Macrogenics Inc Q1 FY2020 Earnings Call

Good afternoon. We will begin the MacroGenics 2020 First Quarter Corporate Progress and Financial Results Conference Call in just a moment. All participants are in a listen-only mode at the moment, and we will conduct a question-and-answer session at the conclusion of the call. At this point, I will turn the call over to Anna Krassowska, Vice President, Investor Relations and Corporate Communications of MacroGenics.

Thank you. Good afternoon and welcome to MacroGenics’ conference call to discuss our first quarter 2020 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 Investors tab on our website at macrogenics.com. You may also listen to this conference call via webcast on our website where it will be archived for 30 days beginning approximately two 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, President and Chief Executive Officer of MacroGenics. Scott?

Thank you, Anna. I’d like to welcome everyone participating via conference call and webcast today. Given the ongoing COVID-19 pandemic, it goes without saying that I hope all of you, as well as your family members, are safe. Thank you for joining us. This afternoon, I will provide an update on our clinical programs and the data expected during the year. 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.

Thank you, Scott. This afternoon, MacroGenics reported financial results for the quarter ended March 31, 2020, which highlight our financial position as well as our recent progress. As described in our release, MacroGenics had research and development expenses of $48.9 million for the quarter ended March 31, 2020 compared to $47.1 million for the quarter ended March 31, 2019. This increase was primarily due to an increase in development and clinical trial costs for multiple programs. We had general and administrative expenses of $10.2 million for the quarter ended March 31, 2020 compared to the same amount for the quarter ended March 31, 2019. We recorded total revenue consisting primarily of revenue from collaborative agreements of $13.7 million for the quarter ended March 31, 2020 compared to $9.7 million for the quarter ended March 31, 2019. This increase was primarily due to revenue recognized for manufacturing services under the clinical supply agreements with Incyte and Zai Lab, as well as milestone payments under the Zai Lab agreement for clinical trial initiations in Greater China. We recorded a net loss of $44.7 million for the quarter ended March 31, 2020 compared to a net loss of $45 million for the quarter ended March 31, 2019. And finally, our cash, cash equivalents, and marketable securities as of March 31st, 2020 were $170.8 million compared to $215.8 million as of December 31st, 2019. We anticipate that our cash, cash equivalents, and marketable securities as of March 31, 2020, combined with anticipated and potential collaboration payments, should now enable us to fund our operations into 2022 assuming our programs and collaborations advance as currently contemplated. We've previously guided into 2021. This extension was made possible through several factors including our program prioritization efforts. And now I'll turn the call back to Scott.

