrollment imminently.

We continue to enroll patients in the dose escalation segment of our Phase I clinical study of MGA012, our proprietary anti-PD-1 monoclonal antibody.

To date, the antibody has been well tolerated up to 10 mg per kg.

We expect to define a target dose and schedule very soon and have submitted an abstract for presentation of monotherapy dose escalation data at a conference later this fall.

You may recall that we showed very compelling preclinical data combining MGA012 with MGD009 last December at our R&D day.

In model systems, we showed that inhibiting PD-1 through MGA012 greatly added to the activity of MGD009.

We believe that MGA 012 will be the basis for potential combination therapy with several other molecules in our pipeline, including our redirected T cell DART molecules, namely flotetuzumab, MGD007 and MGD009.

We intend to begin a first combination study with MGA012 with one of these DART molecules by year-end 2017, pending successful regulatory interactions, with others to follow.

We remain on track to submit an IND for MGD014, our HIV x CD3 DART molecule, in the coming months.

MGD014 will represent our first infectious disease-based application of our DART platform.

You will recall that NIH/NIAID funds this program.

Let me now conclude with comments on margetuximab, our Fc-optimized monoclonal antibody that targets the human epidermal growth factor receptor 2, or HER2.

This continues to be our furthest advanced clinical program, as we are actively enrolling patients in a pivotal Phase III study of metastatic HER2-positive breast cancer.

In this study called SOPHIA, we are evaluating the efficacy of margetuximab plus chemotherapy as compared to trastuzumab plus chemotherapy following progression after previous therapy.

The study remains on track to complete enrollment of approximately 530 patients across trial sites in North America, Europe and Asia by late 2018, with PFS data reading out in 2019.

Our assumption is that, if positive, we will file a BLA based on this PFS data.

Enrollment also continues for our Phase II study of margetuximab in combination with pembrolizumab, an anti-PD-1 therapy for patients with advanced HER2-positive gastric cancer.

The proposed combination regimen of margetuximab and pembrolizumab will allow patients, all of whom have limited treatment options, to utilize the immune mediated killing properties without chemotherapy treatments.

The study will enroll a total of 30 patients in the U.S. and 30 in Asia, including Korea, Taiwan and Singapore.

We expect to complete enrollment of these patients by the end of this year, with presentation of clinical data thereafter.

In summary, our clinical programs continue to advance, and we expect to accomplish several milestones in the months to come.

We remain in a strong financial position to support the continued advancement of these programs and look forward to continuing to update you on the company and science as they progress.

This concludes my prepared comments, and we'd now be glad to address any questions that callers may have.

Operator?

(Operator Instructions) Our first question comes from the line of Christopher Marai of Nomura.

I wanted to touch base really on some of the data that we might be seeing at ESMO here for the CD123 x CD3.

I know it was an interim look, and so I was wondering if you could perhaps elaborate a little bit on the type of data that we might be seeing for that program.

And I have one other follow-up.

Thanks very much, Christopher.

As you know, we can't preview the data at this point until the presentation occurs in Madrid, but as I noted here in this presentation today, what we had been trying to achieve since our last R&D day was defining a dose for this molecule.

As we had pointed out at R&D day, we had designed a supportive therapy and an increasing dose regimen that would be both tolerable and hopefully giving the best efficacy for the molecule.

As I stated today, we believe we've achieved that dose, and therefore, we will be presenting some of these -- some of the data of the patients that have already been treated over the past 6, 7 months.

And obviously, we'll be updating on that data since the last abstract.

As I noted also today, we've submitted another abstract for a future meeting to continue to be able to update this data.

Okay, great.

So it sounds like you've got the dose.

Would it be safe to conclude that the next plan here is a pivotal -- additional pivotal study?

And then when you look at MDS versus AML, maybe could you help walk us through how you think about that?

Great question.

So as I pointed out today, we're in the expansion phase of the study.

And so we intend to wait on a significant number of patients over the pursuing months with an analysis of that data.

