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Macrogenics Inc  (NASDAQ:MGNX)
Q4 2018 Earnings Conference Call
Feb. 26, 2019, 4:30 p.m. ET

Contents:

Prepared Remarks:

Operator

Good afternoon. We will begin the MacroGenics 2018 Fourth Quarter and Full Year Corporate Progress and Financial Results Conference Call in just a moment. All participants are in 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 Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

Thank you, operator. Good afternoon and welcome to MacroGenics' conference call to discuss our fourth quarter and full year 2018 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 announcement, which is available under the Investors tab on our website at www.macrogenics.com. You can also listen to this conference call via webcast on our website, where it will be archived for 30 days beginning approximately 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, MacroGenics' President and Chief Executive Officer.

Scott Koenig -- President, Chief Executive Officer and Director

Thank you, Jim. I'd like to welcome everyone participating via conference call or webcast today. Thank you for joining us.

We've had an eventful forth quarter and early 2019, and I will be providing an update on what was accomplished on several fronts as well as some upcoming events. But before I do so, let me first turn the call back to Jim, who will review our financial results for the quarter.

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

Thank you, Scott. This afternoon we reported financial results for the year ended December 31, 2018, which highlight our strong financial position as well as the progress we've made over the past year and this most recent quarter. As described in our release, MacroGenics had research and development expenses of $190.8 million for the year-end December 31, 2018, compared to $147.2 million for the year ended December 31, 2017. This increase was primarily due to the continued enrollment in multiple ongoing studies, including the SOPHIA Phase 3 study of margetuximab, increased development and manufacturing costs related to MGA012 of which $22 million was offset by revenue recognized from our collaborator Incyte Corporation, as well as increased headcount to support our expanded manufacturing and development activities.

We had general and administrative expenses of $40.5 million for the year ended December 31, 2018, compared to $32.7 million for the year-end December 31, 2017. This increase was was primarily due to increased labor-related costs including stock-based compensation expense, patent-related expenses and information technology-related expenses.

We've recorded total revenue, consisting primarily of revenue from collaborative agreements, was $60.1 million for the year ended December 31, 2018, compared to $157.2 million for the 12-months ended December 31, 2017. This increase (ph) was primarily due to the $150 million upfront payment recognized under the Incyte agreement in 2017, compared to $41 million recognized in 2018 under the Incyte agreement. Revenue from collaborative agreements includes the recognition of deferred revenues from payments received in previous periods as well as payments received during the year.

For the year end December 31, 2018, we had a net loss of $171.5 million compared to a net loss of $19.6 million for the 12-months ended December 31, 2017.

Our cash, cash equivalents and marketable securities as of December 31, 2018 were $232.9 million, which compared to $305.1 million as of December 31, 2017. Cash, cash equivalents and marketable securities as of December 31, 2018 did not include the $25 million, less foreign withholding tax of $2.5 million, representing the upfront payment from Zai Lab received in early 2019 or the $118.5 million net proceeds from the follow-on offering recently completed.

We anticipate that our cash, cash equivalents and marketable securities as of December 31, 2018, combined with the estimated net proceeds from our recently completed equity offering as well as proceeds from collaboration payments we anticipate receiving, will enable us to fund our operations into 2021, assuming all the Company's programs and collaborations advances as currently contemplated.

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

Scott Koenig -- President, Chief Executive Officer and Director

Thank you, Jim. The most important news for the company has been our recent announcement regarding the positive top line results of our pivotal Phase 3 trial in HER-2-positive metastatic breast cancer with margetuximab, our novel immune-optimizing anti-HER2 antibody, which has an Fc domain engineered to enhance engagement and activation of the immune system.

Just to quickly recap those results, the SOPHIA clinical trial that the 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 when their associated P value of 0.033. Approximately 85% of the patients in the study were carriers of the CD16A, 158F allele, which has been previously associated with diminished clinical response to trastuzumab and other antibodies. In this pre-specified sub population, patients in the margetuximab arm experience a 32% risk reduction in PFS compared to patients in the trastuzumab arm with a p-value of 0.005. The combination of margetuximab in chemotherapy demonstrated acceptable safety and tolerability compared overall to that of Trastuzumab in chemotherapy. These results or for the potential of the new treatment option for patients living with HER-2-positive metastatic breast cancer, a devastating disease for which we are currently no FDA approved therapies in this setting. This is the first example of an Fc enhanced monoclonal antibody shown to be clinically superior in a Phase 3 clinical study to an antibody analog with the wild-type FC domain. And I believe these results provide important new insight regarding the importance of the immune system in mediating the clinical activity of anti-HER-2 antibodies like margetuximab. Our hope is that this approach to Fc modifications will not only help patients with breast cancer, but potentially other types of cancer as well.

We believe this is possible, not only by studying margetuximab in HER-2 driven cancers, including breast and gastric. We also by advancing enoblituzumab and which we've incorporated the same Fc mutations and for which we reported encouraging clinical data last quarter, but more on that in a few minutes.

As noted in our earlier announcements, it is too early to evaluate the sequential secondary primary endpoint, overall survival. As always, events continue to accrue in the study population. We plan to meet with the FDA in the first half of 2019 and anticipate submitting a Biologics licensing application of the FDA on the basis of the PFS results in the second half of 2019. We have already submitted an abstract containing previously disclosed as well as additional results for the ASCO meeting in June.