Thank you, Jim. We are encouraged by the progress and clinical activity that we continue to observe across our broad portfolio of certain antibody-based product candidates and anticipate presenting clinical data from all these molecules this year. While we expect some near-term impact on clinical trial site initiation and patient enrollment due to the unprecedented challenges posed by the COVID-19 pandemic, we have not changed our guidance for the timing of key anticipated 2020 clinical data readouts and regulatory events. I will start with flotetuzumab, our investigational bispecific CD123 x CD3 DART molecule. During a plenary session at the Virtual AACR Annual Meeting held last week, Dr. Sergio Rutella presented the translational data suggesting that TP53 mutated acute myeloid leukemia or AML was correlated with an immune-infiltrated tumor microenvironment in the bone marrow, which as previously reported, predicts and was, in fact, associated with response to flotetuzumab. This new analysis stills our prior data by Dr. Rutella presented at ASH last year showing the same immune signature was associated with a lack of response to chemotherapy or the response to flotetuzumab immunotherapy and the ongoing Phase 1/2 dose expansion study. Separately, we are scheduled to meet with the FDA in the coming weeks to gain feedback on our planned registration test in the U.S. for flotetuzumab for the treatment of patients with AML who are refractory to induction treatment, defined as primary induction failure or PIF patients and patients who relapsed within six months of initial response. We intend to share these plans with you before the end of the second quarter. Of the approximately 20,000 patients diagnosed with AML in the U.S. annually, at least 30% fail to achieve a complete response with intensive induction therapy. These AML patients have a poor prognosis with limited options to treat this particularly challenging disease. We expect to present updated data from the ongoing expansion study of flotetuzumab in this AML population in the second half of 2020. Separately, we stopped enrollment in an ex-U.S. Phase 1/2 study combining flotetuzumab with retifanlimab, an anti-PD-1 molecule also known as MGA012 in patients with relapsed or refractory AML. This decision followed the successful completion of the first planned dose escalation cohort of 300 nanograms per kg per day flotetuzumab plus three mgs per kg of retifanlimab, and with no safety finding or lack of activity. We plan to resume the study at U.S. sites in the future. I would like to turn to the clinical abstracts that have been selected for presentation at the upcoming ASCO Annual Meeting that will be held virtually at the end of May. The first is an oral presentation covering dose escalation and select expansion cohorts from the ongoing Phase 1 study of MGD013, our investigational bispecific PD-1 x LAG-3 DART molecule. The overall safety profile of MGD013 as it relates to immune-mediated toxicity is generally consistent with anti-PD-1 molecules with respect to event type and frequency. We have not identified the maximum tolerated dose. Tumor-specific expansion cohorts have been treated at a flat dose of 600 milligrams once every two weeks. Among the valuable patients, we are observing activity of MGD013 across expansion cohorts in several tumor types, including after anti-PD-1 therapy, which warrants further investigation. While expression of LAG-3 PD-1 were not criteria for study entry, high LAG-3 expression on archival biopsy tissue seems to associate with response to MGD013 monotherapy. We are also conducting further translational work into other potential correlative biomarkers. The course we noted that margetuximab, our investigational Fc-engineered monoclonal antibody targeting HER2, enhances LAG-3 on effector cells. We initiated an expansion cohort in combination with MGD013. Most notably, and as you will hear more about at ASCO, in a cohort of over a dozen valuable patients with advanced HER2-positive tumors treated with a combination of MGD013 and margetuximab, we observed confirmed and unconfirmed objective responses in excess of 40%. All responders remain on therapy. We are very encouraged by this observation that we believe represents synergistic activity of the two molecules based on our results in monotherapy studies. For additional context, published data indicate that responses among HER2-positive breast cancer patients treated with trastuzumab plus anti-PD-1 or anti-PDL-1 antibodies are 0% among PDL-1 negative patients and 15% among PDL-1 positive patients. Given the strong early efficacy signal and favorable safety profile, we expect to prioritize the combination of MGD013 and margetuximab for further development. We believe that the combination of Fc-engineering and dual checkpoint blockade engages both innate and adaptive immune responses against a broad range of tumors with very tumor microenvironments. Separately, Zai Lab, our regional partner in Greater China is continuing to explore MGD013 in combination with their pipeline assets, including niraparib, a PARP inhibitor, and patients with advanced gastric cancer and brivanib, a dual tyrosine kinase inhibitor of the VEGF, FGF receptors in patients with hepatocellular carcinoma. The second presentation of clinical results at ASCO will be a poster covering initial dose escalation data from the ongoing Phase 1 study of MGC018, our investigational antibody drug conjugate targeting B7-H3. Dose escalation studies are ongoing. Among enrolled patients, the safety profile, which includes hematologic and skin toxicity, as expected, has been manageable. In dose escalation, we have also observed early evidence of clinical activity, especially in patients with metastatic castration-resistant prostate cancer, or mCRPC, with reductions in PSA levels of 50% or more in five of seven patients treated, including one with sustained regression of bone disease. Based on these encouraging observations, we are planning a dose expansion in patients with metastatic CRPC once the dose escalation is completed. The third and final of our clinical presentations at ASCO will be a poster of results stratified by chemotherapy in the Phase 3 SOFIA study of margetuximab plus chemotherapy compared to trastuzumab plus chemotherapy in patients with HER2-positive metastatic breast cancer. A note regarding the timing of the final analysis of overall survival in SOFIA. We continue to anticipate reporting final OS results in the second half of 2020 pending the accrual of death events needed per the protocol to conduct the analysis. Separately, as a reminder, the FDA has indicated its plan to schedule an Oncologic Drug Advisory Committee or ODAC Meeting in the second half of 2020 and has a prescription drug user fee (PDUFA) target action date for margetuximab for the treatment of HER2-positive metastatic breast cancer in December 2020. While we are discussing margetuximab, beyond breast cancer, we are opening clinical sites globally to enroll patients in the Phase 2/3 MAHOGANY study, evaluating the combination of margetuximab and checkpoint blockade as a frontline treatment for advanced gastric and gastroesophageal junction cancer. Initially, MAHOGANY is evaluating margetuximab plus retifanlimab, our investigational anti-PD-1 antibody licensed to Incyte in patients with HER2 IHC 3+ and PDL-1 positive disease. The single arm part of the MAHOGANY study which we refer to as Module A is designed to support potential accelerated approval of margetuximab plus retifanlimab in the U.S. based on a primary efficacy endpoint of objective response rate. I can comment on our initial observations. We have observed objective responses in the first three to four valuable patients treated on the study with a schema-free regimen. These are very early observations but support optimism around possibilities for margetuximab in this indication. As you all recall, we observed responses in approximately 50% of second-line patients with HER2 IHC 3+ and PDL-1 positive disease in the study of margetuximab and enoblituzumab. We expect to report initial data from MAHOGANY Module A in the second half of 2020. The second component of the MAHOGANY study, which we refer to as Module B, is designed as a randomized control trial to evaluate the combination of margetuximab with chemotherapy, retifanlimab, or MGD013 compared to trastuzumab and chemotherapy in a broader population of patients with advanced HER2-positive gastric cancer. We expect to first initiate Module B in Greater China in collaboration with our regional partner, Zai Lab in the second half of 2020. To briefly discuss retifanlimab, Incyte plans to present data in the second half of 2020 from their potentially registration enabling monotherapy study in patients with anal cancer, which is now fully enrolled. Two other monotherapy studies of retifanlimab are also ongoing in MSI high endometrial cancer and Merkel cell carcinoma and could potentially support registration. In addition, we expect Incyte to initiate a Phase 3 study known as POD1UM-304 in patients with metastatic non-small cell lung cancer in 2020. In all, there are currently five registration-directed clinical studies ongoing or planned in 2020 by either company across a broad range of tumor types. Let me next turn to MGD019, an investigational bispecific PD-1 x CTLA-4 DART molecule. The dose escalation is ongoing in all covered populations with advanced cancers. We have not restricted the study to tumor types that are known to respond to checkpoint inhibitors. We are currently enrolling patients in additional dose escalation cohorts with no dose limiting toxicities observed. Of the 13 valuable patients treated at doses of three milligrams per kilogram or greater, we have observed four patients across different tumor types with three confirmed and one unconfirmed objective response. We are encouraged by these admittedly very early data and plan to submit results from the dose escalation presentation at scientific conferences later this year. Finally, let me discuss enoblituzumab, our investigational Fc-engineered, anti-B7-H3 monoclonal antibody. In consideration of the current global and domestic COVID-19 pandemic, the planned Phase 2 study initiation of enoblituzumab in combination with checkpoint blockade as chemotherapy-free treatment of patients with advanced head and neck cancer will be delayed. We expect to provide an update on the timing for initiating the study in the second half of 2020. The delay to the study does not reflect a lack of enthusiasm for this molecule. As you can see, despite the current global crisis, we continue to expect 2020 to be a data and catalyst-rich year for MacroGenics. We would now be happy to address any questions that callers may have.