We should then be able to decide the avenues we would like to pursue for further development of this drug and hopefully towards registration studies.

Obviously, we need to engage the regulatory agencies for best advice on this, but we feel like we're in a very good position now, given that we have a good profile both in terms of safety and, as you'll see, some of the biological activity of this molecule at ESMO.

And with regards to specific indications, as I've noted before, we're looking at the relapse/refractory population of the patients with AML.

That's obviously a starting point for the development of this, but obviously, we're looking to expand the utility of these molecules in other AML populations and also potentially MDS patients.

Great.

Excellent.

And then just maybe one on MGD007.

You know, obviously, the CEA-targeted bispecific out there has generated a lot of buzz just around data, particularly in combination with PD-1.

I was wondering if you can comment on the gpA33 target relative to CEA, perhaps how you see that evolving.

And the path forward there, would that be also next step for a combo with PD-1?

And that's my last question.

Yes, so thank you very much for the question on MGD007.

As I pointed out today, and as we indicated at our R&D day last December, the biggest challenge with this molecule was establishing the tolerability because of on-target effects in the GI tract.

We were observing the -- particularly on initial infusions, on the first and second infusions, patients would be developing some severe nausea and vomiting and diarrhea, which we then resorted to making changes in the supportive care to make the treatment more tolerable.

What we've been exploring, as I again noted back last December and the team noted back last December, was that we were going to look at different dosing regimens with this new supportive care.

So currently, we've treated a number of patients on a every-3-week basis, and now we're exploring dosing of patients on a weekly and a soon-to-be twice-weekly basis.

Once we've established the profile of this drug, which we expect to occur later this year, we will then design the next steps for this -- use of this drug, which, as I pointed out earlier today, could include the combination with our MGA012 molecule or anti-PD-1 molecule.

So if I look back at the profile of the data that was presented at ASCO by Roche on their CD3 x CEA and anti-PD-L1 combination, I think the data that we presented last December compares quite favorably.

And we hope to actually get additional data to better define what the next steps is -- steps are for advancing this program.

Our next question comes from the line of Michael Schmidt of Leerink Partners.

This is Jonathan Chang stepping in for Michael.

First, are you still planning to provide an update on the enoblituzumab Phase I monotherapy this year?

And any color on when we might see data from the combination studies?

Jonathan, thanks for the question.

As I pointed out earlier today, we're very excited about the prospects of our B7-H3 programs, and certainly, the enoblituzumab study is the furthest along.

We will see if there's a proper forum for presenting the monotherapy data in prostate, but as I've pointed out, we're putting a lot of effort now on looking at the combination studies with anti-PD-1.

We think that this has the best prospects for getting the most impact in patient population.

As I see things unfolding over the next few months, as I pointed out, we're on target for dosing somewhere between 60 and 70 patients with that combination of enoblituzumab and anti-PD-1.

If the opportunity arises to present the data later this year in the right forum, we will do so assuming that we have enough data accumulated on treatment with that combination.

If it's too early, it will probably occur sometime early next year.

Great.

And then, lastly, just how are you thinking about prioritizing which internal combinations to evaluate with MGA012?

Oh, so from that vantage point, as I pointed out, we have already preclinical data on the combinations of MGA012 and our B7-H3 x CD3 molecule, MGD009, that's data we presented, again, last December.

We have had additional studies confirming that data, and we also have now studies looking at MGA012 with other molecules in our portfolio.

As I pointed out today, we are looking at the possibilities of combining this with flotetuzumab as well as MGD007, the gpA33 x CD3 molecule.

The timing of these will -- is really a resource-dependent decision.

So we're making all reference, as I pointed, to have at least one of these combinations started by the end of the year and likely additional ones soon thereafter.

Our next question comes from Ren Benjamin of Raymond James.

Scott, maybe just a couple of questions, starting off with margetuximab.

Obviously, as we get closer to the interim analysis -- or the futility analysis this year, I imagine there are more and more questions.

