MacroGenics Inc (MGNX) 2018 Q3 法說會逐字稿

Good afternoon.

We will begin the MacroGenics 2018 Third Quarter Corporate Progress and Financial Results 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 third quarter 2018 financial and operational results.

For anyone who's not had the chance to review our results, we issued a press release this afternoon outlining today's announcements, 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 would 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' President and Chief Executive Officer.

Thank you, Jim.

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

Thank you for joining us.

During the third quarter of 2018, we made significant progress on several fronts, and I'm happy to provide an update that is focused on our most advanced product candidates and our financial position.

But before I do so, let me first turn the call back to Jim, who will review our financial results for the quarter.

Thank you, Scott.

This afternoon, we reported financial results for the third quarter, which highlight our strong financial position as well as the considerable progress we've made over the past year and this most recent quarter.

As described in our release, MacroGenics have research and development expenses of $46.2 million for the quarter ended September 30, 2018, compared to $41 million for the quarter ended September 30, 2017.

This increase was primarily due to the initiation of combination studies of MGA012, also known as INCMGA0012; continued enrollment in multiple ongoing studies; increased development and manufacturing costs related to MGA012, which were partially reimbursed by our collaborator Incyte Corporation; and increased headcount to support our expanded manufacturing and development activities.

We had general and administrative expenses of $9.6 million for the quarter ended September 30, 2018, compared to $8.4 million for the quarter ended September 30, 2017.

This increase was primarily due to increased patent-related expenses and consulting and other costs incurred related to the implementation of the company's new enterprise resource planning, or ERP system.

We recorded total revenue, consisting primarily of revenue from collaborative agreements, of $20.8 million for the 3 months ended September 30, 2018, compared to $1.7 million for the 3 months ended September 30, 2017.

This increase was primarily due to revenue recognized under the Incyte MGA012 collaboration, including $10 million related to meeting certain clinical proof-of-concept criteria during the third quarter.

MacroGenics also recognized revenue of $6.1 million during the third quarter of 2018 for MGA012 manufacturing services provided to Incyte.

I should note that an additional $5 million proof-of-concept milestone was achieved and is expected to be recognized during the fourth quarter.

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

For the quarter ended September 30, 2018, we had a net loss of $34 million compared to a net loss of $47 million for the 3 months ended September 30, 2017.

Our cash, cash equivalents and marketable securities as of September 30, 2018 were $260.1 million, which compared to $305.1 million as of December 31, 2017.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities combined with collaboration payments we anticipate receiving should enable us to fund our operations into mid-2020, assuming our programs and collaborations advance as currently contemplated.

Following the outcome of the SOPHIA Phase III clinical study in the first quarter of 2019, assuming positive results, guidance subsequently will be provided to include plans for commercialization of margetuximab.

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

Thank you, Jim.

Today, I will provide an overview of some of our leading programs, which represent the most significant value creation opportunities.

Beginning with margetuximab, our novel immune optimized anti-HER2 antibody, which has a Fc domain engineered to enhance engagement and activation of the immune system.

In the third quarter, we completed enrollment in our pivotal Phase III SOPHIA study, which is evaluating the efficacy of margetuximab plus chemotherapy compared to trastuzumab plus chemotherapy in approximately 530 relapsed/refractory HER-2-positive metastatic breast cancer patients.

Based on the accrual of PFS events in this study to date, we expect to announce top line results in the first quarter of 2019.

This is a significant accomplishment that underscores our ability to execute on a large international Phase III study with approximately 200 sites in a timely and efficient manner.

I would like to take a moment to thank the patients who participated in the study as well as the many clinical trial investigators and their staff and the MacroGenics clinical team, who have worked tirelessly to support the SOPHIA trial to this point.

In addition to this important trial of metastatic breast cancer, we are also studying margetuximab in combination with an anti-PD-1 agent in a Phase Ib/II clinical trial in the HER-2-positive gastroesophageal adenocarcinoma patients.

This chemotherapy free combination engages both the adaptive and innate immune systems in a coordinated approach.

In October, at the 2018 ESMO meeting, we presented updated results suggesting that this combination therapy has antitumor activity in patients with advanced gastric cancer.

In the third quarter, we also completed enrollment of an additional 25 HER2-positive gastric cancer patients, and we expect to announce results on this cohort in the first quarter of 2019.