And our first question comes from the line of Christopher Marai with Nomura. Your line is open.

Hey, good afternoon, everybody. Thank you for the update. Scott, that was quite extensive. To start with MGC018, you mentioned that the hematological and skin toxicity was as expected and manageable. Could you elaborate on whether that toxicity is caused by B7-H3 engagement or if it is separate from your payload on the ADC? Thank you.

Thank you very much for the question. Obviously, details will be presented at a poster session at ASCO. The expectations with regard to the hematological toxicity was related to the toxin, and the skin observations were either due to the toxin or due to the targeting of B7-H3. Right now, it's unclear. But as I noted, they are manageable toxicities.

Okay, great. Regarding SOFIA's final data, it seems that it will be available before the PDUFA decision. How should we interpret the FDA's communication to you regarding the necessity of an overall survival result? In your opinion, what are the implications for the potential outcomes of SOFIA's final results in relation to any approval decision?

Jackson, thanks for the question. Right now, we're continuing to monitor the number of death events, as I've indicated, we still anticipate this in the second half of this year. It's very hard to predict with precision of when this will occur; my expectation is that it will be later in this year, and obviously, there has to be some data cleaning. So, it may be very close, even to the PDUFA date when that data would be ready to present. So at this point, our plan is to take the second interim analysis for overall survival and use that as the basis which has obviously been already provided to the FDA and the BLA filing for evaluation. If any changes occur, we will obviously update everyone at that appropriate time.

Great. And then just sticking with margetuximab at MAHOGANY, progress looks really exciting, but your observed responses in three or four valuable patients. I was just wondering if you can comment on what level of durability we expect to see in terms of these responses? How durable are they? How much time have you have you observed them for? And how much will be available at ASCO? And then two, I think previously, you had discussed that this could be potentially registrational worthy the Module A, with a response rate and an endpoint in this patient population. So just maybe, if you could remind us of your plans with respect to that, and maybe what the hurdle might be in terms of, I suppose, adding more patients to the expansion part of that Module A? Thank you.

So, that's a couple of questions. So with regard to the length of duration of response, if it's still these patients are still on treatments. So it's still too early to predict, even on these few patients, what the target progression-free survival or overall survival would be. Just to give you a little context: the median progression-free survival for first-line therapy for flotetuzumab is 6.7 months and the overall survival was 13.1 months. So our hope is that, this will far exceed that with regard to progression-free survival and overall survival. With regard to overall response rate, which is the target endpoint for the single-arm study, just again to recall, toggle was 47%. Our hope is that this will be north of 50% and use that as a basis for decision. As we pointed out previously, we have said that, we should have a sufficient number of data from the initial patients to make a decision whether we are achieving the targeted range that would then encourage us to finish out completing enrollment. And we will plan to update everyone later this year, assuming if we continue to enroll with the rate we have been doing at this point.

