[Call Starts Abruptly] …MacroGenics' 2019 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 the 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, operator. Good afternoon, and welcome to MacroGenics' conference call to discuss our first quarter 2019 financial and operational results. For anyone who has 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 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 only 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 as 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, Anna. I'd like to welcome everyone participating via conference call and webcast today. Thank you, for joining us. We have had an eventful start to the year and I will be providing a review of what was accomplished on several fronts, as well as some upcoming events. But, before I do so, let me first turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer, who will review our financial results for the quarter.

Thank you, Scott. This afternoon, MacroGenics reported its net results for the quarter ended March 31, 2019 which highlight our financial position, as well as the progress we've made over the quarter. As described in our release, MacroGenics had research and development expenses of $47.1 million for the quarter ending March 31, 2019 compared to $45.7 million for the quarter ended March 31, 2018. This increase was due to increased costs across multiple clinical studies including MGD013, MGC018 enoblituzumab, as well as increased development and manufacturing costs related to MGA012 which were largely offset by revenue from Incyte. These increases were partially offset by decreased expenses related to SOPHIA and enoblituzumab clinical studies. We had General and Administrative expenses of $10.2 million for the quarter ended March 31, 2019, compared to $9.2 million for the quarter ended March 31, 2018. This increase was primarily attributable to increased consulting and other professional service fees. We recorded total revenue consisting primarily of revenue from collaborative agreements of $9.7 million for the quarter ended March 31, 2019, compared to $4.7 million for the quarter ended March 31, 2018. Revenue from collaborative agreements included revenue received under a clinical supply agreement with Incyte, as well as the recognition of deferred revenue from payments received in previous periods and payments received during the quarter. We had a net loss of $45 million for the quarter ended March 31, 2019, compared to a net loss of $49.5 million for the quarter ended March 31, 2018. And finally, our cash, cash equivalents and marketable securities as of March 31, 2019 was $320.4 million compared to $232.9 million as of December 31, 2018. Our March 31, 2019, balance includes the upfront payment from Zai Lab of $25 million less foreign holding tax of $2.5 million as well as the $118.7 million net proceeds from the follow-on offering we completed in February and now I'll turn the call back to Scott.

Thank you, Jim. The most important news for the Company has been our recent announcement regarding the positive top line results of SOPHIA, our pivotal Phase 3 trial in HER2-positive metastatic breast cancer with margetuximab, our novel, investigational immune optimized anti-HER2 antibody, which has an Fc domain engineered to enhance engagement and activation of the immune system. To recap the top line results that we have disclosed previously, SOPHIA met the trial's first sequential primary endpoint of prolongation of progression-free survival in patients treated with the combination of margetuximab plus chemotherapy compared to trastuzumab plus chemotherapy. Patients in the margetuximab arm experienced a 24% risk reduction in PFS compared to patients in the trastuzumab arm with an associated p value of 0.033. Approximately 85% of patients in this study were carriers of the CD16A or Fc-gamma RIIIA 158F allele, which has been previously associated with diminished clinical response to trastuzumab and other antibodies. In this pre-specified subpopulation, patients in the margetuximab arm experienced a 32% risk reduction in PFS compared to patients in the trastuzumab arm with a p value of 0.005. The combination of margetuximab and chemotherapy demonstrated acceptable safety and tolerability. As we have previously noted, it is too early to evaluate the second sequential primary endpoint of overall survival, as OS events continue to accrue in the study population. An abstract describing the SOPHIA results has been accepted for an oral presentation at the annual meeting of the American Society of Clinical Oncology or ASCO to be held in June. The presentation will take place during the metastatic breast cancer session in the morning on Tuesday, June 4th. We look forward to presenting the detailed results there. We have a pre-POA meeting scheduled with FDA this quarter and anticipate submitting a Biologics License Application to the FDA…

Thank you. [Operator Instructions] Our first question comes from Jonathan Chang from SVB Leerink. Please go ahead.

Thank you for taking my questions and congrats on the progress. This is John Barrett on for Jonathan. Can you please help set investor expectations ahead of the ASCO update, and specifically what sort of data will be presented? And will you have survival data in the ASCO presentation?

