Good afternoon. We will begin the MacroGenics 2020 Second quarter Corporate Progress and Financial Results Conference Call in just a moment. [Operator Instructions] At this point, I will turn the call over to Anna Krassowska, Vice President, Investor Relations and Corporate Communications of MacroGenics.

Thank you. Good afternoon, and welcome to the MacroGenics conference call to discuss our second quarter 2020 financial and operational results. For anyone who has not had the chance to review these 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 listen to this conference call via webcast on our website where it is 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, President and Chief Executive Officer of MacroGenics.

Thank you, Anna. I'd like to welcome everyone participating via conference call and webcast today. This afternoon, I will provide key highlights from our clinical programs. 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 June 30, 2020, which highlight our financial position as well as our recent progress. As described in our release, MacroGenics total revenue consisting primarily of revenue from collaborative agreements was $20.3 million for the quarter ended June 30, 2020, compared to $10.6 million for the quarter ended June 30, 2019. This increase was primarily due to the recognition of a $12 million payment from Boehringer Ingelheim under a 2010 license and collaboration agreement. Our research and development expenses were $57.4 million for the quarter ended June 30, 2020, compared to $51.4 million for the quarter ended June 30, 2019. This increase was primarily due to an increase in development and clinical trial costs for multiple programs. General and administrative expenses were $10.2 million for the quarter ended June 30, 2020, compared to $12.1 million for the quarter ended June 30, 2019. This decrease is primarily due to a decrease in consulting costs with a smaller decrease in travel-related costs due to COVID-19. MacroGenics net loss was $46.9 million for the quarter ended June 30, 2020, compared to a net loss of $31.8 million for the quarter ended June 30, 2019. Our cash, cash equivalents and marketable securities as of June 30, 2020, were $232.8 million compared to $215.8 million as of December 31, 2019. During the quarter ended June 30, 2020, we received $96.5 million in net proceeds from the sale of approximately 4 million shares of our common stock pursuant to an at the market or ATM offering. Subsequent to June 30, 2020, we received an additional $21.3 million in net proceeds from sale of approximately 726,000 shares pursuant to the ATM as well as the earlier mentioned $12 million from Boehringer Ingelheim. I'll point out that as of June 30, 2020, the $12 million from BI was reflected on our balance sheet as a receivable. Finally, we anticipate that our cash, cash equivalents and marketable securities as of June 30, 2020, plus the additional proceeds just described, which we subsequently received, combined with anticipated and potential collaboration payments should enable us to fund our operations into 2023, assuming the company's programs and collaborations advance as currently contemplated. This represents an extension of our previously reported cash runway guidance. I'll now turn the call back to Scott.

Thank you, Jim. We are excited about the momentum we have built to date in 2020 as well as the events we are anticipating during the remainder of the year and into 2021. I would like to begin by introducing Stephen Eck. As we announced, Stephen joined us at the beginning of July as our Senior Vice President of Clinical Development and Chief Medical Officer. Stephen is a hematologist oncologist by training with broad leadership experience in the development and commercialization of oncology therapeutics, and we are excited to have him on the team. Assets that he has managed include enzalutamide, erlotinib and gilteritinib. Stephen is with us on the call today and will join us for the Q&A portion. Welcome, Stephen.

Thank you, Scott. I'm delighted to have joined MacroGenics at such an exciting time of its history.