Okay, great. Thank you very much. Congratulations.

Yes. Thanks very much. And sorry, I thought – the volume is very low. Are you there Chris?

It’s me. Yeah. You sitting down the questions were easier.

I am sorry. Thank you so much.

Thank you. And our next question comes from Debjit Chattopadhyay with H.C. Wainwright. Your line is open.

Hey, good afternoon. Lot of data drop here, so I probably have missed a few. So based on the activity with MGD013, do you expect to develop a companion diagnostic or the trend that you alluded to regarding correlation of responses, but LAG-3 expression is mostly a trend and you don't have anything concrete yet. And you know, because it’s a PD-1 LAG-3, you're getting a pretty holistic kind of response?

Rather than me commenting on that, why don't you stay and wait for the ASCO presentation? There may be merit in developing a diagnostic associated with this to select patients that would most benefit from this. But again, wait for the ASCO presentations to hear the details.

Okay. Then, just a clarification here for the upcoming data with the MGD013, you mentioned responses in multiple different tumor types in the post PD-1 setting. So are these patients primary refractory patients or patients who progressed after an initial response?

You know, we had cohorts of approximately 16 in some of these expansion groups. And so there is a mixed history on these patients. And I can't specify off the top of my head for the particular populations. We will show at the meeting, where they fall, but we can follow up with you afterwards.

Great. And just one quick follow-up on 018. Did you reach the recommended Phase 2 dose and the 50% PSA reductions in five out of seven with bone regression? Is this at the RP2D or is the dose escalation still ongoing?

The dose escalation is still ongoing. These were actually at lower doses and on previous calls, I had indicated, we were very encouraged by the data we're seeing, even in this lower doses range. So we're actually moving the dose up. We're right now enrolling patients at what we believe would be the top cells to establish a maximum tolerated dose, whether we achieve that with its highest dose, we do not intend to go higher. And we will select based on the response rate and pharmacokinetics and obviously, the safety profile of the preferred dose going forward. But the fact that we're seeing such a high response rate across multiple doses is obviously very exciting for us.

Perfect. I will hop back in the queue. I have a few more. I'll come back later. Thank you.

Thank you.

Thank you. And our next question comes from David Lebowitz with Morgan Stanley. Your line is open.

Thank you very much for taking my question. When you meet with the –

David, David, we can’t hear you. Can you talk closer to the phone?

When you meet later with the FDA on flotetuzumab, what are the range of possible outcomes you think on the registration or path forward?

If I heard your question, when you were very soft - in on our end, is what is the outcome of our expected outcome with a meeting with the FDA later this month? As I previously indicated, we had met with the FDA last September to discuss the design of a registration study in the refractory population. They agreed that this was a population that was very suitable and addressable and necessary given the current state of affairs for this population. Obviously, we can't predict what an outcome of any meeting with the FDA is. But we're very highly encouraged based on the last meeting we had with them. With some of the open questions, we were going to provide them which we have already done, some additional data on new patients that have been enrolled at the targeted doses, both with regard to safety and response rate. And as I have previously indicated, they were very interested in the historical data, a patient with so-called refractory disease and their response rate, as reported in the published literature over the last 30 years. And we provided them with all that data. So our goal right now is mainly to come up with some final designs on this trial and some certain understanding of what a target successful outcome would be for this study. So right now, we're very optimistic, but until we have that meeting, we can't give you any more clarity about the outcomes.

That makes sense. And I might have missed this when you mentioned on the call. But on the Phase 1/2 combination with formerly named MGA012 that was halted. What was the primary reason? Was it halted? Is this COVID-19 related or what?

So what happens is, is that enrollment slowed down because this was an ex-U.S. study in three countries, including Spain, which basically all the sites shut down, Australia sites were shutting down, and Israeli sites were shutting down. And basically, with very poor enrollment and incurring very significant costs just to maintain a Clinical Research Laboratory, we said it doesn't make sense to continue paying these huge fees. And so we said, let the COVID-19 pandemic slow down, and we will resume the study in the U.S.

Make sense. Thanks for taking my question.

Thank you, David.

Thank you. Our next question comes from the line of an analyst with Citi. Your line is now open.

Hi, thanks for taking our questions. Regarding SOPHIA and the upcoming ODAC meeting for margetuximab, what key questions do you feel you need to be ready to answer to ensure a positive outcome? I assume you are preparing for the ODAC meeting in advance. Any insights on that?