Thank you, John for that question. Obviously, we're very excited about being able to disclose additional data from the SOPHIA trial. There will be obviously an abstract coming out in mid-May and that will be followed up obviously at a -- with a presentation on the morning of June 4th. Our expectation is obviously to provide a recapping of the data we presented today on the [indiscernible] population, various subset population particularly looking at the F allele 158 population where we've seen the significant response rate. And we will likely present the OS data at that point which were -- was disclosed or examined at the time of February 5th when we had our initial data. There will be analysis of different subsets that were defined as secondary endpoints and I presume that data -- sub data presentation has not obviously been put together yet, but it should be very revealing in terms of where we think the promise of this drug is.

Got it. Thank you for that update. One more question, for the Gastric Cancer trials expected to start in the second half, what sort of biomarker cut-offs do you expect to have for those patients in terms of IHC expression?

So we now intend to look at predominantly the 3+ top -- expressed IHC positive population. But the final program for this has not been fully baked out, but I would say the majority will be gastric patients with IHC 3+.

Thank you. Our next question comes from Jonathan Miller from Evercore. Please go ahead.

Hi guys. Thanks for taking my question and congrats again on a good first quarter. I want to ask about your discussions on margetuximab and SOPHIA Data with EU regulators. Is your expectation that you'll be able to file with them on PFS data alone as well or will they require OS data?

So, from the historical views on these type of studies in cancer, the EU has had a greater need for reviewing the OS data and we anticipate to provide that at the time of submission. So as we have noted, the OS data is accumulating and our anticipation is that will occur sometime next year and we anticipate to file at that time when we achieve the 385 death events for the analysis.

Great, thanks. That makes sense. One more. You have spoken in the past about possibly being interested in moving earlier in breast cancer with margetuximab. Do you have any update in your plans for a potential neoadjuvant study or what timing might look like on that or you guys still interested in that program?

Yes, certainly, a lot of interest in the next steps for treating patients with breast cancer, including early line therapy. We've had outreach from a number of parties with regard to conducting a neoadjuvant study and those conversations are ongoing. I think we should be able to provide some further insights on those plans for neoadjuvant studies sometime after ASCO.

Great. Thanks very much for taking my questions.

Thank you. Our next question comes from Christopher Marai from Nomura. Please go ahead.

Good afternoon. Thanks for taking the questions. First, just with respect to margetuximab and perhaps a companion diagnostic, could you elaborate on any potential plans you might have to look at that? I guess with respect to [indiscernible] . And then I'll have a follow up. Thank you.

Sure. Thanks, Chris. The intention -- our intention is to file with a complete data set which included both the F alleles and the Bb alleles, and look forward to feedback from the FDA. And having said that, we are working on being prepared with a diagnostic. We have engaged a number of different diagnostic groups. There is a number of groups that have actually done testing for the various CD16 alleles. So I don't think that this is going to be very problematic for us to put a diagnostic test in place, even in the case of when this is desired to be used on a research basis.

Okay. Would you consider using it at all for inclusion, exclusion criteria or stratification? I guess around the gastric cancer study?

No, we have no intentions to do that in the gastric cancer study but we will continue to analyze on those patients retrospectively. It is possible though and again this is not been set in stone considering looking at the F alleles and the neoadjuvant population for example. So, we are looking at the usefulness of pre-defining populations that will have the greatest benefit from treatment.

Okay great. And then with respect to flotetuzumab, just thinking about the data coming out later this year. This is all from the expansion cohort I believe, and you know, I was just wondering, what [indiscernible] should expect how many patients will you be providing from that expansion update? And then secondarily with respect to combinations with maybe MGA012, I recall PD-L1 was up regulated in response to flotetuzumab. So I was just wondering if you had -- had any further thoughts on a potential combination with an anti-PD-1. Thank you.

Yes. So, Chris with regard to the expansion data, we've been very encouraged with the data we've seen to date since the ASH meeting in December. As we have noted previously, we made some minor modifications in the first week of dosing and in the patients we treated so far we're seeing a reduced severity of CRS in those patients. We're achieving the targeted doses in most of those patients and are very encouraged by the continued response rates that are similar to what we had reported in December. Our plan is to continue with this expansion, and our hope is to soon have up to 25 patients being treated with this alternative regimen. This should occur very soon. We will then analyze that data and again, if we achieve the safety profile and the targeted response rate, it will allow for us to engage the regulators to talk about next steps and even defining hopefully a pathway toward registration as monotherapy. Having said that, we are not stopping at a monotherapy to enhance the therapy for these patients. So as you alluded to, we have reported in our regulation of PD-L1 on patients there after a single cycle of flotetuzumab and have seen in refractory patients, an increase in PD-L1 on AML blast. We have a preclinical data that combinations of that, with our anti-PD-1, increase the anti tumor response. We are in a great position now to actually start that trial. We have gotten regulatory approval in several countries for conducting that combination study and we will initiate that, once we have finished this 25 patients expansion cohort, and that's expected to start in the second half of this year.