In this regard, we are currently reviewing options and strategies for commercialization assuming Margetuximab received FDA approval in this indication. We are also evaluating Margetuximab in our Phase 2 clinical trial in patients with HER-2 positive gastric or gastroesophageal junction cancer in combination with an anti-PD-1 mAb. In January 2019, data demonstrating encouraging anti-tumor activity and acceptable safety and tolerability were presented at the ASCO GI symposium. In this trial the objective response rate for this population for the HER2 IHC 3+ gastric cancer population was 32.7%, with a disease control rate which includes partial responses and stable disease of 69.1%. Median progression-free survival was 4.7 months.

Following up on these results, during the first quarter of 2019, MacroGenics discussed our development plans with the FDA for a proposed registration-directed study of margetuximab in combination with MGA012, an anti-PD-1 mAb. This approach is designed to coordinately engage both innate and adaptive immunity with a chemotherapy-free regimen for the treatment of patients with gastric cancer in the first-line setting. We expect to initiate this study in the second half of 2019. We also plan to evaluate the merits of combining margetuximab with chemotherapy and MGA012 or MGD013, a PD-1 x LAG-3 DART in a randomized controlled study.

We plan to coordinate these global efforts with our partner in Greater China, Zai Lab and hope to provide details in the coming months. Together, we believe that the Phase 3 results of metastatic HER2-positive breast cancer and the Phase 2 result in HER2-positive gastric cancer provide validation of our Fc Optimization platform.

Next, I will discuss our franchise. The B7-H3 directed product candidates. Our lead program enoblituzumab is currently in development in combination with anti-PD1, also using an approach where we seek to engage both innate and adaptive immunity in a coordinated manner for cancer immunotherapy.

In November 2018, encouraging data from a clinical study of the combination of enoblituzumab and an anti-PD-1 mAb were presented at the Society for Immunotherapy of Cancer Annual Meeting. In this study, cohorts of patients who are naive to anti-PD1 therapy with either squamous cell carcinoma of the head and neck or non-small cell lung cancer had objective responses at rates that benchmark favorably with data reported in prior studies in which patients were treated with anti-PD1 monotherapy. The combination of enoblituzumab and anti-PD1 mAb demonstrated acceptable safety and tolerability in patients treated to-date. Encouraged by these results, we intend to commence a Phase 2 study of enoblituzumab in combination with MGA012 in patients with squamous cell carcinoma of the head and neck, beginning in the second half of 2019.

I look forward to telling you more about this study as we get closer. Our second drug candidate in our B7-H3 franchise is MGD009, bispecific DART molecule that is -- to target both B7-H3 expressed on tumor cells as well as CD3, which is expressed on normal T cells. MacroGenics is conducting a Phase 1 clinical study with MGD09 as monotherapy and in a separate study the combined MGD009 and MGA012.

In December 2018, the FDA imposed a partial clinical hold on the Company's Phase 1 monotherapy study of MGD009, as well as on a combination study of MGD009 an MGA012. The partial clinical hold was lifted in January 2019. We expect to have both monotherapy and incumbent study is enrolling new patients very soon.

MGC018 our therapy B7-H3 molecule is an antibody-drug conjugate, that targets cell tumors expressing B7-H3 MGC018 is in a Phase 1 dose escalation trial, which was initiated in the fourth quarter of 2018.

I will now turn to our PD-1 directed franchise, we are making tremendous steps forward in advancing these programs. We have 3 PD-1 directed programs in the clinic. MGA012, MGD013 and MGD019, the first and most advanced MGA012 is licensed to Incyte Corporation although we retain the rights to develop it in combination with our pipeline programs.

At the November 2018 SITC meeting, Incyte presented encouraging initial anti-tumor and safety and tolerability data in non-small cell lung cancer, cervical cancer, endometrial cancer and soft tissue sarcoma. Incyte is pursuing development of MGA012 through three monotherapy registration-directed studies with initial data anticipated in 2020, in the case of MSI-high endometrial cancer and Merkel cell carcinoma, and in 2021, in the case of anal cancer. In addition, both Incyte and MacroGenics are each studying MGA012 the combination study.

I'll remind listeners that under the terms of our agreement with Incyte, MacroGenics is eligible to receive up to $420 million in potential development and regulatory milestone and up to $330 million in potential commercial milestones. If MGA012 approved to commercialize, MacroGenics would be eligible to receive royalties tiered from 15% to 24% on future sales of MGA012 by Incyte.

Our second checkpoint molecules MGD013, our first-in-class DART molecule that provides co-blockade of two immune checkpoint molecules expressed on T cell, PD-1 and LAG-3 for the potential treatment of a range of solid tumors and hematological malignancies. MacroGenics' Phase 1 dose or expansion study and up to nine tumor types is ongoing and the company expects to present data from this study in 2019. MGD019 another checkpoint DART molecule is designed to provide blockade of both PD-1 and CTLA-4 on T cell. MGD019 is currently enrolling patients in the Phase 1 dose escalation study.

The next program I will discuss this for the new demand, two demands our bispecific humanized DART molecule that recognizes both CD123 and CD3. In December 2018 MacroGenics presented both updated clinical data, as well as gene signature data from its completed, completed acute myeloid leukemia dose expansion cohort in two of our presentations at the American Society of Hematology Annual Meeting. In this study, flotetuzumab demonstrated anti-leukemic activity and acceptable tolerability in patients with relapsed/refractory AML, with a higher response rate observed in primary refractory patients, an extremely challenging population to treat.

