Good afternoon. We will begin the MacroGenics 2018 Fourth Quarter and Full Year Corporate Progress and Financial Results Conference Call in just a moment. [Operator Instructions] At this point, I will turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

Thank you, operator. Good afternoon, and welcome to MacroGenics' conference call to discuss our fourth quarter and full year 2018 financial and operational results. For anyone who's not had the chance to review our results, we issued a press release this afternoon outlining today's announcements, which is available under the Investors tab on our website at www.macrogenics.com. You can also listen to this conference call via webcast on our website, where it would be archived for 30 days beginning approximately 2 hours after the call is completed. I would like to alert listeners that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual, quarterly and current reports filed with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change, except to the extent required by applicable law. And now I'd like to turn the call over to Dr. Scott Koenig, MacroGenics' President and Chief Executive Officer.

Thank you, Jim. I'd like to welcome everyone participating via conference call and webcast today. Thank you for joining us. We've had an eventful fourth 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.

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 ended 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 head count 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 ended December 31, 2017. This increase was primarily due to increased labor-related costs including stock-based compensation expense, patent-related expenses and information technology-related expenses. We recorded total revenue, consisting primarily of revenue from collaborative agreements of $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 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 revenue from payments received in previous periods as well as payments received during the year. For the year ended 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 we 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 its operations into 2021, assuming all of the company's programs and collaborations advance as currently contemplated. 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 our pivotal Phase 3 trial in HER2+ metastatic breast cancer with margetuximab, our novel immune optimized anti-HER2 antibody, which has a 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 a combination of margetuximab plus chemotherapy compared to trastuzumab plus chemotherapy. Patients in the margetuximab arm experience a 24% risk reduction in PFS compared to patients in the trastuzumab arm when there associated p-value of 0.033. Approximately 85% of patients in the study were carriers of the CD16A 158F allele, which has been previously associated with diminished clinical response to HERCEPTIN 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 the p-value of 0.005. The combination of margetuximab and chemotherapy demonstrated acceptable safety and tolerability, compared overall to that of trastuzumab and chemotherapy. These results offer the potential of a new treatment option for patients living with HER2+ metastatic breast cancer, a devastating disease for which there 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 a 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-HER2 antibodies like margetuximab. Our hope is that this approach to Fc modification will not only help patients with breast cancer but potentially other…

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

Hey, guys. Earl DeSouza in for Debjit, I appreciate taking our question. Can you hear me?

Yes, Earl. Thank you.

All right. So the first question, we had is, given the validation of the Fc-modified NK cell activation hypothesis. How do you see the enoblituzumab franchise playing out, for example, which becomes more important, the monoclonal antibody or the variance or more importantly the ADC? Assuming the ADC retains most of the damages of Fc-modification and when moving to earlier lines of therapy, it'd be more efficacious?

Thank you very much, Earl, for that question. We were obviously, very encouraged by the recent data in SOPHIA with the Fc-modification in margetuximab. With regard to enoblituzumab, we are seeing – at least initially similar principles being upheld that we observe with margetuximab. As noted before the Fc-modifications, we've incorporated dramatically increased innate immunity through ADCC and other Fc-mediated functions. But we have observed that by incorporating these changes we can also promote T cell specific immunity. This has been observed both in clonal expansion of particular clonal types that both our novel as well as previous clones that were observed before treatment. We were going to have some updates on our Phase 1 study with margetuximab illustrating the importance of generating these T cells specific responses in an upcoming scientific meeting. So with regard to enoblituzumab, we think that that same principle, it will be upheld increasing autoimmunity as well as in generating T cell specific responses. For many of these tumors, particularly at later-stage, the generation of specific immunity 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 immunity being up promoted. With regard to how we see this franchise evolving with regard to B7-H3 specificity, we see opportunities to combine on 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 registration type study first starting with a Phase 2 study of enoblituzumab combined with our anti-PD-1 molecule MGA012 that we are – which we licensed to 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 are going to take advantage of these different mechanisms to optimize the treatment for patients.