And I know you haven't had much to say regarding that analysis, but I just wanted to know if there's been any sort of an update in terms of what could trigger the futility or any of the numbers involved?

So thanks for the question, Ren.

You know, at this point, we're on track, as I have noted earlier, that we should be able to conduct this analysis, have the DSMB review the data and give us its feedback, but we're not providing any detail with regard to how the analysis is being conducted.

Okay, fair enough.

And just switching gears, you mentioned certain supportive protocols that are being evaluated.

Can you give us any color as to what kind of protocols you're evaluating?

Are they vastly different than kind of what we're seeing in the space in terms of handling CRS with tocilizumab.

And maybe related to that, have you done any work, or is there any interest in doing any work, to look at biomarker data to identify those patients who may have the potential to have lesser side effects?

Well, that's obviously an excellent question.

And so a lot of this, we need to sort of think about for the general principle of CRS and CD3 redirected mechanism.

And in that vein, we have -- as we will update, for instance, with flotetuzumab at the ESMO meeting, is the experience we had in improving the CRS profile of those patients.

And these have included very early opportunities to -- once a patient shows early signs of CRS, to begin an intervention with toci at that point to abort any severe responses.

And then I would say, this has been quite successful at quickly turning those patients around.

The second point is that we made a strong effort in looking at what we call lead-in dosing.

And this has been very successful for MGD006, and we're applying this principle now for MGD009 and may apply it to others as well.

And again, here, we think that the exposure at lower doses somehow creates a sort of tolerance-like state with regard to the side effect profile.

It doesn't completely remove the side effects, but it attenuates that sufficiently enough that the patients can continue on therapy and continue completing dosing through the various regimens.

So I would say those are probably the most important with the general principle of CRS.

With regard to the specific target-related interventions, as you know, for MGD007, we -- because of the GI side effects of -- on-target effects on the normal tract there, in most of these cases, we're targeting tumor growth that's outside the GI tract.

And therefore, by giving oral budesonide and early intervention with low-dose steroids and toci, again, we've been able to mitigate some of the side effect profiles in those subjects and reduce the requirement for systemic steroids.

Got it.

With the IND from MGD013 being cleared, can you just talk a little bit about the clinical trial design and how that's going to progress?

Yes, I mean, so we have -- this is sort of a standard Phase I dose escalation study, with dosing established with discussions with the FDA.

We're looking at a very wide array of patients of solid tumor types, and we expect, again, this shouldn't be that much different than the design of the trial we did for MGA012, our anti-PD-1 antibody.

There are probably a couple of extra doses that we incorporated in this, given that this is the first combination checkpoint bispecific compared to the anti-PD-1 alone.

Got it.

And then just one final one for me.

As we're seeing in the landscape certain combinations of I/O molecules not necessarily conveying a survival benefit, how do you guys mitigate this potential risk, especially, in the case of bispecifics as well as combining bispecifics?

I think that's an excellent question.

And obviously, we're trying to learn as everybody else is from the clinical data that unfolds.

We're looking for evidence of biomarker activity that may give us insights.

Obviously, many of these molecules have very unique mechanisms of action.

Looking at the expression patterns, in particular, subpopulations, the coordinate expression of these molecules.

One of the things that we are very excited about, for instance, for MGD013, is that we're seeing that the DART configuration engaging both PD-1 and LAG-3 gives us a signaling activity through the cross linking of those molecules that further enhances T cell compared to 2 separate antibodies there.

And so I think getting a better sense of expression patterns over time, other therapies these patients may have and making sure they fit in line may give guidance on which way to further develop these molecules.

Our next question comes from Yigal Nochomovitz from Citigroup.

Can you comment at all on the CD3, CD19 with Janssen?

Obviously, we haven't had an update on that in a long time.

We understand from looking at clinical trials that their monotherapy study is recruiting, but the one with the ibrutinib, it's unclear where that one stands.

So thanks, Yigal.

And as I recall, I think you asked me that question last time as well.