MacroGenics plans to enroll additional patients in this ongoing study and announced data in 2019. We are collaborating with Servier on this program and under the terms of the agreement Servier has development and commercialization rights outside North America. Japan, Korea and India for flotetuzumab.

Finally, on the corporate level, we have also been busy. In November, we announced the collaboration and license agreement with Zai Lab Limited, under the terms of this agreement, we have licensed design, we have the right to develop and commercialize margetuximab, MGD013 and an undisclosed preclinical TRIDENT binding molecule in mainland in China, Hong Kong, Macau and Taiwan.

Zai Lab will lead clinical development in its territory by leveraging its regulatory and clinical development expertise and broad regional network of investigators. Under our agreement with Zai Lab, we received an upfront payment of $25 million, less foreign withholding, in January 2019 and are eligible to receive up to a $140 million in potential development and regulatory-based milestone payments. In addition, Zai Lab has agreed to pay us double-digit royalties on annual net sales of the assets, which may be subject to adjustment in specified circumstance.

As Jim noted earlier, we completed a follow-on offering of 6,325,000 shares of our common stock, raising $118.5 million, net of underwriting discounts and commissions and estimated offering expenses. This puts MacroGenics in a strong financial position to continue to advance our multiple programs in the clinic, as well as begin our preparations for the potential commercialization of margetuximab. This has been a busy and indeed transformational period for MacroGenics as we have not only advance the number of our very exciting clinical programs, but have also begun the process is evolving MacroGenics do a commercial pharmaceutical company with a rich pipeline of innovative molecules in development.

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

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of Debjit Chattopadhyay with H.C. Wainwright. Your line is now open.

Earl DeSouza -- HC Wainwright -- Analyst

Hey, guys, Earl DeSouza in for Debjit. Appreciate taking our questions. Can you hear me?

Scott Koenig -- President, Chief Executive Officer and Director

Yes, Earl. Thank you.

Earl DeSouza -- HC Wainwright -- Analyst

All right. So, the first question we had is -- given the validation of the Fc modified NK cell activation hypotheses, how do you see a number of Trastuzumab franchise playing out. for example, which becomes more important, the monoclonal antibody or variance or more importantly the ADC, assuming the ADC retains most of the advantages of Fc modification. And when moving to earlier lines of therapy, be more efficacious.

Scott Koenig -- President, Chief Executive Officer and Director

Thank you very much for that question. We are obviously very encouraged by the recent data and SOPHIA with the Fc modification in margetuximab. With regard to enoblituzumab, we are seeing at least initially similar principles being upheld that we observed with margetuximab.

As noted before, the Fc modifications we've incorporated dramatically increase the need immunity through ADCC and other Fc mediated functions, but we have observed that by incorporating these changes, we can also promote T cells specific community. This has been observed both in clonal expansion of particular clonal types that both are novel as well as previous clones that were observed before treatment. We are going to have some updates on our Phase 1 study with margetuximab illustrating the importance of generating these T cell specific responses and an upcoming scientific meeting.

So with regard to enoblituzumab, we think that that same principle will be upheld, increasing innate and immunity as well as in generating T cells specific responses. For many of these tumors, particularly at later stage the generation of specific community, even in these circumstances where these patients may have impaired immune systems is a very important principle for treating these patients and their cancers because we believe that the long sustain therapeutic benefits will come from specific community being promoted.

With regard to how we see this franchise evolving with regard to B7-H3 specificity, we see opportunities to combined these molecules together irrespective of their mechanism of action. So in the case of an ADC where we can promote killing of tumors and debulking, that does not remove the opportunity to also through the DART bispecific or through enoblituzumab to generate better immune responses. So, as you will hear and as I noted earlier, we are looking forward to initiating a registration type study first starting with a Phase 2 study of enoblituzumab combined with our anti-PD-1 molecule MGA012 that we are -- what we licensed the Incyte.

We're also looking at the possibility of combining that with chemotherapy and also looking at this in earlier lines of therapy. So we're going to take advantage of these different mechanisms to optimize the treatment for patients.

Earl DeSouza -- HC Wainwright -- Analyst

Okay. Thanks. If you look at to the mAb, why do you enhance the activity in refractory as opposed to relapse patients? Can you drastically reduce the CRS events with further schedule between and I think the third part for trastuzumab. What would be the dose when used in combination with an anti-PD-1. Thanks.

Scott Koenig -- President, Chief Executive Officer and Director

Excellent. Three questions. So with regard to the effects we're seeing in refractory preferentially as opposed to relapse. I think the dataset is still little small, we are extremely encouraged by the ability to treat this refractory population which is then resistance to most other conventional as well as newer therapy. So being able to treat this population is a great start.

With regard to how we are looking at treating the relapsed population as well as patients in earlier lines of therapy, we actually have seen responses in relapsed patients as well, but we've made to have an opportunity to expand on the activity of flotetuzumab by combining with specific agents. For example as we had shown a little over a year ago, by combining with anti-PD-1, we can enhance the activity of flotetuzumab in killing tumors quite dramatically. And this is consistent with the observation that patients treated with flotetuzumab will up regulate PDL-1 on the AML blebs. So, as you know, this is combination study, is planned to start later this year.

In addition, we have combined flotetuzumab with other agents such as hypomethylating agents and other chemotherapies and as sound that there is synergy in the anti-tumor response with those combinations. So in the future as we move forward with this we will be looking at various combination therapies to promote the best anti-tumor activity.