In summary, we have achieved a major milestone with margetuximab in the SOPHIA breast cancer trial and are encouraged by our continuing progress in the Phase Ib/II gastric cancer study and look forward to announcing results from both trials in the first quarter of 2019.

Next, let me provide an update on our PD-1-based franchise that builds upon a common PD-1 specificity, or variable regions, and which includes 3 product candidates that have all advanced significantly over the past several months.

As Jim mentioned, MGA012, our anti-PD-1 antibody, licensed to Incyte in the fourth quarter of 2017, met certain clinical proof-of-concept criteria triggering a total of $15 million in milestones achieved to date.

Incyte plans to present updated data from the cohort expansion portion of the Phase I study of MGA012 in a poster session at the upcoming SITC annual meeting in a few days.

Incyte has announced its intention to pursue monotherapy development of MGA012 in MSI-high endometrial cancer, Merkel cell carcinoma and anal cancer through registration-directed studies, with initial data anticipated in 2020.

In addition, across both Incyte and MacroGenics, multiple studies have been initiated, which will feature various combination regimens with MGA012.

We are very pleased with the significant clinical advancement of MGA012 and are excited for its potential in treating solid tumor cancers.

In addition to the MGA012 program, we have 2 bispecific DART molecule programs in development that each target PD-1.

MGD013 is a first-in-class DART molecule that provides co-blockade of 2 immune checkpoints molecule expressed on T cells PD-1 and LAG-3 for the potential treatment of a range of solid tumors and hematological malignancies.

We recently established the dose and schedule for MGD013 administration and have initiated dose expansion in up to 9 different tumor types in a Phase I study.

In addition, a few weeks ago, we entered a relationship with NanoString to develop and evaluate tumor inflammation signatures and novel predictive gene expression signatures in order to explore potentially predictive biomarkers for MGD013 clinical application.

MGD019, another DART molecule, is designed to provide co-blockade of both PD-1 and CTLA-4 on T cell.

We recently received IND clearance for this molecule from the FDA.

We are preparing to initiate a Phase I clinical trial.

As you can see, our PD-1 franchise has advanced very rapidly this year, with near-term cohort expansion data on MGA012 at SITC in a few days as well as data from registration-directed studies anticipated a few years out.

The first of our 2 PD-1 DART molecule, MGD013, quickly completed dose escalation and is now being evaluated across several tumor types and dose expansion.

And finally, MGD019 is ready to start dose escalation.

I couldn't be more excited about the progress we and Incyte have made.

Let me now shift to our B7-H3 franchise and our most advanced candidate, enoblituzumab, an Fc-optimized monoclonal antibody.

Clinical data from a study of enoblituzumab in combination with pembrolizumab has been selected for oral presentation at the upcoming SITC meeting this coming weekend.

As you'll see in the presentation and related poster, the combination has demonstrated a manageable safety profile and showed antitumor activity in multiple cancers evaluated.

As an update of the recently released SITC abstract, the combination of enoblituzumab and anti-PD-1 demonstrated antitumor activity in checkpoint inhibitor-naïve patients, who had squamous cell carcinoma of the head and neck, and in checkpoint inhibitor-naïve patients with non-small cell lung cancer, with tumor PD-L1 expression of less than 1%.

In these 2 cohorts, objective responses occurred in 6 of 18, or a 33%, of response-evaluable head and neck patients, and in 5 of 14, or 36%, of response-evaluable non-small cell lung cancer patients.

Additional details, including higher response rates among patients with threshold B7-H3 expression levels, will be provided at SITC.

Let me take a moment to highlight an important emerging theme.

The leveraging of our Fc-optimized molecules with checkpoint blockade appears to coordinately engage both innate and adaptive immunity, the 2 major components of the immune response, which has resulted in antitumor activity.

We've seen this when combining margetuximab and anti-PD-1 in gastric cancer, and now we're very excited about seeing similar biological activity when combining enoblituzumab and anti-PD-1 in multiple solid tumor types.

We look forward to the presentation on Sunday.

The second clinical candidate in our B7-H3 franchise is orlotamab, previously known as MGD009, a DART molecule targeting B7-H3 and CD3.

Orlotamab is being evaluated in a Phase I monotherapy study in multiple tumor types.

In addition, a combination study with MGA012 is ongoing.

The third candidate in our B7-H3 franchise is MGC018, an anti-B7-H3 antibody drug conjugate that has shown potent antitumor activity in preclinical models.