And frankly, as I had told you at that point, it's the responsibility of Janssen to update, and we're precluded to making any comments.

What I had said, as you recall, was that they were not going to open up the combination study until they established a dose escalation study with the CD3 x CD19.

So that's all I can say at this point.

Okay, got it.

And then sort of a more conceptual question with regard to how you are proceeding with dose escalation.

In terms of, I guess, modeling of the target dose, I guess this would apply for 007, 009 and maybe 012.

(inaudible) of the target obviously -- presumably, you know the half-life, some idea of the number of binding sites on the target cells, volume of distribution for the antibody, and maybe some knowledge of the rate of internalization.

So putting all of those things together, how much work have you done to sort of have a sense of what your target dose looks like across some of these escalations, so you have an idea where you're headed?

That sounds like a great question, in a sense that I would love to put those particular figures into the computer, punch a button and the answer comes out in terms of the dosing schedule.

What realistically happens is that we, first of all, take as much data from the primate studies that we've done in terms of dosing regimen and, obviously, look for specifically the density in the cyno monkeys for the target compared to what we're seeing in humans.

And obviously, for each tumor type, we're seeing -- and there's a lot of inter-patient -- or differences in density of a given antigen.

So what we're looking at right now is, number one is taking the data, first and foremost, of the half-life and understanding for the -- particularly for the Fc-bearing molecules, should we be giving these things every 2 weeks, every 3 weeks, every 1 week?

As I pointed out to you before on MGD007, we started out on a q3 weekly basis.

We're looking now at a q1 or twice-a-week basis with lower doses.

So a lot of this is a little bit trial and error, depending on the particular target that we're doing, it's unfortunate on that.

Starting doses, a lot of times, particularly with the most biologically active molecules, because of regulatory concerns across the whole class of molecules, this is not peculiar to MacroGenics, is that most of these drugs have to start at MABEL dosing or close to MABEL dosing.

So this gives the assurance that for probably several logs difference in terms of where one would see toxicity.

And so that's the reality of dealing with the objective data and the regulatory issues that we confront.

Our next question comes from Peter Lawson of SunTrust Robinson.

Filling in for Peter Lawson.

When we're thinking about MGD009 timing, will you be releasing the dose escalation date?

Or will you be waiting to have some expansion data on that?

And when would you expect those?

So thanks for the question.

So as I pointed out, we're still in the dose-finding range.

To give -- be a little bit more granular about it, as we pointed in our R&D day last year, we were dosing patients at 10 micrograms per kg on a q2 weekly basis and had begun to see antitumor effects in a number of those patients.

At that point, we also began to see some of the cytokine release associated with that effect.

And so what we have decided to do is look at different dosing regimens, where we're now -- we've treated a number of patients at 10 mg per kg, q2 weekly.

We're now also applying the lessons that we described before on having lead-in dosing, and we're dosing those patients now so that we can achieve even higher doses at 10 micrograms per kg.

We're extracting out the data from these patients with regard to occupancy of the various cells.

We're looking at various biopsy specimens.

And so what I believe will happen is that, over the course of the next few months, we should be able to define the dose.

Once we define the dose, what we will do is move into expansion cohorts in 6 different tumor types, which would be approximately 100 patients in total that we will start dosing.

But we will not wait for the completion of that data to entertain the notion of combining this with our anti-PD-1 molecule.

So you could expect parallel tracking of those 2 trials for this molecule.

With regard to the timing and the reporting of the data, it's too early right now to say when we will do this.

Again, likely to have the dose later this year; likely to present the initial data from that initial dose escalation cohort, but then, as we expand into these various protocols, we'll provide further update next year.

Okay.

And then, so with MGD013, is the plan to move that into combinations kind of immediately after the safety study?

Or are we going to see that go further as a monotherapy?

Well, I mean MGD013 is a combo.

It's already a single molecule that has PD-1 and LAG-3.

So we are looking at the utility of this in various tumor populations, including those that are PD-1 or PD-1 experienced as well as naïve.