Great. Thanks. Flotetuzumab, why do you enhance activity in refractory as opposed to relapse patients? Can you drastically reduce the CRS events with for the schedule bickering and I think third part for flotetuzumab, what would be the dose when used in combination in anti-PD-1? Thanks.

Excellent. Three questions. So with regard to the effects we're seeing in refractory preferentially as opposed to relapse, I think that the data set is still a little small. We are extremely encouraged by the ability to treat this refractory population, which is been resistance to most other conventional as well as newer therapies. So being able to treat this population is a great start. With regard to how we are looking at treating the relapse population as well as patients in earlier lines of therapy, we actually have seen responses in relapse patients as well. But we 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 PD-L1 on the AML blasts. 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 found that there is synergy in the antitumor response with those combinations. So in the future, as we move forward with this, we'll be looking at various combination therapies to promote the best antitumor 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 increased the dosing a patient before we reached the targeted dose of 500 nanograms per kilogram. 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 the updates you later this year with regard to a fuller data set, treating our larger numbers of patients mostly with refractory disease, but some relapse patients as well.

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

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

Thanks very much, Chris. Yes, obviously, we do 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 investigated sponsors trial, including those in the neoadjuvant setting as well as combination studies of margetuximab with other HER2 directed agents. And we're considering these and 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 discuss 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 discussing the opportunity in upfront treatment for gastric cancer, either with MGA012, the anti-PD-1, MGD013 or PD-1 x LAG-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're 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.

Okay. Thank you.

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

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 rates and collaboration with Zai Lab, are you still somewhat bandwidth limited and it seems like you've got a lot of trials contemplate and lot of things started. So what's your capacity now to advance not just your existing opportunities, but new indications, advanced early pipeline, how much more bandwidth you have now and what can you bite off with that?

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 by different mechanisms. So when this vein, no 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 as vein, as I've noted, we would like to obviously advance the later-stage programs further. And so in the context of margetuximab, we are planning this Phase 2/3 development plan for gastric cancer. For enoblituzumab, we're similarly advancing of Phase 2/3 study plan 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 and the opportunity to combine these molecules. Once some of these other earlier Phase 1 studies declared 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 were planning towards the end of the year to begin a Phase 1 study of a second ADC in our portfolio targeting at 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 five years, actually since the IPO, we have brought in $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 interest in our DART and TRIDENT technology but increased interest in our Fc-optimization technology as well.

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

Jon, thanks very much for the question. And obviously, we looked at all molecule being used to treat these patients with AML. We hope to be successful. With regard to the cytokine release and the deaths associated with the recent molecule from Zencore [ph]. As you know, when we started out first DART molecule, which was flotetuzumab in the clinic, one of our major concerns was the expression pattern of CD123 on a normal tissues, particularly on monocytes, macrophages, positive cytoides and dendritic cells, some endothelial cells 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 initiative 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 of this drug. So while you can never guarantee what the outcome is going to be with a given a patient and that they may experience, we feel we have implemented on the best conditions for treating these patients so that the drug will be both safe and efficacious.

Great. Thank you so much for answering my questions.

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

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.

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 promoting the induction of specific immunity 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 cells specific immunity by incorporating combinations of margetuximab with anti-PD-1 MGA012 and also exploring combinations of margetuximab and that with MGD013. our PD-1 x LAG-3 in gastric cancer, given that not only does one see increases the PD-L1, but in a large number of these patients increases of LAG-3. As I indicated earlier, we're 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 marget plus chemo can still allow for the promoting specific immunity, we think we can further enhance that in our gastric cancer study.

Thank you.

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

Yes. Thanks for taking the questions. Scott, I guess – just guess with respect to margetuximab, I know that you've stated an interest in independently being responsible for U.S. commercialization. And I think on the last call you had talked about perhaps entertaining some collaborative options maybe outside of the U.S., just curious if you could 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 via some kind of cost sharing arrangement.

Steve, thanks very much for the question. 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 had the interest in this mechanism of action in breast cancer, in particular. What I can say is, is that since the announcement, the response has been quite strong. Not only have the initial parties continued to show interest, but there's been an expanded network of 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, we're putting in place for the U.S., just to be prepared irrespective of whether we were going to do it ourself or partner was going to come in to do it along with us or even independently. And so we are 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 offset some of the costs for 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 Lab's.