Thank you. Our next question comes from Debjit Chattopadhyay with H.C. Wainwright. Please go ahead.

Hey, good afternoon. So maybe, I didn't catch this correctly. But, the phase -- planned Phase 3 study in gastric cancer, the second arm -- about the second part is that going to be a three arm study or did I miss that totally?

So, thanks for the question, Debjit. So it is a complex study as we laid out here. The first part as we said, we would start in front line patients, we would treat them with margetuximab plus MGA012 or anti-PD-1. We would then take another cohort and add the PD-1 LAG-3 bispecific, the MGD013 and then the next step is layering over on chemotherapy. We would then look at response rates in that population compared to a control group which would be the ToGA regimen for those patients. We would then collect those results picking the best responding population whether it be MGA012 plus chemo or MGD013 plus chemo and then that would be -- those patients would be randomized in the Phase 3 study.

Okay, got it. Then for the PD-1 LAG-3 program, I assume that, that you disclosed before the dose on schedule has been established. So have you narrowed down the tumor types and the expansion cohort or is this still an all-comers study at this point?

So in all-comers study nine tumor types the increased number of groups because we're including patients that are both anti PD-1 or anti PD-L1 experience as well as several groups that are naive to those treatments. Our expectation is that, as I stated before, that we should have at least an additional 100 patients enrolled in that study this year. We'll present that data where they are in the course of therapy that patients that are valuable. But we hope around that time or soon thereafter then to focus on a given population that we think will have the best response rate. So stay tuned for that data later this year.

Thank you. Our next question comes from Michael Morabito from Credit Suisse. Please, go ahead.

Hi guys. Thanks for taking my question. I just had a quick question on MGD009, if there was any updates that you had since clinical hold was lifted and how the modified dosing has been impacting the trial?

So while it's too early into the dosing, the monotherapy study has been initiated, patients have been enrolled and we're soon to enroll on the combination with the anti-PD-1. But the study isn't far enough alone to be able to give you any significant updates on that program.

Okay. And as you mentioned that there'd be updates in the second half of this year on flotetuzumab and MGD013. Are there any other data updates that we could expect coming in 2019?

At this point, you know, we haven't highlighted any additional programs. Clearly there's a number of studies that are dose escalating the MGC018, the MGD019, we don't think those will be far enough along in time for similar abstract to make it to any of the major meetings, but if something accelerates, sure we'll be able to provide some updates. There probably will be some interim update of the second line gastric data at a later conference, a number of the patients are still on study, the OS continues to mature and getting longer and longer. We're very excited about that data and that was obviously part of the reason why we moved that up to front line study with margetuximab, but that's what we anticipate at least in the near-term.

Thank you. Our next question comes from Stephen Willey from Stifel. Please go ahead.

Yes. Thanks for taking the questions. So I'm not sure if you mentioned it before Scott, or if you can, but do you know if the abstract will include the median progression free survival benefit the absolute benefit inferred by the hazard ratio?

I believe it does. Yes.

Okay. And then, just going back to the question regarding EMA and the need for OS data for regulatory purposes, does presumably there's a number of different structures that a partnership can assume, but is it kind of safe to say that I guess any kind of partnership that would include some kind of ex-US commercialization piece would be dependent upon that overall survival data?

So thanks for the question, Steve. We're talking to a number of different parties that are structured in different ways and with different interests. So there may be in the context of these conversations, there are some parties where the -- that data would be important in terms of ex-US deals. But in others, it actually hasn't entered the conversation. So it's still too early to determine which way we're going to go on this.

Okay. And then just lastly, I know that you talked a little bit about the use of a diagnostic for the gastric study.

Yes.

Is there going to be a need there to assay either PD-L1 baseline expression and/or even LAG-3 in the context of of the bispecific?