We have received FDA clearance to initiate a Phase I clinical trial, both as monotherapy and in combination with MGA012 in patients with solid tumors.

Finally, flotetuzumab is a DART molecule that recognizes both CD123 and CD3, and is being developed for the treatment of acute myeloid leukemia, or AML.

We completed the AML dose expansion earlier this year and will have 2 oral presentations at the upcoming ASH Meeting in December.

One presentation is focused on updated clinical data and the other on gene signature data as a potential biomarker for selecting patients with a high probability of response.

In addition, we will have 2 flotetuzumab posters at ASH.

MacroGenics has previously presented data supporting the rationale for using checkpoint blockade as an approach to potentially enhance the anti-leukemic activity of flotetuzumab, and plans to commence a combination study with MGA012.

Our partner, Servier, has development and commercialization rights for flotetuzumab outside of North America, Japan, Korea and India.

This has been another busy and productive quarter for MacroGenics, with the completion of enrollment in our pivotal Phase III trial of margetuximab in breast cancer as well as the clinical advancement of multiple product candidates across our pipeline.

This progress means that the next 12 month has the potential to be transformative for MacroGenics, as important data readouts, including top line Phase III results in the first quarter could provide catalyst for future growth.

And we'd now be glad to address any questions that callers may have.

Operator?

(Operator Instructions)

The first question comes from Jonathan Chang with Leerink Partners.

First question.

Can you provide more color on the preparations for the potential U.S. commercial launch of margetuximab?

And also, how are you thinking about an ex U.S. partnership?

Jonathan, thanks for the question.

And obviously, we're getting prepared for potential launch in the U.S. We have a team focused in-house that has reached out to various KOLs with regarding the potential loss and have gotten input from them.

We've obviously looked at the opportunity to both begin to build an internal marketing and sales team.

We anticipate this will be sort of a hybrid model where we will be hiring individuals in-house as well as use outsource contractors.

And again, this has all being planned out with the readout of, hopefully, positive data in the SOPHIA study.

With regard to the ex U.S. opportunities, we clearly have had engagements of various other organizations that have sales forces around the world.

And we are looking at opportunities either developing regional partnerships or partnerships for ex U.S. activity.

Of course, many of these partners are waiting -- potential partners, let's put it, for the results of the clinical trial data.

So that's where we are at this point.

That's helpful.

Second question.

With SITC abstracts published, can you talk about how you're thinking about benchmarks for the enoblituzumab plus KEYTRUDA combination?

Yes.

Thank you very much for that question.

We're very excited about the data that we have partially revealed and that you'll hear at the oral presentation on Sunday, and there will be also a poster with regard to the combination of enoblituzumab and pembrolizumab on Saturday.

So if you look at this patient population for both the head and neck, and lung cancer patients, we're talking about patients that have in large part almost all have seen chemotherapy.

Except for a rare individual, actually, all patients with lung cancer have seen chemotherapy in first-line, a rare patient seeing it in the adjuvant setting.

All the patients but one in head and neck had seen chemotherapy in first-line.

And so if you look at the previous results, let's start with the head and neck studies.

If we compare the response rates, we've seen now in our study of 33%.

The benchmarks are 2 pembrolizumab studies KEYNOTE-012 and KEYNOTE-040 with respect to response rates in this population of 16% and 15%, and in the CheckMate 141 study with nivolumab, an overall response rate of 13%.

So we are doing at least 2x better in the head and neck population.

The same theme is true for the lung cancer patients.

The comparison here would be KEYNOTE-001 for pembrolizumab, where in the less than 1% PD-L1-positive population, they were seeing response rates of 8%.

And then the comparators for nivolumab was CheckMate 017 and CheckMate 057, which respectively, had a response rate, again, in the less than 1% of 17% and 9%, respectively, in squamous and nonsquamous respectively.

So again, in all these cases, we're seeing at least twofold better in terms of the response rate in this second-line population.

And maybe just 1 follow-up to that.

How could the enoblituzumab data at SITC and potential next steps impact your thinking on your other early-stage B7-H3 programs?

I couldn't hear you.

Can you speak up again and just repeat the question?

I'm sorry, I can't hear you.

How could the enoblituzumab data at SITC and potential next steps there impact your thinking on your other B7-H3 programs?

Well, thank you very much for that question.

Clearly, we are very encouraged by this data.