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 or not 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 Incyte on MGD013. How much of it is driven I guess by just biology at this point and to what extent the Phase 1 data from the dose expansion cohorts might also be driving that decision?

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 totally independent of the revenue being generated.

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

Hello, this is John Barrett on for Jonathan Chang. Thanks for taking my questions. Based on your 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 they would need to see in order to drive commercial uptake for margetuximab?

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 Rugo, who knew the results and was very encouraged by the dataset. But it's too early to make comment 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 interest for more IST's from very notable institutions who are experts in breast cancer. So from that vantage point we're very encouraged by those responses. But it's just too early to understand how broadly does the drugs will be used and we'll have to wait to see the update.

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

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 during the first infusion of MGD009 to give anti-cytokines including on one arm for example, tocilizumab 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 LFT. So those changes are being incorporated in our protocols. And as I noted earlier, we expect to start enrolling patients shortly.

Great. Thank you so much.

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

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 regimen. 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 part of the game plan in frontline more generally? Thanks.

Excellent question, Yigal. So this was in fact was prompted by us. We're looking at sort of very broadly of how to best treat patients in a frontline setting. In fact, we will initiate likely the first studies without chemotherapy established a response and safety of those combinations initially. And then that can continue on to a Phase 3 if the data is significant and suggest a response rate and long-term benefit in the frontline patients. But given that, as I pointed out earlier, that for instance, marg and chemo worked very well in the latest setting and still allowed for generation of specific immune responses in patients with breast cancer. So 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 a stepwise approach that we're not doing all these things at once. We'll be implemented initially in a Phase 2 design and then we'll be able to collapse particular groups and then move forward in a Phase 3 development plan with the best combination therapy for the patients.

Okay. So this – are you suggesting it might be an adaptive design at some kind, or it's going to be separate studies Phase 2 and then move to Phase 3?

I would call them adaptive in nature. Yes.

All right. And then second one was on enoblituzumab. You've picked head and neck for the Phase 2 combo. Is that mainly because of better B7H3 expression or lack of competitive pressures relative to lung cancer. Can you just expand on why that's the choice for the Phase 2?

That's a conversation we've had internally and when it flips back and forth between head and neck and lung cancer and there's no right and wrong answer on that. Obviously there's been a lot more activity in lung cancer with many different combinations as you quite well and recent approvals in frontline lung cancer. 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 in no way should dispel our interests of proceeding in lung cancer and others. But again, given the size of the organization, we only could do a certain number of studies at one time.

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 some people over the last few weeks. So I just wanted to ask you again.

Sure.

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 would have to hit that sig on that or to satisfy the agency if it ends up just being a trend and not worse, which is – I mean, I've heard this from Richard Pazdur with respect to other drugs that they're fine. So where do you stand on that?

Well Richard says, it must be the rule, it 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 would 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 persists. So stay tuned for that.

Okay. Thank you.

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

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

So, not knowing the complete answer in terms of what's taken into account and what was predefined. And the hazard ratio as stated is the hazard ratio for the PFS. And when we hit 385 events for OS, that will be the hazard ratio for the OS events. So I think it's predefined. And at that point, can patients continue to be followed and an imputed hazard ratio be determined. Yes, but 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.

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 commercializing in 2020? How should we be thinking about the sales force and the like?

Yes. I made a little comment earlier, Ren, which is, right now is that for the U.S. we're 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 U.S. Our goal right now, given that this is the only molecule least near-term that has the potential for commercialization, obviously if the FDA agrees with that. It's very hard to just have as a separate sales force with one product and make it cost effective. So, the way we're looking at that, 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're open to many different structures here to commercialize this. So stay tune as we get feedback from potential partners.

Got it. And then just switching gears to flotetuzumab. Can you talk a little bit, Scott, about – 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?