With regard to your question regarding CRs, as we noted after the ASH meeting in December, we instituted some minor modifications during the first week of dosing where we more slowly increase the dosing of patients before we reached the targeted dose of 500 nanograms per kilogram. So it's a little too early to announce that this is an absolute success, but having looked at the data recently of the initial patients treated with this regimen, we are very encouraged where this is going and we hope -- and we expect to update you later this year with regard to a lot of -- full of dataset treating our larger numbers of patients, mostly with refractory disease, but some relapse patients as well.

Operator

Our next question comes from the line of Christopher Marai with Nomura. Your line is now open.

Christopher Marai -- Nomura Instinet -- Analyst

Good afternoon, guys. Thanks for taking the question. And Scott, just a question regarding margetuximab, both been breast cancer maybe in gastric, given the results of the Phase 3, having a little bit of time to digest that further, have you guys thought about further development of adding additional clinical trials, whether it's new indication with respect to HER2 positivity or also just different lines of therapy earlier for symptom in breast cancer or additional studies beyond the ongoing gastric PD-1 pivotal study. Thank you.

Scott Koenig -- President, Chief Executive Officer and Director

Thanks very much, Chris. Yes. Obviously, we -- by having these results in hand, as well as the studies in gastric cancer and the update we presented at ASCO GI meeting, we're forging ahead with our development plan. So in the context of breast cancer, we've had extended interest for various investigator-sponsored trials including those in the neo-adjuvant setting as well as combination studies of margetuximab with other HER2 directed agents and we are considering these an anticipate starting these probably later this year.

With regard to the plans for gastric, as I noted earlier, we had a very successful meeting with the FDA, very recently where we discussed various opportunities to combine margetuximab with other agents in our portfolio. As noted previously, we conducted our studies in second line in combination with pembrolizumab but we had approached the FDA's discussing the opportunity in upfront treatment for gastric cancer either with MGA012 the anti-PD-1, MGDO-13 PD-1 by -- Layer 3 bispecific DART molecule as well as combinations of these molecules with chemotherapy and with the feedback from the FDA, we have a plan that we are beginning to implement and protocols that we are writing up now and anticipate this study to start later this year and so stay tuned for the details about the design of that trial.

Christopher Marai -- Nomura Instinet -- Analyst

Okay. Thank you.

Operator

Our next question comes from Jonathan Miller with Evercore ISI. Your line is now open.

Jonathan Miller -- Evercore ISI -- Analyst

Hi, guys. Thanks for taking the question, and congrats again on all of the SOPHIA data and all your other recent updates. I have a question about your financial guidance to start with. Despite your recent raise and collaboration with Zai Labs. Are you still somewhat bandwidth-limited and it seems like you've got a lot of trials contemplated and lot of things started. So what's your capacity now to advance, not just your existing opportunities but new indications advanced nearly pipeline, how much more bandwidth do you have now and what can you bite off with that?

Scott Koenig -- President, Chief Executive Officer and Director

Jon, great question. As you know, one of the principles about MacroGenics is continually to organically grow the company through the terrific discovery efforts of our research organization and take opportunities where we can compliment mechanisms of action where combining these molecules can enhance immunity quite different mechanisms. So in advance -- noting that we have currently nine molecules in clinical development and at least four or more molecules in sort of later stage preclinical development. We obviously have to set certain priorities to the organization.

And in this vein (ph), as I've noted, we would like to obviously advance the latest stage programs further and so in the context of margetuximab, we are planning this Phase 2, Phase 3 development plan for gastric cancer for enoblituzumab were similarly advancing a Phase 2, Phase 3 study planned for head and neck cancer. But we are going to continue to support the Phase 1 development, but highlight in particular, the development of MGD013 given it's now an expansion in nine different tumor types. And flotetuzumab getting data as monotherapy in the opportunity to combine these molecules.

One some of these other earlier Phase 1 studies declare themselves, we may be able to augment those programs forward. But right now, our plan is to get through the Phase 1 development of these programs. With regard to new programs, as we and our partner, ImmunoGen have announced, we are planning toward the end of the year to begin a Phase 1 study of a second ADC in our portfolio targeting out of nine.

Future molecules from the preclinical development efforts will be announced in future years. But right now, this is sort of what we can afford with the capital we have available to us. Obviously, as you know, we have been historically quite successful at bringing in non-dilutive capital through partnerships over the past 4.5 to 5 years, actually since the IPO, we have broadened $450 million of non-dilutive capital through these various partnerships and our business development team is very active at seeking new partnerships, both on assets, we have in our portfolio, but also now with our platforms where not only there has been introduced in our DART and TRIDENT technology, but increased interest in our Fc Optimization technology as well.

Jonathan Miller -- Evercore ISI -- Analyst

Great. Thank you very much. One further question, specifically on flotetuzumab in the CD123 program. You may have noticed recently that our competitor molecule was put on a partial clinical hold, because of some debts with toxicities that are pretty familiar from this -- these sorts of targets, and those sorts of modalities of action. Is there any read through from the competitor clinical hold flotetuzumab, and how you approach the toxicity profile of DARTs relative to competitor molecules or similar mechanisms of action.

Scott Koenig -- President, Chief Executive Officer and Director

Jon, thanks very much for the question. And obviously, we looked that all molecules being used to treat these patients with AML. We hope to be successful. With regard to the cytokine released and the debts (ph) associated with the recent molecule from Xencor. As you know, when we started our first DART molecule which was flotetuzumab in the clinic. I wanted our major concerns was the expression pattern of CD123 on normal tissues, particularly on monocyte, macrophages, positive cytoids and dendritic cells from endothelial cell and other cells as well.