Thank you, Stephen. I will start with flotetuzumab, an investigational bispecific CD123 x CD3 DART molecule and our most recent product candidate to date in a registration study. Informed by discussions with the FDA, this trial will be a single-arm study in up to 200 AML patients whose disease is either refractory to induction treatment, which we refer to as primary induction failure or as relapsed early within 6 months after an initial response. The study will be conducted as an expansion of the ongoing Phase I/II study. The primary endpoint is response rate comprised of complete remission and complete remissions with partial hematological recovery or CRH. We plan to submit updated study data for presentation at a scientific conference in the fourth quarter of 2020. In June, research led by Dr. Sergio Rutella at the John van Geest Cancer Research Center in the U.K., was published in science translational medicine and describes an immunological signature related to interferon gamma gene expression in the tumor microenvironment. In patients with primary refractory or early relapsed AML, this gene signature appears to be predictive of resistance to chemotherapy, yet associated with response to flotetuzumab treatment. These data provide a molecular basis to understand why AML patients who are refractory to chemotherapy may be responsive to immunotherapy with flotetuzumab. Moving on to MGC018, our investigational antibody drug conjugate designed to deliver a DNA alkylating, duocarmycin cytotoxic payload to cells that express B7-H3. Initial dose escalation data for the ongoing Phase I study was very well received at the ASCO Virtual Annual Meeting. Of particular interest was the early evidence of clinical activity observed in patients with metastatic castration-resistant prostate cancer or MCRPC. Reductions in PSA levels of 50% or more were observed in 5 of 7 patients including 1 with substantial regression of…

[Operator Instructions] Our first question comes from the line of Debjit Chattopadhyay with H.C. Wainwright.

Could you talk to the ability to get to higher doses with MGD019? Is it an engineered lower affinity for CTLA-4? Or do you need engagement of both PD-1 x CTLA-4 on the T-cells, which allows you to kind of circumvent the GI tox?

The molecule was designed very specifically to get maximum engagement of PD-1. As you remember, this was a tetravalent bispecific molecule. And so the affinity is a slight increase on PD-1 to get initial engagement with that and because there are 2 binding sites for CTLA-4, you get an NVIDIA advantage for then binding the CTLA-4 site. So in essence, we are getting optimum of recognition of cells that express both receptors. You also see, obviously, binding to cells that express PD-1 alone and occasionally ones that have only CTLA-4, but it was really designed as a way to enhance engagement of these co-expressing cell types. Could we go higher than 10 mg/kg? It certainly could. But we found, as we will discuss at the ESMO presentation, is that we're in a very optimal range. We're seeing clinical responsiveness across multiple doses. What we have previously reported are seeing responses between 3 and 10 mg/kg, #1. And secondly, we saw activation markers associated with these therapeutic responses. So we see no need to expand the treatment above 10 mg/kg.

Great. Just one follow-up, then. Since you're collecting the biomarker data, are you seeing any differential evolution in either the CD-8 or CD-4 effector T-cell compartment compared to monotherapy PD-1 x CTLA-4?

In the patients?

Yes, in the responders, for example, versus, say, the nonresponders?

I can't really address that with regard to the subpopulations at this time, but it's a question we could look on the subsequent analysis.

Great. And just one last follow-up for me. The MGD013 plus marge. Have all the 6 responses been confirmed since it's been a few -- more than a few weeks since ASCO?

The unconfirmed responses have now been confirmed, and we've had additional patients that have been enrolled in the trial as we've just described. We expect that we will provide an update on this combination trial at a scientific conference later this year.

Our next question comes from the line of Etzer Darout with Guggenheim Securities.

This is Paul on for Etzer. I wanted to ask about MAHOGANY. I understand, I know we're expecting data for Module A of the trial next year. I was wondering, have you measured LAG-3 expression in the Module A patients as a potential kind of hint for what the patient makeup in Module B might look like? And if so, what have you observed? Also wondering about whether LAG-3 expression might inform your plans for potentially accelerating in the marge plus L1-2 combo in the study?

Thanks for that question. I'm not aware of actually looking at those patients at this point. So I can't comment on LAG-3 and the module A. Clearly, we will continue to look and follow the biomarkers in Module B as we go forward. And certainly, as we get more data from the MGD013 monotherapy study alone, in terms of determining which biomarkers are best predictable for responsiveness, and that could be expanded beyond LAG-3 x PDL-1 and other activation markers. So it's still too early to comment on that.

Okay, great. And then just one more follow-up on flotetuzumab. Just a little bit on the timing. Could you give us an update about whether or not the trial with PD-1, the ex-U.S. Phase I/II study that was paused due to COVID has started up again?

So what we have decided to do, given that we've had the go-ahead to start this registration study with monotherapy and given the broadness of our portfolio, we decided not to start-up the combination study until a later time. We're still very interested because we do see an enhanced signal in preclinical. And as you know, we treated a few patients initially, but because of the COVID-19 situation, it was difficult to enroll patients. But that's more likely to start up sometime next year.