I think it's a nice validation of B7-H3 target and the activity of an Fc-engineered molecule in combination with a checkpoint to get enhanced responses.

Again, as we pointed out earlier in this call, the ability of priming both the innate and then subsequently, the adaptive immune system here complements the data we have already presented, as discussed earlier, of margetuximab and anti-PD-1 in gastric cancer.

So we think this mechanism is holding up in multiple tumor types, with multiple molecules.

We think that the mechanisms that will be engaged with the CD3 by B7-H3 orlotamab studies, either alone as monotherapy, and combination obviously can amplify T cell infiltration into the tumors.

I should also note that there will be a poster being presented by the Johns Hopkins Group, who's conducting an IST study with enoblituzumab as neoadjuvant therapy in prostate cancer.

And I would encourage you to look at that poster as well.

Again, supporting the principle that enoblituzumab can enhance immune responses or certainly, the attraction of T cells into tumors, and may be a very important vehicle for converting relatively cold tumors to warmer tumors.

And then finally, clearly, we are very excited about the start of the MGC018 study with the ADC for B7-H3, where we believe that the mechanism of a -- essentially, a chemotherapy can enhance antigen presentation in this setting, again, providing another mechanism for inducing better immune responses.

So we see that these 3 different mechanisms of action targeting B7-H3 could potentially be used either individually or in combination with other molecules.

And we are looking forward to that data coming out over the course of the next year to 1.5 years.

The next question comes from Peter Lawson with SunTrust Robinson Humphrey.

Scott, just on flotetuzumab, any thoughts around pivotal trial, what that could potentially look like in AML, whether it's in relapsed disease or refractory disease?

Any help around that would be great.

Thanks, Peter, for the question.

Again, we've made very nice progress on flotetuzumab.

As was pointed out earlier today, we will have 2 oral sessions.

Adding onto the data that we've already presented at ESMO and ASH last year, there will be an additional 18 patients to the 8 we already presented at ASH last year in patients with relapsed/refractory AML.

As important though is an oral presentation, which will also be presented, which gives certain insights to biomarkers that we believe can guide us for targeting particular populations of AML patients.

Rather than speak about the data now, I'll let the presentation speak for itself at ASH.

We're also, as we reported today, are also encouraged by combination studies where we have seen in preclinical model systems enhanced activity of PD-1 checkpoint blockade in combination with flotetuzumab.

And we believe that this could enhance the responsiveness of flotetuzumab alone in the late-stage unresponsive patients.

And we have also additional preclinical data that combinations with HMA and other agents can enhance response as well.

So I think we'll give you a update at ASH, and then we'll talk about the next steps moving forward with this program.

And then just around the enoblituzumab.

Enoblituzumab?

Yes.

What's the go-forward approach there as regards to indications, go-forward combinations and potentially, screening patients for B7-H3?

That's an excellent question, Peter.

So number one is, at the presentation -- again, I didn't want to discuss it today, I'll let the presentation speak for itself.

But we can get further enrichment of responses so far in, obviously, a subset of these patients if we look at certain levels of B7-H3 expression.

So their increased response is based on B7-H3 levels in the data we've analyzed so far.

The next step is obvious.

We want to obviously confirm some of these responses with a larger data set and with a similar patient profiles.

But given where this -- the state of treatment are right now for head and neck, and lung cancer, we see potential opportunities even moving the earlier lines and obviously, potentially, exploring with chemotherapy as well.

I should also point out, now that we're seeing such potent activity both in PD-L1-negative patients as well as in the head and neck patients, we see PD-L1-positive patients that were participating in the data -- in the study that I just described.

We will be looking at this with different biomarkers as well.

So -- and as well as in other tumor types, because we think that this may be a very generalizable enhanced way of targeting tumors.

The next question comes from Umer Raffat with Evercore.

First, Scott, Jim, I guess, for both of you.

But my question is what I'm trying to reconcile is your ongoing Phase III study on margetuximab is obviously open label, and we should get the results in 1Q.

But I'm just trying to figure out if I should be or shouldn't be reading into how the press release talked about commercial preparation, partnership.

Do you have additional visibility or additional confidence over the last few months?

Just trying to understand what prompted that disclosure.

And I had another one.

Well, I think, Umer, it would be -- I do not know the results of the data, neither do other members of the team.

This is a study that may be open at the local level, but we as management have no idea what the outcome is in terms of the individual treatment regimens for patients.