And so, we selected a short-acting version of this molecule, so that we could shut off the dosing of patients, if they would experience side effect profiles, including cytokine release. As a result of our long and thoughtful development plan for the use of flotetuzumab, we have instituted support initiatives that can mitigate in a large way the cytokine release associated with this disease, and while a majority of the patients have experienced cytokine release, the grade of the cytokine release have dropped significantly by these various measures that we have implemented.

And as I noted earlier in the call, we have also instituted more recently even further dose escalation during the first week of treatment which has further improved the safety profile as this drug. So you can never guarantee what the outcome is going to be with a given patient and that they may experience. We feel we have implemented the best conditions for treating these patients, so that the drug will be both safe and efficacious.

Jonathan Miller -- Evercore ISI -- Analyst

Great. Thank you so much for answering my questions.

Operator

Our next question comes from the line of David Lebowitz with Morgan Stanley. Your line is now open.

Ishmael Asante -- Morgan Stanley -- Analyst

Hello, this is Ishmael on for David. Thank you for taking our question. Building on one of the more recent questions, could you discuss how the recent results of the Phase 3 SOPHIA trial might inform your plans of designing the Phase 2 or Phase 3 or impact in any way with checkpoints and gastric cancer. Thank you.

Scott Koenig -- President, Chief Executive Officer and Director

So, thank you, Ishmael. With regard to that. Obviously, we were very encouraged with the results of the combination of margetuximab and a chemotherapeutic regimen in these patients that a, we could obviously get a good clinical outcome, but as importantly, we were prompting the induction of specific community even in the presence of chemotherapy.

And so, as I described earlier to you, we will be implementing studies where we can continue to enhance T-cell specific community by incorporating combinations of margetuximab with anti-PD-1 MGA012, and also exploring combinations of margetuximab with MGD013 , our PD-1 by LAG-3 in gastric cancer given that not only -- thus one fee increases the PD-L1, but in a large number of these patients increases of LAG-3.

As I indicated earlier, we are also looking at the potential of combining those two molecules with chemotherapy as well. And so therefore, having the insights from the breast cancer study that margetuximab plus chemo can still allow for the promoting specific community. We think we can further enhance that in our gastric cancer study.

Ishmael Asante -- Morgan Stanley -- Analyst

Thank you.

Operator

Our next question comes from the line of Stephen Willey with Stifel. Your line is now open.

Stephen Willey -- Stifel -- Analyst

Yeah, thanks for taking the questions. Scott, I just guess with respect to margetuximab and others you've stated and interest in independently being responsible for US commercialization. And I think on the last call, you talked about perhaps entertaining some collaborative options, may be outside of the US. Just curious if you can maybe, I know it's still kind of pretty early with respect to the top line data disclosure. But if you'd be willing to maybe just kind of characterize the level of strategic interest, you may have received thus far, and whether or not any kind of collaboration that may or may not take place, if you would also look to maybe offset some of the gastric cancer development costs some kind of cost-sharing arrangement?

Scott Koenig -- President, Chief Executive Officer and Director

Steve. Thanks very much for the question. As you know, as I said earlier, prior to even having the data, we had outreach to a large number of organizations, both large pharmaceutical companies, biotech companies as well as regional players who will -- who had interest in this mechanism of action and breast cancer in particular. What I can say is that since the announcement, the response has been quite strong, not only have the initial parties continued to show inches, but there has been an expanded network companies that have come to us and are interested in finding out more details on the confidentiality with us. So that process is continuing.

As I noted earlier, at the time of the announcement of the data. The plans for commercialization were put in place for the US, just to be prepared irrespective of whether we were going to do it ourselves or partner was going to come in to do it along with us or even independently, and so we are up absolutely open to all options there in helping to find the right organization that can best commercialize this molecule for breast cancer. But additionally, support other studies in breast cancer as well as the gastric cancer studies.

And so we do hope to find such a party that can check all the boxes there including offsets on the cost of the gastric studies going forward. Obviously, the relationship with Zai Lab, which we executed in December, a significant portion of the gastric cancer studies will be subsumed by Zai Labs.

Stephen Willey -- Stifel -- Analyst

Got it. And then, just with respect to the proposed gastric cancer trial design, I know it's still a bit of a work in progress, but maybe you can just kind of walk through the decision regarding whether in on Margetuximab gets combined with either MGA012 or MGD013 and how much of that decision is going to be driven by economics i.e. the lack of costs or the lack of revenue sharing with inside on MGD013. How much of it is driven I guess by just the biology at this point. And to what extent the Phase 1 data from the dose expansion cohorts might also be driving that decision.

Scott Koenig -- President, Chief Executive Officer and Director

Thanks for that question. I can say that the decision is totally independent of revenue. We feel that the economics that would come out of any successful drug for gastric cancer whether with MGA012 or MGD013 will be sufficient for the organizations. This is all being driven by the biology and the responses by the patients. And so in this vein, our plans right now is to conduct Phase 2 studies of significant size, so that we can decide which therapy results in the best outcome. So got totally independent of the revenue being generated.

Operator

Our next question comes from the line of Jonathan Chang with SVB Leerink. Your line is now open.

John Barrett -- SVB Leerink -- Analyst

Hello, this is John Barrett on for Jonathan Chang. Thanks for taking my questions. Based on a continued conversations and diligence with physicians, now that they've had some time to adjust the results. Can you gauge their view of the data and have you gotten a sense of what PFS benefit would they would need to see in order to drive commercial uptake for Margetuximab.