So with regard to the diagnostic, I mean we were talking about HER2 expression. We will obviously look at PD-L1 expression as well. I think the plan right now with regard to LAG-3 would be to do this retrospectively rather than prospectively going forward. The issue as you know with LAG-3 is that the temporal expression of that marker kind of occurred at varying times and may not be coordinated with PD-L1 expression. So I don't know how valuable a set analysis of that is going to be prospectively.

Understood. Thanks for taking the questions.

Thank you. Our next question comes from Yigal Nochomovitz from Citigroup. Please go ahead.

Yes, hi. Thank you, Jim. Thanks for taking the question. I just wanted to get a better understanding with respect to the dose selections for the MGD013 in the pivotal study in frontline gastric, because you already have the dose escalation data and you're doing dose expansion for MGD013, so I'm assuming there's valuable information there in that dose escalation study that could help inform the combo with a margetuximab so if you could just expand a bit on your thinking as to how you would use that dose escalation data to pick a dose for the combo?

Yigal, thanks for the question. So yes, we've done the dose escalation. We've actually looked at the PK as well as occupancy of circulating cells on that. So we have picked a dose that's in expansion right now and as I said earlier in nine different tumor types. And that's the dose that would be included in this gastric study. Our plan is to provide updates on the dosing of MGD013 later this year in one of the scientific conferences. And probably, you know what, later this year, we'll also be a little more disclosive about the specifics around the design of the gastric study and clearly the dosing would fall under that plan.

And can you talk at least in broad terms around what percent contribution Zai will make to this study in terms of Zai's patient growth as to your contribution [indiscernible] ?

Good question. So we have ongoing discussions with Zai right now. They are planning in the near-term to engage the regulators in China. We clearly have to understand how they view the study situation. We obviously had interactions with the US FDA. If everything is aligned, they can contribute significant percentage of the Phase 2 and Phase 3 study going forward. But the absolute numbers have not been worked out yet. As you recall, I have noted that they have ongoing gastric studies in about 30 sites in China currently with another program. And so, we'll have to determine which number or what percentage of both sides will participate in that study to then come out with an estimate of their actual patient contribution. But I do think that this could be a significant percentage of the enrolled patients.

Thank you. Our next question comes from Waleed Naby from SunTrust. Please go ahead. Mr. Nabi, if you have your phone on mute please un-mute your line. Okay. Moving on to the next question which comes from Michael Schmidt from Guggenheim Securities. Please go ahead.

Hey guys, this is Charles Zhu on for Michael Schmidt. Thanks for taking the questions and congratulations on the quarter. As you referenced earlier, I had a quick question on the gastric cancer, as you referenced earlier, the trial is going to get quite complicated especially with the margetuximab with potentially the PD-1 LAG-3 bispecific and chemotherapy layered on top. In this context, how do you think about -- not only the active compare [ph] arm, but other arms that you may need in the fully randomized study?

That's an excellent question, Charles. And we've had a discussion with the FDA. So as we've -- as I sort of laid this out on the layering of the various arms here, that data will also -- not only provide the safety for these individual components, it will also give us some insight into the contribution of parts going forward. And so we had this discussion with the FDA who have been very helpful in looking at what we think is a very novel adaptive design of combining novel Biologics in one study. So this has been planned out going forward and hope to be able to reveal some more details later this year. Got it. Thank you. And we probably haven't heard as much on a MGD007, the gpA33 CD3 bispecific. Just kind of wondering if I remember correctly, you guys mentioned that there was going to be some data coming out later this year. I was wondering if you could provide some additional incremental color along what kind of data -- our expectations should be and if that might include a combo data with the MGA012? Charles, thanks for that question. As I noted on the -- very shortly on our -- on the script earlier, we have made nice progress with the MGD007 program, as you know our biggest challenge is around that program was the side effects we were seeing on target are normal tissues particularly nausea, vomiting and diarrhea. And I'm very pleased to say that in the dose escalation of the molecule now in combination with anti-PD-1, we have achieved what I believe to be a good profile in terms of tolerability in this population. And so, what our plans are this year for this program is to complete out an expansion cohort of the combination of MGD007 and MGA012 are anti PD-1 in approximately 25 patients and we would anticipate that, that enrollments would be completed during this year. And hopefully by the end of the year or maybe early next year, possibly at ASCO GI, and we'll put a particular site until we have the patients enrolled and analyzed. We'll be able to make a decision about the merits of that program. I think we're in a good shape now that given the tolerability is going well if that continues, as we have seen it recently and we now start seeing evidence of clinical benefit, then that would give us the goal to expand that program in further studies.