I just think it is critical for a management team to be ready with the filing of a BLA.

And we're obviously preparing for that with successful data as well as the next steps forward for the commercialization strategy as well as supporting all the manufacturing that goes ahead with this.

If the data turns out to be positive, we don't want to delay at all being able to provide a very effective treatment to patients.

So you shouldn't read anything more than that, that we're a very diligent group in trying to do our work.

Makes sense.

On CD123, Scott, I noticed a couple of things.

One that just the order in which it was mentioned in the press release appears to have dropped.

And also in the additional 16 patients in the expansion cohort, it sounds like the complete response rate was 2 out of 16 in these expansion versus 2 out of 8 in the first 8. So what I'm really trying to get at is, do we know if there were far more relapsed patients in those additional 16?

I'm just trying to understand why the CR/CRi looks so different, the 2 out of 8 versus 2 out of 16 in the next batch that we just learned about at ASH?

Yes.

So with regard to the order of presenting this.

I've been asked this question before on other calls.

And again, given that the data is going to be updated at ASH, this, we think, will be a more appropriate highlight at our fourth quarter earnings call.

Given such advancements that we've now made with the PD-1 franchise, the B7-H3 franchise in March, we just spoke about it before.

But it's not -- you should not interpret this anything more than that, that we have a lot of things going on that we think are very good news for the company.

With regard to the number of patients that are relapsed or refectory, stay tuned for the data.

I think again, as I pointed out in response to Peter's question before, I think you're going to have some very nice insights on to the populations that may be most responsive to flotetuzumab therapy.

And I think you'll get a lot more clarity then, so I'd rather not discuss the data at this point.

Okay.

No, makes sense.

And then just briefly, the PD-1 x LAG-3, will you have truly PD-1 refectory patients in there?

And/or would you be open to doing a bit more of a randomized-type design, where we can get to see what the PD-1 mono does versus your PD-1 x LAG-3?

Excellent question.

So obviously, we did not screen ahead of time and did not put any requirements for either refractory or naïve patients to PD-1 in the dose escalation part of the study, because we wanted to, obviously, just to first establish safety of them -- of those patients.

We are going to retrospectively look at those patients, and obviously, we'll provide data on which patients were anti-PD-1-experienced, those who have elevated PD-L1's going forward.

As you know, the point is to establish the safety and the pharmacokinetics and the occupancy.

And I'm very happy to say that this molecule looks great.

It is -- we have a very nicely established PK and occupancy profile.

We've selected the dose to move forward with in this Phase II study.

As I said, we will be moving into at least 9 different tumor types.

Included in this population will be those that are PD-1-naïve as well as anti-PD-1-experienced and include those that are PD-L1-low as well as PD-L1-high.

And clearly, we will also analyze these patients for LAG-3 expression.

As we pointed out today, we have a collaboration with NanoString to look at various markers that maybe predictive in this population for responsiveness.

In addition, in parallel, we're doing work on IHC expression.

And so we'll have those coordinate activities for biomarker analysis to be able to be provided.

My expectation given that the enthusiasm we've seen for this molecule, patients are lining up to get into the trial, that this should recruit very nicely and hopefully, in the later part of next year, should be able to provide a nice update of this dataset.

The next question comes from Debjit Chattopadhyay with H.C. Wainwright .

I joined a bit late, so I must have missed some of the comments here.

But on the SOPHIA study, if the -- if you're ready for the data presentation sometime in the first quarter of next year, have all the events happened, accrued kind of at this point?

Or how far away are you from the event -- all the events from happening?

And has that tracked in line with your expectation?

Deb, thanks for the question.

So clearly, we have been tracking the PFS rate as well as the OS rate in the population, it's tracking with our expectations.

And that's why we're able to indicate that we should have the top line PFS data in the first quarter to announce.

So I think things are on track.

So the events, have they happened already?

Or they're pretty -- I mean, they should happen by the end of the year?

Looking at the rate of events that have happened over the last month, we have not achieved the full analysis of all the events happening.

But we think it will be imminent, so that we should be prepared.

Obviously, the data has to be cleaned and moved forward, but we have not achieved the last 257th PFS event for this yet with central review.

But we expect in the time remaining over the next couple of months, we should have that data, have it cleaned and be ready to report in the first quarter.

Then on the enoblituzumab, the 33% objective response rate in the press release, I wasn't sure if, one, that's confirmed responses?