Our next question comes from the line of Jonathan Miller with Evercore ISI.

I guess a couple here. First, the cancellation of ad com from margetuximab, is that a sign of the FDA's thinking on the approvability of that drug? Do you retake that as a direct read through to the likelihood of success there? And secondly, do we have any color on when that registrational cohort for flotetuzumab, when that 200-patient cohort could get started? And if so, when you might expect data from them?

Thanks, Jonathan, for the question. So with regard to the ad com, it's very difficult to interpret what the thinking is from the FDA. I would say that given this was at mid-cycle review many months before or whatever the time ad com, we perceive this as a very favorable response, but I can't speak for the FDA in that context. And similarly, the questions that we had gotten at that time and subsequently, suggests that they're continuing to have interest in evaluating this and evaluating this for an approval. But again, it's in the hands of the FDA. I can't comment on that. With regard to the registration study for flotetuzumab. As I had previously reported, we had made modifications on the Phase I/II program. And so we have not stopped enrollment in that trial and including the patients with a specific pretreatment regimens that we've aligned with, with the FDA. And so that is, in fact, ongoing right now. Our expectation right now is that we will have some update on data for patients that we have treated from the previous ASH meeting last December. Hopefully, if our abstract is accepted at the ASH meeting this year. So we'll be able to provide interim update on some additional data of patients being treated, and then our hope is to complete the enrollment not later than the end of next year, assuming that the enrollment goes as planned.

Great. I guess one of the things that I wanted to ask about is when you discussed your cash runway now being extended into '23, you mentioned that, that is relying on payment of certain future milestones. And I guess you probably won't tell us which milestones exactly or assuming you're going to hit it. But can you tell us how much money is -- how much milestone base money is assumed in that new runway guidance?

So...

Jonathan, this is James Karrels. Thanks for your question. So we can't -- unfortunately, we can't answer that question specifically, but we will remind you and other listeners that under our agreement with Incyte, we have the ability to collect up to $405 million in clinical and regulatory milestones as well as $330 million in commercial milestones. And then aside from that, regarding teplizumab, which we actually sold to Provention Bio, we have the ability to receive a $60 million milestone upon BLA approval of that asset, which the BLA is in the process of being submitted now on a rolling basis, and we anticipate a likely PDUFA date of sometime middle of next year. We handicap all of these milestones to the extent it makes sense, and then we -- that's what we budget. So we tend to value this fairly conservatively. Yes. I think I'll just leave it at that.

Our next comes from the line of Jonathan Chang with SVB Leerink.

First question on MGC018. Can you elaborate on your decision to move forward with the 3 mg/kg dose?

Yes, pleasure, Jonathan. As I had commented on the last call, we were seeing responses at the 2 mg/kg and the 3 mg/kg range with, as I've noted, with acceptable toxicity profiles. We had performed pharmacokinetic analysis since our last call. And we found that, in fact, what I had predicted that we would see suitable PK between 2 and 3 mg/kg would be acceptable to move things forward. So we selected the 3 mg/kg dose. And that protocol is being amended right now. And we expect to have patients starting to enroll later in this quarter.

Got it. When could we expect the next data update on the MGC018 program?

So we were thinking about what's the most appropriate form for this going forward because we'd like some additional data from some of these new patients that would be enrolled. So given that the data cut on the Phase I study was very recent, in May, we believe that it's most likely that we would present data very early in 2021 at an appropriate scientific meeting with an acceptance of an abstract.

Got it. And just one last question to follow-up on a previous question. Earlier in the year, you spoke about prioritizing your pipeline. Can you talk about your current thoughts on that as it relates to your cash position and runway?

I'm sorry, prioritization of what?

A pipeline.