Got it. Thank you. And just one last question if you don't mind on flotetuzumab, not sure if I just missed this one earlier as well. But were you able to -- are you able to go forward with the full dose on flotetuzumab, when it's used in combination with the MGA012 and if not then what kind of a dosing adjustments have you had to do?

So, we have not started the combo study yet with MGA012. The study has been designed as when you combine two active agents like this. There is a sort of lead in dosing where you have a small numbers of cohorts to get the maximum dosing we fit -- we expect that as I said the study to start probably midyear or just after the middle of the year, once we have the data on those 25 patients from the monotherapy dosing regimen. So the expectation is the dose up over a couple of small cohorts and then go into a full dosing thereafter.

Thank you. Our next question comes from Peter Lawson with SunTrust Robinson. Please go ahead.

Hi Scott. Thanks for taking my questions. Just on the updated flotetuzumab data. You told that you've got a lot of data in hand. So do you see that potentially ahead of ASH, and what should we expect to see?

So, from the submissions, the appropriate forms of these meetings given its hematological malignancy, it was too assumed for EHA [ph] to go into that meeting and we were then questioned whether we had the full data set ready for ESMO and we decided to let's proceed with additional dosing and so it's most likely that this data will be presented at ASH. We always like to present at that meeting and this is obviously a good forum for that. Having said that, if there is any change with regard to speeding up the development plan, with regard to a, for instance the initiation of the combination study or interactions with regulators in terms of registration, that's something that we would press release and discuss before the ASH meeting.

Got it. Thank you. And then, just as we think about the launch perhaps for margetuximab, where are you for that, and just kind of the thoughts about ex-US partners, how you can think about dividing that?

Yes. So again it's all going to be dependent on who the partner is and whether it's a, someone with a global footprint versus a US or just ex-US experienced in sales force. It's just too early to discuss that. We're making nice headway in our own preparation ahead of any partnership. We've hired a head of medical affairs. We're interviewing folks for various MSL positions. We are engaging on access and getting estimates on the particular populations that will benefit from the drug. So we're doing the work ourselves, but until we have a partner in place I can't give you anymore definition on those other activities.

Thank you. [Operator Instructions]. Actually our next question comes from Yigal Nochomovitz from Citigroup. Please go ahead.

Yes. Hi, Scott. I just had one scientific question. Do you have any data to support the view that, that LAG-3 plays a role in gastric and that, that would be the preferable molecule to combine with the margetuximab and PD-1 mechanism? Or is this really a -- you need to run the clinical test and then you'll know?

So, let me put it this way. There is clearly a significant proportion of gastric cancer patients from the histology we've done, showing LAG-3 -- a significant LAG-3 expression. So that number one, we know on a sizable portion of the population LAG-3 is there. Let me say that we have some early insights that targeting LAG-3 could be beneficial in combination with targeting other checkpoints as well. So we will clearly accumulate additional data on patients with gastric cancer being treated with a PD-1 LAG-3 bispecific going forward at separate from the combination study with the HER2-positive population, but the initial insights on this is encouraging.

Okay. Thank you.

Thank you. Our next question comes from Debjit Chattopadhyay from H.C. Wainwright. Go ahead.

Can you hear me?

Yes. Now I can hear you. You were cut off for a second.

Sorry. So just a follow up on Yigal's question then. In your experience is the LAG-3 expression and I mean already present a baseline or does it happen as a result of prior treatment to a checkpoint inhibition.

It's there on baseline. So for instance if we take samples from patients who have not been treated with checkpoints and just random samples of that we've looked at -- we've seen both the PDL-1 expression and LAG-3 expression in a significant percentage of those tumors.

So in your PD-1 LAG-3 monotherapy expansion cohort, are you enrolling gastric cancer patients as well to have a handle on what you might expect down the road? Thank you.

Yes.

Thank you so much.

Thank you. This concludes our Q&A session. I'd now like to turn the call back to Dr. Koenig for closing remarks. Please go ahead.

I'd 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 programs in the coming months and providing updates on our progress. Hope to see you all at ASCO.

Thank you, ladies and gentlemen for attending today's conference. This concludes the program you may all disconnect. Good day.