Yeah. I think probably the biggest questions that are looming and which has been publicly aired in many different settings is the value clinically of the molecule in the intensity population with regard to the PFS data that we presented. As you know, when we saw a hazard ratio and the intensity population of a reduction of 24% compared to the control population, but a very short actual value in terms of months with regard to the improvement in that market F allele population. I think the second question is related to the F allele population, which as you know was a targeted exploratory population that was predefined but did not allocate any output in the analysis. And given that which we have shown quite clearly, most of the therapeutic benefits are related to that F allele population which represents 85% of the overall population. How the FDA views that population further includes there. I think those are probably the two major questions.

Great, thank you. That's very helpful. And then you mentioned in your prepared remarks that you were going to open an expansion cohort for MGD013 and margetuximab. I wonder if you could give a bit more context for the study you quoted as a combination of Herceptin combined with PD-1 therapy is that a 0% response rate for PDL-1 negative? What line of therapy was that study conducted in? And in the data that you're going to be presenting for MGD013 and margetuximab, I think you said 40% responders, how many of those are PDL-1 negative? Just trying to get a clear picture of how those two studies compare?

I think it would be premature for me to state this at this call. So please attend or listen to the meeting at ASCO. We will have clarity about all those aspects with regard to line of therapy, specific tumors, the PDL-1 expression pattern, but it would be inappropriate for me to comment on this now before the ASCO presentation.

Okay. Got it. Understand and we'll certainly be tuning into that. If one more question for me, maybe a bit of a bigger picture question. We're going to see obviously a meaningful data set for MGD013 at ASCO, and you're still in dose escalation for MGD019, but we should get initial data for them in the second half. Given that these are both assets that are bispecific with a PD-1 arm, I guess, I'm just wondering how you're thinking that both of these assets are going to finish the treatment landscape together. Are there certain tumor types or even potentially drug combinations where you think each of these assets may be better suited?

What you will see related to both molecules is the value of this bispecific and its ability to enhance responses in certain populations regarding PD-1 and PDL-1 expression, as well as prior treatment with anti-PD-1 and PDL-1 therapies. We envision that both molecules will be easily combinable with other therapies. I wish we could show you the illustration of MGD013 today. We are currently conducting the ongoing gastric study for MGD013. One of the primary goals for the MGD019 study is to achieve the synergy that comes from combining an anti-PD-1 with anti-CCR4 while avoiding the toxicity that has been previously seen with ichinib combinations. To clarify, we have completed the dose escalation phase for MGD019, and we will share that with you later this year. As previously mentioned, we are well above the dose typically used in epi-evo combinations; historically, epi has been used in the clinic at three milligrams per kg, and more recently at one mg per kg, and we are significantly above that. Our findings show a favorable toxicity profile compared to the effects typically associated with anti-PD-1 treatments. For context, in our monkey study with MGD019, we administered doses as high as 100 meg’s per kg without significant toxicities. In contrast, lower doses of niebo led to severe outcomes like death due to diarrhea and dehydration in those animals. Therefore, the enhanced ability to activate T cells without associated toxicity will be an important factor in the value of this asset.

Okay, great. Thank you so much, and appreciate all the color there.

Thank you. And our next question comes from Peter Lawson. Your line is open.

Hi there. This is Mitch, on for Peter. Thank you for taking our questions. The first one is going into the December PDUFA can you get as an update on how you are prepared for a potential launch of margetuximab?

So we've previously mentioned, earlier in the year, we have done our marketing assessments. One of the things obviously with monitoring is the watch of other drugs that have been recently approved in third and late line therapies. So we are doing our homework both on the marketing side and other aspects of the drug. We have engagement obviously before COVID-19 with our MSLs in the community, to educate them with regard to FC engineering. The value potentially of immune-mediated effects that are associated with molecules like margetuximab. Our plan, as I said previously, is to open up discussions again with additional partners who can be in a position to help commercialize this molecule.

Thank you. I just wanted to get your thoughts on the timing of data release in the context of social distancing. Are you considering waiting for UN conferences for better reception from the medical community, or is that not something you're thinking about?

So, again, if you saw today, we were very transparent with trying to provide as much data recognizing that there are a lot of challenges that occur currently and we expect will continue throughout the year for access. So our goal is to be as open with ongoing studies as we can. We're not planning to give patient-by-patient updates. But we will provide as much data as we can in sizable numbers so that you can be aware. One of the things that we're very excited about, as I have said previously, also than our clinical molecules, are active, and right now our goal in the course of this year and next year is to have multiple registration studies ongoing and to build on the prospects of these molecules to get them to patients as quickly as possible.

Thank you. And our next question comes from Jon Miller. Your line is open.

Hi, guys. Thanks for taking my question and congrats on all of the progress. I guess after the ACR presentation on flotetuzumab and the TP53 genotyping observations you made there. Are you still focused on the refractory population? Or is there a space for a genotype-defined population? Is it better? Can you get a larger population by going for TP53 mutant patients as opposed to simply refractory population?