But there is, obviously, prospects of combining this with other checkpoints and other active molecules as well.

So we see that this has the ability to be a franchise unto itself because of the bispecific nature and combine checkpoint properties of the molecule.

Okay, okay.

And then last question is when you think about your CTLA-4 and PD-1 combination -- or bispecific DARTs and Tridents, are there any learnings from the MYSTIC trial?

Or like how does that affect how you're thinking about those potential therapies?

So that's an excellent question.

Obviously, the MYSTIC data is new to us and everyone, and we are looking at the prospects there.

I think that there have been, from our preclinical studies, very attractive results in our primate studies.

We are now engaged in conducting a toxicology study with one of these molecules and looking forward to that.

But let me point out that the MYSTIC study was with an anti-PD-L1 and anti-CTLA-4, tremelimumab, which may, by itself, not be as good as ipilimumab.

So I don't think we can necessarily generalize on the combination of those 2 molecules.

As we have pointed out already, the PD-1 component of our molecule in this combination is the same one that we have for MGA012.

And the binding characteristics of this molecule based on acidity and other biological activity seems slightly better than that of the approved molecules out there.

So we think we have an opportunity by combining these in this particular format, that we may have opportunities that the MYSTIC study ultimately didn't produce.

Our next question comes from David Lebowitz of Morgan Stanley.

I had a question on MGD010.

I was just curious as to what are your thoughts on the molecule going forward and which indications you might look at.

Thanks, David.

Obviously, we didn't comment on that today because there's been no further progress.

As you know, we presented data to you on June, showing very exciting data in a normal-volunteer study, single-dose escalation, where we showed significant anti-B cell activity functionally but no depletion of B cells in these subjects and the ability to inhibit an antigen specific response with coadministration.

We're still thinking about how to progress this concept clinically, and we are in discussions with partners who have strong interest in autoimmune diseases.

We are also looking at some very select opportunities that we might pursue ourselves or with various academic groups.

But given the use portfolio we have in oncology now, it would be a burden for our organization to advance into a significant development plan in autoimmune disease as well as oncology.

So we're trying to find out what the best way for further development of an anti-CD32B x CD79B bispecific.

Sure.

And also, what's the status of MGD014?

We haven't heard about that in a while.

So I did make a quick comment in today's call, and we're on target for starting a Phase I study with the first in the envelope, anti-CD3.

As you recall, we have funding from the NIH to support 2 different molecules if they (inaudible) the option period, which should occur likely very, very soon.

So with regard to the initial -- start of study, we expect to file the IND very soon.

So we'll be updating everybody in the next couple of months.

Our next question comes from Dane Leone of BTIG.

I guess, I could start maybe at a high level.

A lot of the discussion and a lot of the detailed discussion today is focused on dose-finding and some of the T cell redirected bispecifics you're working on.

Can you kind of, without rehashing the discussion here, just give us more of a picture of what you see in the pipeline right now?

I'd leave margetuximab to the side, but what do you see in the pipeline right now in terms of actual response or efficacy?

So maybe specifically to flotetuzumab, you're finding a dose -- a recommended dose level that you're moving forward with.

Can you, without spoiling data, just comment in terms of whether you've seen corollary responses to that?

Or is that something that's going to need to be proven out in the next step here.

Essentially, we're just trying to understand the actual -- where you see therapeutic windows open right now across your pipeline.

Yes.

So Dane, I'd love to be able to disclose everything at this point.

I think the first disclosure would be flotetuzumab, at ESMO, you'll get the first sense of where we are, both in terms of safety and biological activity.

So you'll have to wait a couple of weeks into September.

And as I said, the fact that we are expanding these into a much larger population should indicate that we have certain encouragement to do this to get a bigger data set.

So that, coupled with what we've already presented in terms of antitumor activity with solid tumors, I think, that the prospects for our DART platform are very good.

And I think a lot of this comes down to which targets you go after and the dosing regimen and the supportive care.