And number two, are these I-O naïve patients, the PD-1-negative are the I-O naïve patients?

Or I mean -- or how should I think about that?

Because if they're PD-1-naïve, they may not have gotten an I-O in the first place, they just got chemo or something.

So all the patients in both the head and neck, and lung patients we reported were confirmed responses, number one.

Second, with regard to the population in the lung cancer patients, these were PD-1-naïve and in -- anti-PD-1-naïve.

In the head and neck, they included both anti-PD-1-naïve.

And these are -- actually, they were both anti-PD-1-naïve.

In the head and neck patients, they were both PD-L1-positive and negative.

In the lung cancer patients, they were all less than 1% PD-L1-positive.

So they did -- did they get first-line chemo?

Or I mean, are they second-line patients in that case, but PD-1-naïve?

Yes.

So the clarity is that, as I said before, you came in, I guess, a little late to the call, with regard to all the patients with head and neck, all but 1 patient have had chemotherapy.

That 1 patient that didn't have chemotherapy, actually had enoblituzumab as monotherapy.

In the non-small lung cancer patients, all the patients had chemotherapy, almost all have had it in a first-line or later-line therapy.

There were a couple of patients that had it as either adjuvant or neoadjuvant.

But by and large, almost all had it at least in a first-line therapy.

Great.

And then from the gastric cancer, next step perspective.

Are you guys going to wait on the SOPHIA to read out before committing to some sort of randomized study in gastric cancer?

Or do you think you can do a large expansion single-arm kind of a study, given -- especially in the third-line setting, given what's happened with anti-PD-1s previously?

Great question.

Obviously, given all the things that are going on right now, and as I -- as we pointed out earlier, we have 25 additional patients that have been enrolled in the gastric cancer study.

We obviously want to confirm the signal that we were seeing from the initial patients, as we continue to follow the original gastric cancer patients.

But we are preparing for additional studies going forward in gastric cancer.

We're analyzing this both as potential second-line as well as first-line treatment regimens.

We obviously haven't pulled the trigger on that.

We want to see the additional data, and certainly, we'd like to understand where SOPHIA is.

And the timing is, as we pointed out, will all be in the first quarter.

So everything is coming at the same time.

So we should be able -- in the first quarter, be able to update you on specific plans on gastric cancer further development, as we also find out the breast cancer results.

The next question comes from Yigal Nochomovitz with Citi.

You have Samantha on for Yigal.

A bit of -- I wondered if you could perhaps outline your thoughts for some of the reasons that you're optimistic about SOPHIA working.

And also, what do you think the biggest risks to the study possibly not working are?

Thank you, Samantha, and thanks for the question.

We have been very encouraged by the mechanisms by which margetuximab has been working.

In addition to the early Phase I data that we provided, we have -- and we'll update soon some additional work that we've been doing on mechanisms of action and also observations from the original patient dataset.

So first of all, from the latter, we had several of the patients who responded to margetuximab as monotherapy that -- who had been on all previous anti-HER2 therapies that have -- or maintained on monotherapy 3, 4 and 5 years, doing exceptionally well as monotherapy.

And we believe that sits quite nicely with immune-based responses that had been described previously for anti-HER2 therapies, particularly with Herceptin.

And given the dramatic enhancement of Fc-mediated activity, both in terms of antigen presentation and ADCC activity, we think the magnitude of this response is going to be even greater, and also was supplemented by the fact that in preclinical studies, we saw this effect in a HER2-negative tumor lines as well.

We've also have data on the immune responses to many of these patients, who've now been treated from the Phase I study with margetuximab alone.

And that data will be presented next year at an upcoming scientific conference, again, supporting the notion that these patients are generating and expanding immune responses to the tumor in a very antigen-specific manner.

So that's the positive.

Obviously, we're doing the study in a controlled manner.

This, I believe, will be the first head-to-head comparison of a Fc-modified antibody compared to a non-Fc-modified antibody to the same epitope.

So I think it's an important scientific study as well as importantly, potentially medical study.

Why won't it work?

Well, obviously, many things could explain that.

Clearly, we did not do a Phase II development of combination studies with chemotherapy and margetuximab.

So we don't have that baseline dataset to enhance our confidence in response rate.

But we believe that based on other clinical trials that have been conducted in this population, we think we have the controlled population response rates correct, and we'll have the data very soon.

So well, stay tuned.

That was very thorough and clear.