Great question, John. As has been pointed out, TP53 is about 10% overall in the population. As I pointed out today, there is a subset of refractory patients is probably the most refractory and given that we saw in our study so far, as reported about 40% response rate in this particular population, we're very excited that even in the most refractory population, we're seeing a good response. So, our goal is to actually treat the entire refractory population, which we think at the minimum is at least 30% and could be as much as 50% of the overall AML population, so that, in fact, we will not select based on genotype going into the study.

Absolutely understood. I guess, another follow-up then for your cash runway, which now reaches into 22. Could you provide any more color on what had to get prioritized out in order to extend the runway?

Sure. So, I think, we tried to give you a lot of detail about obviously, specific programs here. And I think that the ability to decide at various trigger points, when to advance a program. One of the points we have made previously and as part of our analysis, historically, we would typically look at four or five or six different tumor types for a given indication. As I pointed out today, for instance, for NGC team, we've got to focus in initially on the prostate population, with then the ability to expand further. So, again, by narrowing down many of our programs to one or two indications, we were able to actually project considerable savings going forward. That's in part on the way we were getting to 2022. But there are other things that contributed to that analysis.

That makes perfect sense. I noticed that unlike many of your peers, you have not engaged with COVID yourself and have left that to others. What has influenced your decision-making in this regard? Do you believe your technology could be beneficial during the ongoing pandemic?

That was a very difficult decision for us. Obviously, we have expertise. Historically, if you go back into the history of the company, we had worked on many different infectious diseases. As you know, we have an ongoing HIV trial with our dark eyes Pacific. So it was quite easy for us to jump into the development side of things. But given with such a broad cancer-focused program, we didn't want to remove all the infrastructure and obviously the costs that we've now allocated to the seven clinical and multiple preclinical programs to then move it into the COVID-19 initiative, particularly for development of antibodies or bispecific molecules, particularly given that we saw that there was an immediate response for very large pharmaceutical companies who had a lot more assets than we did. However, we have reached out to academic investigators who we've worked with in the past. And I've indicated to them if they have very unusual molecules that could actually contribute because of our infrastructure with regard to development and manufacturing. We could provide some help down the road, but right now we're prioritizing moving forward with our cancer molecules.

Got it. Thank you very much.

Thank you. And our next question comes from the line of Stephen Willey with Stifel. Your line is open.

Yeah. Good afternoon. Thanks for taking the questions. I guess, Scott, maybe just kind of given some of the enthusiasm embedded within your commentary around margetuximab, MGD013; just curious if that at all makes you rethink the design of module B. I guess specifically, just given that you're looking at the inside PD-1 there. And the bispecific and obviously, you're, I guess favorably leveraged from an economic perspective to the bispecific here, so, just curious as to what your thoughts there. And could you also maybe just talk a little bit about LAG-3 expression within gastric cancer?

With respect to the design of module B, it's important to remember the complexity of MAHOGANY. The single-arm study was meant for a specific subgroup to obtain accelerated approval, and as per our agreement with the FDA, part of module B's design will include confirmatory elements. The 012 was solely focused on the retinopathy from that exam. Although this second study was initially designed with chemotherapy in mind, it serves as a means of confirmation. Currently, we plan to proceed with the enrollment for module B. Zai is set to begin enrolling in China later this year, and we will continue monitoring that. We have just over a dozen patients in the combination study across multiple tumor types, and more details will be available following ASCO. I believe there is a chance to successfully execute the MAHOGANY study while also conducting a focused, well-structured study of MGD013 across a broad range of indications. We are still discussing how to move forward and would like to see more data. We are particularly interested in understanding the duration of response, but the initial data has been quite promising for us.

Is there anything you can say about LAG-3 expression on gastric cancer?

Yeah, it is. It's not the highest, but there's a significant. I don't recall the exact numbers. I think our data was higher in the subset of specimens we've looked at compared to what's been out in the literature. But it was significantly over 50% of the population.

Okay. That's helpful. And then just lastly, you just talk a little bit about some of the privatisation that's been taken here in an effort to extend cash runway. Can you maybe just speak a little bit to the assumptions regarding the underlying collaborative payments that are embedded within the runway guidance, I guess, specifically as to whether or not that includes some kind of regulatory payment from in the site as a result of MGA012 approval? Thank you.

So, we can't give you the granularity of the timing of payments and the type of payments. And obviously, we've imposed A what I think is a very conservative about valuation of expectations with regard to that. Just to give you again context, to refresh your memory, just the regulatory and approval milestones amount to $405 million. That's obviously across several indications in different territories. But given where I know the programs are, as I pointed out today, the NL study is fully enrolled. There are as I said five registration enabling studies ongoing. We think that we expect some significant milestones coming from that. That’s part of our calculation. But that's not by itself the decider on how we got to 2022.

