MacroGenics' (MGNX) CEO Scott Koenig on Q2 2016 Results - Earnings Call Transcript

| About: MacroGenics, Inc. (MGNX)

MacroGenics, Inc. (NASDAQ:MGNX)

Q2 2016 Earnings Conference Call

August 3, 2016 04:30 PM ET

Executives

Scott Koenig - President & CEO

Jim Karrels - SVP & CFO

Analysts

Jonathan Chang - Leerink Partners LLC

Stephen Willey - Stifel Nicolaus

Debjit Chattopadhyay - Janney Montgommery Scott LLC

David Lebowitz - Morgan Stanley

David Nierengarten - Wedbush Securities

Operator

Good afternoon. We will begin the MacroGenics' 2016 Second Quarter Conference Call in just a moment. All participants are in a listen-only mode at the moment and we will conduct a question-and-answer session at the conclusion of the call.

At this point, I will turn the call over to Jim Karrels, Senior Vice President and Chief Financial Officer of MacroGenics.

Jim Karrels

Thank you, operator. Good afternoon and welcome to MacroGenics' conference call to discuss our second quarter 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 Web site at www.macrogenics.com. You can also listen to this conference call via webcast on our Web site; where it will be archived for 30 days beginning approximately two hours after the call is completed.

I'd like to alert our 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.

Now, I would like to turn the call over to Dr. Scott Koenig, MacroGenics' President and Chief Executive Officer.

Scott Koenig

Thank you Jim. I would like to welcome everyone participating via conference call and webcast today. Thanks for joining us. Building on our accomplishments in the first quarter, we’ve continued our clinical progress into the second quarter of 2016 with a broad portfolio of molecules in clinical development, the majority of which are focused on the immune-oncology.

We also had our first partner to those DART molecule and to the clinic, which makes a total of six DART molecules currently being evaluated in clinical studies. As you may know MacroGenics achievements are driven by our state-of-the-art antibody-based technologies, including our Fc-optimization platform, which enhances an antibodies ability to interact with immunoeffector cells, our DART Type 1 that enables the targeting of two antibody specificities to a single recumbent molecule and our recently introduced Trident platform, which extends our DART platform to create molecules with three specificities.

As we continue to grow, our team remains committed to researching and developing innovative treatment options for patients suffering from cancer, autoimmune disorders, and infectious diseases. As always, I will use our brief time to today to review our growing pipeline of antibody based programs beginning with the most advanced clinical candidate in our portfolio margetuximab, for which we continue to activate sites and enroll patients in our Phase 3 SOPHIA trial.

I will then cover our B7-H3 franchise, which includes multiple candidates that utilize our Fc-optimization and DART technologies, as well as our ever-growing portfolio of DART programs. A notable highlight of this quarter was our recently closed collaboration and license agreement with Janssen to develop MGDO15, a DART molecule designed to simultaneously target CD3, plus an undisclosed tumor target for the potential treatment of various hematological malignancies and solid tumors.

I would provide more detail on this agreement and our greater pipeline shortly, but now I would like to turn the call over to Jim to give an overview of our financial results.

Jim Karrels

Thanks, Scott. This afternoon we recorded financial results with expenses in line with our expectations. Briefly as we described in our release, MacroGenics had research and development expenses of $33.3 million for the quarter ended June 30, 2016 compared to $22.7 million for the quarter ended June 30, 2015. This increase was due primarily to increased activity in our preclinical immune checkpoint programs including MGDO13, the initiation of the Phase 1 clinical trial of MGD009, and the initiation of two Phase 1 clinical trials combining enoblituzumab with other compounds.

We had general and administrative expenses of $7.2 million for the quarter ended June 30, 2016 compared to $5.3 million for the quarter ended June 30, 2015. This increase is primarily due to increased professional fees, recruiting costs, and stock-based compensation expense.