Scott Koenig -- President, Chief Executive Officer and Director

Thanks for the question, John. We've only had a very modest outreach to some of the investigators here. Obviously, there was a comment on our original press release from hope -- we'll go we know the results and was very encouraged by the data set. But it's too early to make comments on the benefits and obviously this will be ultimately a question that both the key opinion leaders as well as the FDA will come to the conclusions about the clinical benefit there.

I would say that after the data came out as reported, we had increased interests for more ISTs from very notable institutions who are experts in breast cancer. So in -- from that vantage point, we're very encouraged by those responses. But it's just too early to understand how broadly the drugs will be used and we'll have to wait and see the update.

John Barrett -- SVB Leerink -- Analyst

Great. Thank you. And could you provide some additional detail on any trial amendments that were implemented for MGD009, the trials following the lifting of the partial clinical hold.

Scott Koenig -- President, Chief Executive Officer and Director

Sure. Thanks, John, for that question. As I noted on previous calls and through our distribution of our press releases, we had made some dosing modifications at the request of the FDA, a slight reduction in dose as well as a plan that we had proposed to them even before we had heard from them of looking prophylactically at -- during the first infusion of MGD009 to give anti-cytokines including on one arm, for example, Trastuzumab as a way to reduce the initial cytokine release which we saw and believe in a large part was due to the cause for elevated LFTs. So those changes are being incorporated in our protocols. And as I noted earlier, we expect to start enrolling patients shortly.

John Barrett -- SVB Leerink -- Analyst

Great. Thank you so much.

Operator

Our next question comes from the line of Yigal Nochomovitz with Citigroup. Your line is now open.

Yigal Nochomovitz -- Citigroup -- Analyst

Hi, Scott and Jim. Thanks for taking the question. On the first line gastric study which you're working on with the FDA, it was interesting that you mentioned that those studies may include chemo too, because I guess I was under the impression that the goal is to do a chemo free regimens. So, I'm just wondering was that something that the FDA snuck in there, that they want to see chemo in the frontline setting or is that just -- is that part of the game plan online more generally. Thanks.

Scott Koenig -- President, Chief Executive Officer and Director

Excellent question, Yigal. So, this is in fact was -- was prompted by us. We're looking at sort of very broadly of how to best treat patients in a front line setting. In fact, we will initiate likely the first studies without chemotherapy established a response and safety of those combinations initially, and then that continue on through a Phase 3, if the data is significant and suggest a response rate and long-term benefit in the front line patients.

But given that as I pointed out earlier, that for instance, marge and chemo worked very well in the latest as setting and still allow for generation of specific immune responses in patients with breast cancer. So did we feel that it would be incumbent on us to see if we could have further enhancement of the response rate by including a chemotherapy arm, combined with the other agents as well.

So again, this will be a step-wise approach, we're not doing all these things at ones, we will be implemented initially in the Phase 2 design, and then we'll be able to collapse particular groups and then move forward into Phase 3 development plan with the best combination therapy for the patients.

Yigal Nochomovitz -- Citigroup -- Analyst

Okay. So this -- are you suggesting it might be an adaptive design of some kind or do you just going to be separate studies Phase 2 and then move to Phase 3.

Scott Koenig -- President, Chief Executive Officer and Director

I would call them adaptive in nature. Yes.

Yigal Nochomovitz -- Citigroup -- Analyst

All right. And then, second one was on enoblituzumab. You've ticked head and neck for the Phase 2 combo. Is that mainly because of better B7-H3 expression or lack of competitive pressures relative to lung cancer. Can you just expand on why that's the choice for the Phase 2?

Scott Koenig -- President, Chief Executive Officer and Director

That's a conversation we've had internally and when it puts back and forth -- and lung cancer, and there is no right and wrong answer on that. Obviously, there's been a lot more activity in lung cancer with many different combinations as you know quite well and recent approvals in frontline lung cancer. We feel -- so therefore, we feel that the opportunity and the need for head and neck cancer at least near term is greater for us and can be handled by us initially, but this is no way you should to spill our interest -- proceeding in lung cancer and others. But again, given the size of the organization, we only could do a certain number of studies at onetime.

Yigal Nochomovitz -- Citigroup -- Analyst

Okay. And then the last one is, just going back to SOPHIA obviously I understand you guys are filing on PFS. But I've been getting this question a lot from people over the last few weeks. So I just wanted to ask you again and -- forgive me for the question, but I just want to understand what is the FDA said on OS. And is there any expectation that you eventually have to hit that figure on that or to satisfy the agency if it's -- if it ends up just being a trend and not worse, which is -- I mean, I've heard this from Richard Baltz (ph) that with respect to other drugs that they're fine. So where do you stand on that?

Scott Koenig -- President, Chief Executive Officer and Director

Well, if Richard says it must be the rule and must be the law. The reality is that there was no indication that we needed to have a statistically significant OS. Obviously, if we had that, that is better, but clearly, the FDA has approved drugs with trending in OS. And as a result we will continue to follow these patients and hope that the favorable response with regard to Margetuximab versus Trastuzumab persist. So stay tuned for that.

Yigal Nochomovitz -- Citigroup -- Analyst

Okay. Thank you.

Operator

Our next question comes from the line of Reni Benjamin with Raymond James. Your line is now open.