All of this is -- has to be worked into this.

And I'll reiterate something I say every time.

Some of these will turn out to be successful, some won't, but I am very encouraged that the platform is performing as I expected.

I guess, specifically, maybe following up on that to the enoblituzumab combination studies, how -- in the design of those studies are -- how are you going to benchmark the individual activity between enoblituzumab and the corollary PD-1 or CTLA-4 response?

Well, that again, just for those who don't remember, enoblituzumab is not the bispecific DART molecules that we were just talking about.

This is the Fc-enhanced molecule.

It engages, obviously, macrophages, NK cells for a killing effect.

There also seems to be a secondary ability to sensitize T cells to expand in these populations.

We're clearly looking at individuals that are both PD-1 and PD-L1 and CTLA-4 experienced and unexperienced.

We've created, as you know, a significant data set against -- across many tumor types as monotherapy.

And so what we think we will be able to do is be able to tease out populations that, a, may have been experienced but with the combination now, might have an effect; or those who are unexperienced for the other checkpoints, the combination based on our monotherapy data and data that's out in the literature, what is the magnitude of that effect to make that decision on a tumor-by-tumor type.

Yes, the reason I asked that was just some of the difficulty we've had this year with some of the IO combinations and other combinations where it's been very unclear what the individual effect is in the combination.

What -- did you -- this is an easy one.

Did you -- I just couldn't hear you, did you say there was an increase or decrease in manufacturing cost for duvortuxizumab?

There was -- I think, there was an offset.

Compared to last year.

Compared to last year.

It was a decrease.

Decrease compared to last year.

There's a decrease in manufacturing cost for duvortuxizumab?

Yes.

Is that a net thing or is that just the actual amount of volume of drug being produced?

That's a gross number, and we -- but we get reimbursed for it anyways.

So it's a gross number in R&D, but the revenue line reflects the reimbursement from our partner, Janssen.

Okay.

So it's just like an accounting thing, I guess?

Yes.

Yes.

Our next question comes from Stephen Willey of Stifel.

This is Philomena Kamya in for Stephen Willey.

So I just have one sort of high-level question.

You mentioned that the dose-establishing efforts for the Phase I 009 and 007 trials will happen in combination or in parallel with the combinations -- with the proposed combination trials of 012.

So does this mean that you anticipate the synergistic potential of the combination to remain intact across a range of doses?

And is anergy something that you're concerned about?

So we'll have to see once we get in the clinic in that regard.

What -- the expectation based on the data today, looking at the various DART molecules using a CD3 redirected mechanism, is that there is up-regulation of PD-1.

We have evidence in, in vitro and in, in vivo animal models that we can achieve synergy there.

Is it possible that continued dosing can lead to a more anergic state that is not -- that won't respond to an anti-PD-1?

Well, certainly, obviously other checkpoint inhibitors could be up-regulated, they could become refractory.

But we'll have to see.

I think that given that, mechanistically, we are not just looking at tumor -- CD3 cells that are tumor-specific at the site of the tumor.

We're able to pull in CD3-positive cells from the entire body here to be able to target here.

So most of these cells are naive to activation signals.

So I think that there's plenty of T cells that can enter the fray here.

Okay, so we will just have to wait and see as the...

Yes, I mean, I -- ultimately, there -- we have enough encouragement from the preclinical data that this -- it makes a sensible rationale to pursue clinically.

Our next question comes from David Nierengarten of Wedbush Securities.

I'm sorry, I actually thought I withdrew my question.

They've all been asked.

Thanks.

(Operator Instructions) There appear to be no further questions in queue at this time.

I'd like to turn the call back over to management for any closing remarks.

I'd like to thank everyone again for joining us today, and let you know that we look forward to updating you on each of the programs that we discussed today as we continue to make progress throughout the year.

Have a great rest of the day.

Ladies and gentlemen, that does conclude your program.

You may disconnect your lines at this time, and have a wonderful day.