Yes. Thanks Ren for that question. As I said earlier, I'm very encouraged by at least the initial cohort of patients that we have treated with a slower ramp up during the first week of dosing in terms of their tolerance, the amount of drug they've received and at least in a small number of patients, even the responses were seeing. So the goal, as I've outlined earlier is that we 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 and reported at the ASH meeting in December. We're obviously a 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 are also patients with relapse 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 much further with additional patients. We would meet with the FDA and European regulatory agencies to track a registration path for monotherapy. We would also initiate the combination studies that 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.

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

Hi, guys. Thanks for taking our questions. This is Ben filling in for Peter. Just two – I guess a few questions on MGA012. I guess the first for the Phase 2 study you guys are planning on initiating in gastric. I know from the ASCO GI data, it looks like the PD-L1 high expressor seem to respond a little better. Are you thinking about trial enrolling both the PD-L1 positive and negative or focus a little more on the PD-L1 group?

Thanks Ben for that question. Very insightful. As we've noted and as you've noted in the data in a small subset of patients with 3+ 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 a major upregulation in PD-L1. And again, we'll let the data guide us to what the proper combinations should be.

I guess really quick last question on the data. So it looks like the – at least when it comes to median PFS, it seems like that the broader population maybe possibly even better than the PD-L1 high expressors. And then, likewise for the current overall survival, do you think it's just like immaturity of the data there or maybe the differences in drastic or maybe down when it comes to survival outcome?

So I think with regard to PFS, it's just too much of an immature data said 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 larger numbers, we'll see. But I think that is certainly should be the case. So with regard, what was the second question?

And then I guess, overall survival is probably like…

Overall survival, yes. So we're extremely encouraged by the overall survival results. Having not even reached that for the 3+ positive population. And, again as I pointed out, as we enhance the specific immune responses by these various combination therapies, we think that will continue to improve and prevail. But we'll let the data speak for itself.

Got you. Thank you. I guess one last quick one. So I know you guys have retain the rights to use MGA012 in combinations with your pipeline. Is there any – I guess preclusion? What's the indications that you may pursue that for examples like going monotherapy, what's in endometrial and Merkel and then later, but is there any preclusion and indications that you may pursue and it overlapping with Incyte's monotherapy?

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 tumor indications or actually a similar molecules targeting the same target we're both free to do so.

We just can't bake to monotherapy.

We can't monotherapy alone, it's only combination.

Yes, great. Got you. Thanks so much for taking our questions.

[Operator Instructions] We have follow follow-up questions from the line of Stephen Willey with Stifel. Your line is now open.

Yes. 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 to also look at gastroesophogeal?

Steve, we are considering gastroesophogeal, so stay tune there. Certainly gastric will there but instance having a 3+ positive population would gastroesophogeal certainly could be included in this study as well.

Got it. And then just curious if there's anything incremental to say on MGD007. I know you guys are still dose escalating this with MGA012, I believe Servier had declined to pick up the option on this asset sometime late last year. Just curious as to kind of what happens now in that Phase 1 trial.

Thanks for that question, Steve. Our obligations to Servier was to provide them with the initial data from the first dosing regimens whereas we had a lot of challenges with regard to the side effects that we're on target specifically the nausea, vomiting and diarrhea because of the expression of gpA33 in the normal colon, small intestine and stomach. That was – they said that they use to make their decision going forward. Having continued 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're 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 suggest 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.

Great. Thanks. And then just one last follow up for Jim. Just housekeeping. Does the Zai Lab payment, is that going to get amortized or is that going to be a lump sum that hits in 1Q. Thank you.

It will amortized Steve.

Okay. Thanks a lot guys.

Thank you.

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

Hey, 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, SOPHIA is winding down or should we be materially higher? Any color would be great?

Well, 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.

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 were confirmed, Scott, as they've been confirmed subsequently or one might we find out an update from that study?

From enoblituzumab.

Yes, I think it was enoblituzumab.

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 one, maybe it was the gastric study from the new cohort that the patients weren't followed long enough to confirm that. I think that's what you're probably remembering. But enoblituzumab all those patients the 33% response rate in the head and neck and 35%-ish response rate in the lung cancer. Those were all confirmed responses.

Terrific. Thank you very much.

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

I 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 month and providing updates on our progress. Have a great day.

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