I was switching gears a little bit to flotetuzumab.

I wondered if you could also just give your thoughts on whether you think you plan to develop single-agent flotetuzumab for a specific population.

Or -- and do you see the combination of flotetuzumab and anti-PD-1 inhibitor as more attractive specifically for the relapsed patients?

Or do you think that, that combination could work for that whole general population, based on the preclinical data you've generated thus far?

So thanks for the question Samantha.

I think that we are very encouraged by single-agent activity with flotetuzumab in relapsed/refractory.

As I pointed out to Umer earlier, stay tuned for the update on biomarkers, because I think we can have some greater clarity there.

Having said that, we never stand still in terms of trying to get the best treatment for patients.

We think that if the data continues to advance in a positive fashion as monotherapy and the marketing conditions and competition make sense, then we should definitely move that forward for providing a therapy that can benefit patients.

Having said that, we are exploring other combinations together that could be -- even give better responsiveness and give better clarity on that.

So I think that both strategies could be successful.

And when do you think we'll see the data for the additional combinations you just mentioned?

We haven't started the combination studies going forward.

I pointed out at a meeting earlier this quarter that -- and I think there will be some additional data at the ASH Meeting.

We spent a lot of time trying to mitigate cytokine release in this population with the CD3-redirected killing and have, as we pointed out at earlier meetings, dropped the grades of CRS side effect profiles with the strategies that we have implemented.

We have decided to continue to try to even further enhance or reduce the CRS.

And so we're doing some fine-tuning to the initial first week of lead-in dosing strategy in the next set of patients that we will be treating.

We'd like to get a small subset of those patients completed.

And if, in fact, we achieve what we hope, then we will implement the combination study with the MGA012.

So this is likely to occur in the first part of 2019.

(Operator Instructions) The next question comes from Stephen Willey with Stifel.

Just wanted to follow-up, I guess, on a few prior questions.

So I guess, on flotetuzumab, you know the CR rate you're seeing is, I guess, in the 20% range.

There was some competitive data that was announced also in conjunction with the ASH abstract release that's also kind of in and around that 20% range.

So just kind of wondering if you think that's -- that number is kind of the best that you're going to get with a CD123 -- CD3-redirected bispecific.

And then also just wanted to confirm that you will be communicating kind of the next steps forward with respect to the single-agent development program in conjunction with ASH?

Thanks, Steve.

So with regard to the data we presented in the competitive rate and the 20% that you cited, as I pointed out, I think that higher percentages could be achieved with the proper selection of patients.

And again, as I pointed out, take a look at the presentation of our biomarker analysis that at least gives us encouragement that we could potentially achieve higher response rate in a subset of patients.

With regard to the competitive data, well, there is some number consistency that's being put out there.

There are some subtle differences in populations that we've treated versus some of the competition.

At least in one other presentation in -- from the abstract, patients that were included in this other study, but not in our study, included patients that were post-transplant.

And as you know, given an allo transplant and restoring an immune response may enhance rates in those patients.

And furthermore, obviously, it could have an independent allogeneic response.

So we have not treated those patient.

We, in fact, have talked about including those patients in future studies, which could further enhance our response rate.

But I can't comment on that, because we don't have any data ourselves on that.

So with regard to your second question, we will provide next steps around the time of the ASH Meeting.

Okay.

And then just a follow-up as well on the gastric development program.

It kind of sounds like that might be a little bit contingent upon SOPHIA results.

But you did mention additional second-line and possibly front-line trials.

Should we presume that any additional development work in the second-line setting would be registrational with respect to capacity?

And I guess, if so, have you guys any given additional thought around swapping out pembro for MGA012?

Yes.

Thank you very much for that question.

So yes, we clearly are looking at alternative checkpoint molecules that we might use instead of pembro.

The analysis would be for what is the quickest way we can get an approval for a combination study going forward.

And that is part of the equation, but that clearly is part of the consideration that we're doing internally.

So the answer is, for the second-line setting, yes, we're looking at the potential for something other than pembro, 012 as an obvious one.

Second, we're looking at pathways for a registration for second-line.

But as importantly, given the data that we've shown on particular subpopulations of patients within gastric, particularly the dramatic enriched responses we saw in the HER2-positive, PD-L1-positive population, where we're seeing responses, at least in the small dataset, of around 60%.

There may be ways of, obviously, developing quickly for a certain subset of patients.