We recorded total revenues consisting primarily of revenue from collaborative agreements of $80.7 million for the quarter ended June 30, 2016 compared to $6.7 million for the quarter ended June 30, 2015. This increase in revenue is due to recognition of the $2 million milestone payment received from Pfizer for the first patient dose in their Phase 1 clinical trial of PF-06671008 and the closing of the global collaboration and license agreement with Janssen Biotech for the development of MGDO15.

I will point out that under GAAP, the $75 million license fee paid by Janssen was only recognized during the second quarter of 2016. However, the cash was received in the beginning of the third quarter of 2016. Therefore our accounts receivable balance as of June 30, 2016 included a $75 million receivable from Janssen. For the quarter ended June 30, 2016, we had net income of $40.5 million compared to a net loss of $21.4 million for the quarter ended June 30, 2015. The previously mentioned collaboration agreements was the reason for the quarter-over-quarter increase.

Our cash, cash equivalents, and marketable securities balance as of June 30, 2016 was $265.6 million. Again, that reflects again some $75 million payment to MacroGenics that was received early in the third quarter of 2016. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities combined with collaboration payments and anticipate receiving should fund MacroGenics operations into 2018, assuming all of our programs in collaborations advances currently contemplated.

And with that, let me hand the call back to you Scott.

Scott Koenig

Thank you, Jim. As I previously mentioned, we ended the second quarter with a broad portfolio molecules in clinical development with the majority focused on immune-oncology.

There are currently six DART molecules in Phase 1 clinical development, which includes PF-06671008 being led by our collaboration partner Pfizer, and MGD011 being led by our collaboration partner Janssen. While we’ve had notable growth in our clinical programs, MacroGenics continues to build a rich pipeline behind these candidates. This work includes the discovery and identification of new antibodies that have shown promising preclinical results.

As a result of this productivity, we plan to submit one IND later this year and two additional INDs in 2017, which keep us on track to continue achieving the goal we’ve laid out in 2013 by submitting at least one new IND per year. Please note that this objective excludes any new molecules being developed by partners based on MacroGenics technology.

Let me now update you on our current pipeline and provide some milestone highlights from our projected quarter. First off, margetuximab, Fc-optimized monoclonal antibody that targets HER2 continues to be our farthest advanced clinical program and is actively enrolling patients and initiating new trial sites for the pivotal Phase 3 SOPHIA study for patients with metastatic HER2 positive breast cancer.

In SOPHIA, we are evaluating the efficacy of margetuximab plus chemotherapy as compared to trastuzumab plus chemotherapy following progression after at least two lines of previous therapy in approximately 530 patients in the U.S and Europe. As of June 30, we had activated approximately 0.75 of the size we’ve planned in U.S., and Europe.

We’ve also continued to actively enroll and treat patients in our Phase 1b/2 trial of margetuximab in combination with pembrolizumab, an anti-PD-1 therapy for patients with advanced HER2-positive gastric cancer. Treatment options for these patients are limited and our proposed combination regimen would avoid chemotherapy while exploiting the expected enhanced immune mediated killing properties of both margetuximab and pembrolizumab. The Phase 1b/2 trial has being conducted in collaboration with our partner Merck and we plan to open trial sites in Asia later this year.

We also continue to see good progress in our other oncology focused programs, including those molecules that make up our B7-H3 franchise. These wholly-owned programs target B7-H3 within the B7 family of molecules, which are involved in immune regulation. We feel that our multiple programs targeting B7-H3 through a variety of complementary mechanisms of action represent the industry's leading B7-H3 franchise, and we intend to explore the full potential of this antigen's broad expression across multiple solid tumor types.

The most advanced B7-H3 target candidate we have in development is enoblituzumab, which is an Fc-optimized monoclonal antibody. We continue to actively recruit patients for three ongoing Phase 1 studies of enoblituzumab. These studies include one monotherapy study and two combination studies with ipilimumab and pembrolizumab.

As we reported last quarter, the additional dose expansion cohorts in the monotherapy trial were extended to include additional prostate and bladder cancer cohorts based on the interim data presented at the SITC Annual Meeting last November. We plan to release updated results from the monotherapy studies of enoblituzumab by the end of this year.