The pipeline. If you look at what we've announced today is I think it's lining up quite nicely. Obviously, ongoing support for March for the BLA, the flotetuzumab registration study, the studies on MGD013 in combination, in particular, the expansion there. We are moving forward, obviously, in the new program with ADAM9 with ImmunoGen. And then clearly, additional data from '19 would likely come next year with follow-up on the current patients. So it's all -- obviously, what I just described with expansion cohorts on '18. So I think this is fitting in quite nicely with our plans going forward and the additional cash giving us additional runway. I think we'll have a very robust pipeline to be able to report new data in the next 6 months to 9 months with these added patients.

Our next question comes from the line of Stephen Willey with Stifel.

Scott, on the flotetuzumab registrational trial. Can you remind us if you're going to be enrolling both transplant eligible and ineligible patients? And I guess, as you assess for durability of response, are you going to be able to allow for any censoring of patients who subsequently are bridge to transplant?

Yes. So we are going to allow both eligible and ineligible patients. In fact, our hope is even patients who are initially ineligible may become eligible through the course of therapy. We've actually observed that in some of the patients in the earlier Phase I study. So this is very much in the hope that if we can get a significant number of these patients to transplant, our experience to date is that they've lived much longer lives, and there's always the possibility of cure. So this is obviously a very -- a big objective for this study.

Okay. And just on MGC018, is there anything that you can say about the experience you had with patients at the 4 mg/kg dose level? And maybe the number of patients that you enrolled into that? And just any observations you might be able to share?

I will probably -- that is still ongoing. It's very few patients in the 3+3 design. So really, nothing more than that I can ascribe to, what we've seen in the other parts of the study, and we'll provide the details at our next update on patients, but there's nothing really outstanding there to make any conclusions about.

Okay. And then just finally, maybe for Jim, another cash guidance question. Can you maybe speak to what extent that, that guidance runway contemplates any kind of margetuximab commercialization activities?

Thanks for that question, Steve. So baked into our budget, we have de minimis spend on commercial -- commercialization. As Scott has indicated in the past, our intent here is to partner the opportunity. So we have a bare minimum of commercial spend to sort of deliver that asset to a place where a partner could be helpful in bringing over the finish line in terms of commercializing.

Our next question comes from the line of Yigal Nochomovitz with Citi.

This is Samantha on for Yigal. First question is on MAHOGANY Module A, the data now expected in the first quarter. I just wondering if you help set expectations there and the number of patients we should expect and the degree of durability? And whether or not these patients that will be sufficient for you to look for accelerated approval?

Thanks so much, Samantha. So as I guided previously, we're targeting to have 40 patients enrolled by the end of the year. And again, a significant portion of those patients, even if we hit the 40, would not be evaluable because they would come later in the year. So a lot of this will be timing of when those patients come in. I'm pleased that, despite the COVID-19, we've been able to enroll additional patients in the U.S. Now we have 11 sites opened in Korea. And so we're hoping that there's a greater influx of patients coming into the trial from those Korean sites to get to the 40 by the end of the year. If we have that and have it sufficiently early enough in 2020, then it's likely we would be able to report this out early in 2021 and make some decisions about how to further accelerate this trial to get it enrolled. But we'll provide updates during the course of the year on how that's going.

Got it. And then just on the MGD013 and margetuximab combo, you're rolling gastric cancer patients there. And ensure the lap perhaps a bit with MAHOGANY and Module B, even though that is chemo arm as well. Just what's your rationale for having both of those combinations? And how do you see them fitting into the landscape?

Excellent question. Again, the fact that very late stage patients, even in the Phase I study in combination were responding was very exciting for the patients and for us. And so we would like to understand how robust that signal is by adding additional late-stage gastric patients in that combination study for -- in the 13 trial. Clearly, in the MAHOGANY B, we're looking at newly diagnosed patients, so it's a completely different population. And in fact, as we get those combination studies, the late-line therapy, if that data is completely robust, it even gives us more impetus to accelerate the MAHOGANY B. Remember though, the difference is that in MAHOGANY B, we're adding chemotherapy to that arm. So there will be differences irrespective of that and getting to understand what the effect of adding chemo to those immune-based therapies.

Got it. And when you started enrolling in MAHOGANY B, is that going to be primarily Zai Lab? Or will you start enrolling in U.S. sites as well in the fourth quarter?