Reni Benjamin -- Raymond James -- Analyst

Hey, good afternoon, Scott and James. Thanks for taking the questions. I have a naive SOPHIA stats question. Having to do with the hazard ratio, can the hazard ratio continue to evolve since only ask the events for accounted for and from a regulatory perspective, what's the final data point that gets taken into account?

Scott Koenig -- President, Chief Executive Officer and Director

So, not knowing the complete answer in terms of what -- what's taken to account as well with pre-defined and the hazard ratio as stated is the hazard ratio for the PFS. And when we hit 3.85 (ph) events for OS that will be the hazard ratio for the OS events. So I think it's pre-defined, and is at that point. Can patients continue to be followed and an imputed hazard ratio be determined? Yes, but for -- for what I understand and forgive me if I'm wrong here, is that -- that is not being considered in the context of the review process.

Reni Benjamin -- Raymond James -- Analyst

Got it. And then just as far as commercialization is concerned, can you talk to us a little bit about how you're thinking about commercialization -- commercializing in 2020. How should we be thinking about the sales force and the like?

Scott Koenig -- President, Chief Executive Officer and Director

Yeah, I made a little comment earlier, Reni, which is -- right now is that for the US -- preparing what's necessary to commercialize, but we are very actively engaged looking for an appropriate partner to help us commercialize and this could be worldwide, including US. Our goal right now given that this is the only molecule lease near term that has the potential for commercialization. Obviously, if the FDA agrees with that, it's very hard to just have a separate sales force with one product and make it cost effective.

So the way we're looking at that, can we -- if we find a appropriate partner and we can participate some way and it doesn't necessarily mean adding sales, but it could be an option to doing that as one example, it could be obviously adding expertise in the field to support this drug. We are open to many different structures here to commercialize this. So stay tuned as we get feedback from potential partners.

Reni Benjamin -- Raymond James -- Analyst

Got it. And just switching gears to flotetuzumab, can you talk a little bit, Scott, about the -- I mean, obviously, we've seen the data from the gene signature at ASH. Can you talk about how you see this evolving in 2019 and any sort of changes or progress in the flotetuzumab development plan that we can anticipate for 2019?

Scott Koenig -- President, Chief Executive Officer and Director

Thanks, Reni for that question. As I said earlier, I'm very encouraged by at least the initial cohort patients that we have treated with a slower ramp up during the first week of dosing. In terms of the tolerance the amount the drug they've received and leased in a small number of patients even the responses we're seeing. So the goal as I've outlined earlier is that -- we'd like to see say 25 patients treated mostly refractory patients. We'd like to see that the response rates are approximating what we had observed at the -- and reported at the ASH meeting in December obviously following with the biomarker data as well.

As we pointed out, while this biomarker data seem to track very well with the refractory population. There also patients with relapsed disease that also may have indications of similar biomarker changes and therefore would be potential prospects for treating these patients. If the results come out and are supported by this data, we would look to expand this quite much further with additional patients, we would meet with the FDA and European regulatory agencies to -- to track a registration path for monotherapy. We would also initiate the combination studies I alluded to before in combination with our anti-PD-1 molecule MGA012 and also consider other combinations with other chemotherapeutic agents.

So what we have indicated is that we expect the enrollment to continue quite nicely, and should be able to update you in the second half of this year with regard to next steps with this program.

Operator

Our next question comes from line of Peter Lawson with SunTrust Robinson Humphrey. Your line is now open.

Ben -- SunTrust Robinson Humphrey -- Analyst

Hi, guys, thanks for taking our questions. This is Ben (ph) joining in for Peter. Just to -- I guess a few questions on MGA012. I guess the first for the Phase 2 study, you guys are planning on initiating gastric. And often ASCO GI data, it looks like the PD-L1 high expresser seem to respond a little better. Are you think about trial enrolling both the PD-L1 positive and negative or focus more on the PD-L1 Group?

Scott Koenig -- President, Chief Executive Officer and Director

Thanks, Vince for that question. Very insightful. As we've noted, and as you've noted in the data in a small subset of patients with the three plus gastric positive IHC for HER2. We were seeing over 50% response rate in the PD-L1 positive population. So as we move forward, we are going to both look at that population as well as the broader population that does not have enough major up regulation in PD-L1. And again, we'll let the data guide us to what the proper combinations there should be.

Ben -- SunTrust Robinson Humphrey -- Analyst

I see. I guess a fairly quick last question on the data. So it looks like the (inaudible) it comes to on median PFS, it seems like the -- the broader population may just as well or maybe possibly even better than the PD-L1 high expressers. And then likewise for the current overall survival, do you think it's just like inventory of data there or maybe the differences in traffic or maybe a sense down when it comes to survival outcome?

Scott Koenig -- President, Chief Executive Officer and Director

So I think with regards to PFS, it's just too much of an immature dataset with regard to the subset of populations. And I don't think that has any particular meaning at this point. I think that the opportunities for the PD-L1 positive population to have a better PFS with large numbers -- we'll see, but I think that is certainly should be the case. So with regard -- what was the second question? I'm sorry.

Ben -- SunTrust Robinson Humphrey -- Analyst

And I guess, minimal overall survival would probably like...

Scott Koenig -- President, Chief Executive Officer and Director

Overall, sort of -- yeah, so we are extremely encouraged by the overall survival results having not even reached that for the three plus positive population. And again, as I pointed out, as we enhance the specific immune responses by these various combination therapies, we think that that will continue to improve and prevails, but we'll let the data speak for itself.