Hey, this is Jim. It's important to note that our agreement with Provention Bio allows us to earn a $60 million milestone upon the potential approval of the BLA for trastuzumab. This molecule has breakthrough designation status, and they plan to submit the BLA within this year, likely in the fourth quarter. We have adjusted that $60 million figure downwards to account for some risk, doing so conservatively. We are continuously updating the probabilities linked to the various milestones across our portfolio to ensure we have an accurate, real-time understanding of the potential outcomes.

Understood. Appreciate the extra color Jim. Thanks.

Thank you. And our next question comes from the line of Etzer Darout with Guggenheim. Your line is open.

Thanks for taking the question. I have a couple of inquiries. My first question is regarding the expansion cohort for 019 patients on prior therapy with combinations of PD-1 and CTLA-4, which appear to be excluded based on the data you've observed. Do you believe this is better suited for patients who are naive to PD-1 treatment or those who are refractory to it? Additionally, have you observed any additivity for flotetuzumab with PD-1 at the 300 milligrams per kg dose in the study that was halted?

With respect to whether we are targeting the naive or refractory patient populations, the study included both. We believe MGD019 could be suitable for both groups. However, we need more experience with larger patient numbers, as our current data set is limited and lacks significant expansion in specific tumor types. We will provide more data later this year, but at this point, we think both populations could potentially benefit from this as a monotherapy, bispecific, or in combination with other drugs to enhance immune activity. Regarding the combination of flotetuzumab and retifanlimab, the number of patients enrolled in the study is too small for us to draw definitive conclusions. Observing enhanced responses in one or two patients makes interpretation difficult, so it's too soon to say. Historically, our analysis of the up-regulation of PDL-1 in patients treated with a single cycle of flotetuzumab has been quite consistent. Additionally, the study by Sergio Rutella indicates that the immune environment favors treatment with flotetuzumab, which includes the activation of checkpoint molecules. Therefore, it seems logical that some combination of this would benefit at least a subset of patients. We will continue to investigate that combination in the future.

Got it. Thanks, Scott.

Thank you. And our next question comes from the line of Jonathan Chang. Your line is now open.

Hello, team. This is John Barrett substituting for Jonathan. My first question is, you mentioned that you have not yet reached a maximum tolerated dose for MGD013. How did you determine the dose you are currently administering, and how confident are you that it is the appropriate dose, given the high levels you are able to achieve?

Thank you for your question. For many checkpoint molecules, it's not uncommon not to reach a maximum tolerated dose. We assess pharmacokinetics and receptor occupancy when determining the dose, while also considering the safety profile. As previously mentioned, this molecule behaves well, demonstrating favorable pharmacokinetics and a safety profile similar to anti-PD-1 treatments. This is our approach to selecting the dose.

Got it. And MGC018, you mentioned the interest in moving forward in prostate cancer. Could you just remind us the expression levels of B7-H3 in prostate cancer and any potential strategy to select for biomarker expression in that patient population?

B7-H3 is highly expressed in most solid tumors, especially in prostate cancer, with nearly all primary and metastatic prostate specimens showing very high levels of B7-H3. Therefore, we do not anticipate the need for diagnostics specifically for prostate cancer. We will conduct a retrospective analysis of one patient in this study to evaluate any variations based on expression levels, but we do not foresee this being a barrier. As previously mentioned, we had a collaboration on another B7-H3 molecule, flotetuzumab, as a neoadjuvant treatment in an ISG study with Johns Hopkins. This study demonstrated that administering enoblituzumab to patients with primary prostate cancer before prostate resection led to effective localization of the drug in the tumor and resulted in an increase of inflammatory cells in what is usually a cold tumor. Thus, we believe that both molecules have the potential to be utilized in various settings for prostate cancer and other types of tumors.

Great. Thank you. And one more, if you don't mind. Of course, the data for the overall survival of margetuximab is still coming in. But do you have an expectation of what setting you might like to present the final overall survival data be at a conference or press release?

This is an important event for the company, and we will issue a press release when the data becomes available. We plan to present the final data at a conference, but the timing depends on when the data is ready. It may be too early for the San Antonio Breast conference, and it's more likely we will present it at a scientific conference next year.

Thank you. And our next question comes from Tom Shrader. Your line is open.

Good afternoon. Thanks for all the details. Back to the ODAC panel, so do you expect the driving force there is the small subset of patients that have seen who have done worse. And also, and I apologize, this was asked if you in fact get the hint that you're going to get approved for a subset. But that changed your launch timing.