So Zai will take the lead. They will start enrolling first, and then we will follow up enrollment. The expectation is, is that they will enroll this year, and we will start enrolling in B next year.

Our next question comes from the line of Peter Lawson with Barclays.

On MGC018, what's the buy you think you need for prostate? What do you want to see in the next read?

Well, that's a good question, Peter. Obviously, looking at historical response rate in late-stage prostate cancers, they've been below 50% for most trials. Obviously, in the Lutetium trial, recently, they had a response rate, I guess, about 66%, but that's obviously already a labeled drug. Our goal, clearly, is, is if we could achieve responses comparable to what we've seen in the Phase I study would be ideal. But right now, we haven't given specifics with regards to the range that ultimately would determine how we would take this further. I think that by enrolling up to 40 patients as we've just recently described, we should get a good idea on how good this drug is.

And what would you like to see around duration of treatment?

Excellent question as well. Remember that historical data suggests on a PFS rate of currently approved drugs, we're talking about 2 to 3 months with a survival in this late-stage population of around a year depending on the study, a little less or a little more. So obviously, if we exceed those parameters, plus have a persistence of reduction of PSA of greater than 50% very early and prolonged, I think we'll be in pretty good shape with regard to the drug.

And then just finally, around CD123 flotetuzumab, just what should we expect to see by Q4 as regards to data?

So the plan is to present at ASH. We've submitted a number of different abstracts. Obviously, they have to go undergo a review. But the expectation is to present the double-digit number of patients since the last ASH meeting. So there'll be a nice sized population to evaluate since our last formal presentation.

Our next question comes from the line of David Lebowitz with Morgan Stanley.

Given the response you've seen thus far with MGD013 in combination with margetuximab, are there any other combinations that you are thinking about trying with the PD-1 x LAG-3?

Thanks, David, for that question. Clearly, we are very excited about the prospects of using an Fc-engineered molecule that like margetuximab, that we know induces both innate and specific immunity. And what we have seen to date as up-regulated many of the activation markers, including LAG-3 x PD-L1 and other checkpoints. And so given that the Fc-engineered an ublituximab molecule which is -- has the exact same Fc modulation as margetuximab and also induces the same up-regulation of these markers in some of our in vitro studies, we expect to design combination studies with MGD013 within abituzumab, and we will be updating later this year on the specific design and the start of those studies, which is likely to occur in 2021.

Our next question comes from the line of David Nierengarten with Wedbush.

I think you have the list of analysts with the hardest to pronounce names. But just a quick question on margetuximab in 013. Are you -- have you reported and are you planning to -- have you reported one, on CD16 mutations or polymorphisms in the patients already treated? And then two, are you planning to either stratify or screen either way or just take a look at those patients going forward in the expansion cohorts, of course that's particularly in breast, in the expansion cohorts going forward?

David, excellent question. We have not planned to either select prospectively patients based on the epithelial variations. But we'll obviously analyze these retrospectively. It is very possible that with the combination therapy here, on -- with immune activation, differences between the VF allele may go away. So this is another question that is very interesting to us. And so we don't want to exclude of patients with different allelic types.

Our next question comes from the line of Boris Peaker with Cowen & Company.

This is Cynthia on for Boris. A few on the ImmunoGen IMGC-936 molecule. Can you please put in context what particular tumor types express ADAM9 at a high level? And perhaps what other programs are out there that may be targeting ADAM9?

So thank you very much for that question. I'm glad we got at least 1 question because we're very excited about the prospects of this molecule.

You are welcome.

Yes. No, it's great. We don't know any other program that historically has been directed or is in progress to ADAM9. So it's clearly a target that we are exploiting. This is an antigen that is highly overexpressed on many different solid tumor types, so included are non-small cell lung cancer, pancreatic cancer, gastric cancer, triple-negative breast cancer, prostate cancer and others. And so we think that, presuming that we achieved good safety profile and evidence of efficacy, that has a very -- is a very good opportunity to address lots of different cancer types.

This concludes today's question-and-answer session. I would now like to turn the call back to Scott Koenig for closing remarks.

Thank you very much for joining our call today. We look forward to updating you in the near future about our programs. Have a good afternoon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.