Ben -- SunTrust Robinson Humphrey -- Analyst

Got it. Thank you. I guess, one last quick one on, so I know you guys have retained the rights to use MGA012 and combinations of your pipeline. Is there any, I guess, preclusion what the indication that you may pursue that for example Incyte doing monotherapy within (inaudible) endometrial and Merkel. And then, later, but is there any preclusion indications that you may pursue and it overlapping what insights monotherapy?

Scott Koenig -- President, Chief Executive Officer and Director

No, in fact, that's the nature of the relationship, very strong relationship with Incyte, but we have decided that if we want to pursue similar in tumor indications or actually a similar molecules targeting the same target we have both free to do so.

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

We just can't pursue monotherapy.

Scott Koenig -- President, Chief Executive Officer and Director

We just -- we can do monotherapy alone, it's only a combination. Yeah.

Ben -- SunTrust Robinson Humphrey -- Analyst

Yeah. Great. Got you. Thanks so much for taking my question.

Scott Koenig -- President, Chief Executive Officer and Director

Thank you.

Operator

(Operator Instructions) We have a follow-up question from the line of Stephen Willey with Stifel. Your line is now open.

Stephen Willey -- Stifel -- Analyst

Yeah. Thanks for squeezing me in. So, Scott, just to clarify on the proposed gastric development program, this is going to be gastric specific right, there's no intention here also look at gastroesophageal?

Scott Koenig -- President, Chief Executive Officer and Director

Steve, we are considering gastroesophageal, so stay tuned there. Certainly, gastric cardia (ph) but for instance, having a three plus positive population with gastroesophageal certainly could be included in the study as well.

Stephen Willey -- Stifel -- Analyst

Got it. And then, just curious if there's anything incremental to say on 007, I know you guys are still dose escalating this with MGA012, I believe Servier had declined pick up the option on this asset sometime late last year. Just curious if that's the kind of what happens now in that Phase 1 trial.

Scott Koenig -- President, Chief Executive Officer and Director

Thanks for that question, Steve. Our obligations to Servier was to provide them with the initial data from the first dosing regimens, whereas you know we were had lot of challenges with regard to the side effects that were on target and specifically the nausea, vomiting and diarrhea, because of the expression of gpA33 in the normal colon small intestine and stomach. That was the days that they used to make their decision going forward.

Having continue to advance that program we have been able to implement a dosing regimen and support that has not completely eliminated, but certainly has mitigated some of the severe side effects of the drug and we are continuing to gingerly dose escalate, we expect to reach the targeted dose, very shortly, and then our plan is to expand into approximately 25 patients. And as I've said previously, if that data set suggests both the tolerability as well as evidence of activity that is doing better than the late-line patients currently have available to them. Then we will continue the program if not, we will stop that program.

Stephen Willey -- Stifel -- Analyst

Great. Thanks. And then just one last follow-up for Jim, just housekeeping does the Zai Lab payment it's not going to get amortize that can be a lump sum like it's in 1Q. Thank you.

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

It will be amortized, Steve.

Stephen Willey -- Stifel -- Analyst

Okay. Thanks a lot guys.

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

Thank you.

Operator

We have a follow up question from line of Reni Benjamin with Raymond James. Your line is now open.

Reni Benjamin -- Raymond James -- Analyst

Hi. Thanks guys for taking the follow-up. Just one for Jim as well -- with all these clinical studies that are starting, Jim. How should we be thinking about R&D in terms of 2019, is it roughly in line with 2018 from SOPHIA is winding down or should we be materially higher -- is there any color would be great.

Scott Koenig -- President, Chief Executive Officer and Director

While as SOPHIA winds down the other studies will be coming up. So I'd say flattish, we're not giving specific guidance, the only guidance we are giving is that our cash runway takes us into 2021, but I would expect R&D to generally be flattish.

Reni Benjamin -- Raymond James -- Analyst

Got it. And then just one last one for Scott, if you don't mind with enoblituzumab. I know in January, you had mentioned that there were 18 or so responses, four (ph) were unconfirmed. Scott, have they've been confirmed subsequently or when might we find out an update from that study.

Scott Koenig -- President, Chief Executive Officer and Director

From enoblituzumab. No. Enoblituzumab all the data from the combination studies with pembro in head and neck and lung were all confirmed. So I don't know which more -- maybe it was gastric maybe it was the gastric study from the note -- the new cohort the patients weren't follow long enough to confirm that. I think that's what you probably remembering, but enoblituzumab all those patients the 33% response rate in the head and neck and 35% response rate in the lung cancer those were all confirm responses.

Reni Benjamin -- Raymond James -- Analyst

Perfect. Thank you very much.

Scott Koenig -- President, Chief Executive Officer and Director

Okay.

Operator

This concludes the question-and-answer session. I'll now turn the call back to Dr. Koenig for closing remarks.

Scott Koenig -- President, Chief Executive Officer and Director

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

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.

Duration: 65 minutes

Call participants:

James Karrels -- Senior Vice President, Chief Financial Officer and Secretary

Scott Koenig -- President, Chief Executive Officer and Director

Earl DeSouza -- HC Wainwright -- Analyst

Christopher Marai -- Nomura Instinet -- Analyst

Jonathan Miller -- Evercore ISI -- Analyst

Ishmael Asante -- Morgan Stanley -- Analyst

Stephen Willey -- Stifel -- Analyst

John Barrett -- SVB Leerink -- Analyst

Yigal Nochomovitz -- Citigroup -- Analyst

Reni Benjamin -- Raymond James -- Analyst

Ben -- SunTrust Robinson Humphrey -- Analyst

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