With regard to the second point, that doesn't change anything. As we've indicated before, having a research-based diagnostic for selecting patients based on their CD16 allele would be valuable for determining the best candidates for the drug. I wouldn't characterize the 15% of the VV population that is showing worse results as a driving subset. We've pointed out multiple times that the poorer response in that population may be due to several factors. One key issue is that it's a very small subset. Patients were not selected based on their CT16 allele, and as noted by participants at the San Antonio Breast Meeting, many characteristics of the randomizations seem to favor the trastuzumab population compared to the margetuximab population. This stems from the randomization involving such a small population. Currently, since there’s no statistical significance, despite a clear numerical trend showing that trastuzumab was performing better in the DV population, we hope the study gets approved as intended. If the FDA does agree to limit us to the F allele, we will not be dissatisfied and will ensure we can provide support through research diagnostics at the time of product launch, which will not be delayed.

Okay, great. Thanks. And then quickly on the 018 prostate cohort, are you going to try to get patients before chemo? Because I assume that's kind of where you would like an ADC to be slotted or will you have to treat later-line patients in this next cohort?

Well, as you know Tom, the advantage of the molecule we're discussing, after taxane and after the antigen blockers, is significant. If we look at a very late-line patient population, as these patients were, we see that most of them had extensive bone disease, and indeed, all had bone disease. This suggests it could be a promising first indication, but there are definitely chances to explore earlier treatment lines. Additionally, as I mentioned in response to a previous question, there's potential for treating in neoadjuvant settings with various B7-H3 targeted agents, which could include enoblituzumab, 018, and others that we will discuss in the future.

Yes. Got it. Okay. Thank you.

Thank you. And our next question comes from the line of Evan Seigerman. Your line is open.

Hi, Scott. Thanks for taking the question. Hope you all are well. So, just on MGD019, I know you kind of provided some really preliminary data on some responses. Can you give us any color to any thoughts on the duration of those responses? And also what type of tumors are in the mix? And how advanced are these patients? I know you don't want to provide all the data, but any more color on that data would be super helpful.

So, rather than characterize detail here, let me say that on the four responses we alluded to, were four different tumor types. These were all very late-stage patients. Very interesting responses in including tumor types, you would not expect not your traditional populations of renal cancer or patients with melanoma. These were distinct populations. Again, numbers are small, but this bears fruit. This is a very exciting opportunity for this drug.

Do you plan to administer a dose higher than three milligrams per kilogram? I understand you mentioned a higher dose, but how much higher do you anticipate going?

We pointed out that we provided results for three milligrams or higher. We have already reached our top dose, which is significantly higher. Currently, based on the pharmacokinetics and occupancy, along with our discussions about the safety profile in the larger data sets, it is clear that the dose will exceed three milligrams per kilogram. However, we have not yet made a final decision on what the ultimate dose will be. We expect to have that information ready by the time we make a public presentation later this year.

Okay. Can you remind us, aside from head and neck, what other tumor types can be targeted with an anti-B7-H3, like enoblituzumab?

So again, as I pointed out B7-H3 is highly expressed in most solid tumors. If you remember the data we presented at SITC, we highlight not only the head and neck of patients; we were very excited about the prospects of combining NATB 1 one enoblituzumab in patients with lung cancer who are PD-1 negative. So again, the prospects of how such a molecule here could be pursued in other tumor types like lung cancer and others again, which we will point to going forward.

All right. Thank you so much for the call. I appreciate it.

Thank you. And our next question comes from the line of Boris Peaker. Your line is open.

Hi, this is Cynthia on for Boris. Thank you for taking our questions. Just a quick one for me regarding margetuximab. Are there any updates around dialogues educational study in Greater China, especially in light of COVID-19 enrollment? And then can you remind us what are the studies also looking at the 158 subset population?

So the answer is that they've done a regulatory review and they are initiating studies in the various countries that they have rights to. At this point, given what we understand, the circumstances are in China, things are open and there should not be any return to enrolling the study. So, as you pointed out, this will occur during the course of this year, but we don't have any details with regard to specificity of specific patients yet.

All right. Thank you.

Thank you. And we have a follow-up question from the line of Debjit Chattopadhyay. Your line is open.

Hey, thanks for squeezing back in. So, with regards to like the expression, I don't know if you have the answer to this or not, but have you noticed any difference between patients who are primary refractory versus patients who have initially responded? Does LAG-3 expression increase over time obviously, if it's a, you know, escape offer for PD-1?

It's too early to say that. I again rather than me giving you more detail, listen to the ASCO presentation; I think you'll get a lot of new information at that call. But certainly, we will have to follow up on the sexiness based on the historical treatment profiles of these patients. But you'll see, you'll see certainly, as I pointed out, the relative expression levels of LAG-3 being associated, I can say is predictive, but associated with higher expression.

Got it. Thank you so much.

Thank you. And I'm not showing any further questions at this time.

I just like to thank everyone again for joining us this afternoon. And to let you all know that we look forward to continuing to advance our program in the coming year and providing updates on our progress. Have a nice evening.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Everyone, have a good day.