As we also begin to think about how does one execute on a first-line therapy, where clearly, chemotherapy is part of the approved regimen.

And obviously, physicians who are treating such patients feel that they like to see that quick reduction of tumor size with that chemo.

Given that the immune therapies tend to take longer to get those responses, it's, I think, become the more standard norm now of trying, particularly in these earlier-line therapies, of combining a chemo with the immune-based regimens.

So these are all on the table, and I think we'll be able to provide greater clarity at the time of the January dataset for the additional 25 patients.

Okay.

And then just lastly, on the enoblituzumab.

I know that there's been kind of this background debate with respect to whether or not B7-H3 is immunomodulatory in nature or just whether or not it's kind of more of an expression marker.

And I was just kind of curious with respect to the Hopkins' data that's going to be presented at SITC.

Do you think that somehow contributes to the notion that this may actually be immunomodulatory in nature?

Just kind of curious as to, I guess, your thoughts around the increase in CEA infiltrate you're seeing and what that might mean from a mechanistic perspective.

Yes.

So as I mentioned to you before, Steve, I'm fairly agnostic with regard to whether this is mechanistically being mediated by a checkpoint blockade or the utility of this as a tumor antigen being targeted in a selective manner because of the high overexpression on tumors versus normal tissues.

I can make a case for both happening here.

Clearly, as I was pointing out before, I think we have compelling data both from marg plus anti-PD-1 and now enoblituzumab plus PD-1, that we are also -- with increased tumor killing, we're also getting expansion of T cells, and in some cases, we have some evidence now of antigen-specific T cells.

So I think both mechanisms could be supported scientifically by the data to date.

So at this -- what's the most important point is that having an exuberant immune response with good patient responses is our goal, and let the mechanisms prevail which are working.

The next question comes from Boris Peaker with Cowen.

My first question on enoblituzumab checkpoint inhibitor combo.

If we look beyond the overall response rate, I'm just curious, are there other differences from just checkpoint inhibitor monotherapy in terms of either time to response or their ability to response or perhaps the overall shape of the PFS curve?

I mean, any other way we could see the contribution of enoblituzumab to the checkpoint inhibitor itself?

Boris, thanks for the question.

Stay tuned for the presentation, you'll see the spaghetti plots of that.

And we were very encouraged with the durability of these responses being seen.

So I'll let you take a look at the data and evaluate that.

Obviously, we're going to continue to follow these patients and expand the study based on this initial promising data.

Great.

And my second question for the B7-H3.

You mentioned that you have plans to develop an antibody drug conjugate.

I'm just curious, can you comment about the internalization of B7-H3 itself, as that's obviously important for an antibody drug conjugate activity?

Very good question.

In the previous earnings calls, I've sort of went into a little bit of detail, which is the specific variable domain we've selected for enoblituzumab and orlotamab, the CD3 x B7-H3.

Our -- to one -- it is 1 specific variable domain to 1 specific epitope.

For the conjugate that we selected, MGC018, we actually selected a different antibody.

And this was selected because of what you were alluding to is that we have seen better uptake of that antibody conjugate complex into the cells.

And it turns out that the 2 epitopes are noncompetitive.

So in theory, one could use combinations of 2 separate B7-H3 agents without impairing the activity of one versus the other.

In preclinical data, we've seen terrific responses in xenograft models, where we have seen in certain tumors a single dose of drug able to obliterate tumors.

So we're very excited about starting this study, and we expect first patient in very shortly.

But -- I'm sorry, but my question was about internalization, just the receptor itself internalizing the bound antibody.

Is there any data regarding that?

Well, again, that's what I'm saying.

We did that testing.

And we have -- so if you look at the B7-H3-specific antibodies and DART molecules we put for the 2 other molecules, they will have residence time on the surface of the molecule, a small number will be taken up.

But when we compared it to the specific antibody we used for the antibody conjugate, it was much more efficient of being taken up into the tumor cell and obviously, releasing toxins, because it's a cleavable linker, and then that binds to the DNA of the cell.

So we have not published this data specifically with regard to the differences in the uptake and the turnover of the receptors, but the data was based on ones we've established internally.

This concludes the question-and-answer session.

I'll now turn the call back to Dr. Koenig for closing remarks.

I'd just like to thank everyone again for joining us and let you all know that we look forward to continuing to advance our programs in the coming months and providing updates on our progress, have a nice day.