MGD009, our B7-H3 by CD3 targeted DART molecule is another program included in our B7-H3 franchise and continues to be evaluated in a Phase 1 study in patients across multiple solid tumor types. In addition to MGD009, we’ve advanced several programs in our portfolio of DART molecules across multiple therapeutic areas. Within oncology, MGD006. a CD123 x CD3 targeting DART molecule and MGD007 a gpA33 x CD3 targeting DART molecule, are two molecules that are currently being studied in Phase 1 trials with clinical updates expected by the end of this year or in early 2017.

MGD006 is being developed to treat patients with AML or MGS and MGD007 is being developed to treat patients with primary metastatic colorectal cancers. Also in Phase 1 development is MGD011 also known as JNJ-64052781 or [indiscernible], a DART molecule targeting CD19 x CD3, which is being developed by our collaboration partner, Janssen.

An important development that demonstrates the value of our DART platform, Pfizer, our collaboration partner, dose the first patient in Its phase 1 study of PF-06671008, a DART molecule that targets P-cadherin x CD3. This is our first partner developed DART molecule that has entered clinical development and we’re delighted with the progress that Pfizer has made. This molecule triggered a $2 million payment to us during the second quarter under the terms of the 2010 agreement between our companies.

Late in the second quarter, we announced the closing of a new global collaboration and license agreement with Janssen Biotech for the development of MGDO15, a preclinical bispecific molecule designed to simultaneously target CD3 and an undisclosed tumor target for the potential treatment of various hematological malignancies and solid tumors.

MacroGenics had previously entered into a collaboration arrangement with Janssen a year and half ago for the development of MGDO11 and we are thrilled to expand this partnership with the addition of MGDO15. Under the terms of this recent agreement, MacroGenics received a $75 million upfront license fee or Janssen will complete IND enabling studies and will be responsible for future clinical development of MGDO15.

Assuming successful development and commercialization of this DART molecule, MacroGenics can receive up to an additional $665 million in Clinical Regulatory and Commercialization milestone payments and they elect to fund a portion of late stage clinical development in exchange for a profit-share in the U.S and Canada. If commercialized, MacroGenics would be eligible to receive double-digit royalties on any global [ph] led sales and as the option to co-promote MGD015 with Janssen in the United States.

This agreement helps further highlight the capabilities and flexibility of our cutting edge DART technology platform, and we look forward to Janssen advancing MGDO15 into the clinic. MacroGenics continues to develop DART molecules in therapeutic areas outside of cancer, including autoimmune disorders and infectious diseases. MGDO10 is a DART molecule designed to simultaneously target the B-cell surface proteins, CD32B, and CD79B and its being developed for the treatment of autoimmune disorders.

CD32B is a checkpoint molecule spent on B lymphocytes that when co-ligated with CD79B, a component of the T-cell antigen receptor complex delivers a co-inhibitory signal that dampens T-cell activation. MGDO10 is our first clinical autoimmune focused DART program.

Now Janssen recently presented clinical data from our Phase 1 study of MGD010 at the Annual European Congress of Rheumatology or EULAR Meeting, in London. The Phase 1 study of MGDO10 was the first in human double-blind placebo-controlled study, in which a single dose of MGDO10 was intravenously administered to 49 healthy subjects. Data from the study showed that MGD010 was well tolerated at all dose levels and no serious adverse effect were reported. Other than subjects participating in the study had premature discontinuations or infusion reactions, systemic hypersensitivity reactions or injection site reactions. They also demonstrated linear pharmacokinetics and dose dependant selective binding to B lymphocytes without T-cell depletion.

We were very pleased with these results and believe the data supports the continued developments of MGDO10 in patients with autoimmune disorders. We intend to use the momentum and success of our DART platform to submit additional IND applications for two new DART molecules in 2017. One of these submissions will be for MGDL13, a DART molecule design to simultaneously block PD-1 and LAG-3 which are two immune checkpoint molecules that are co-expressed on T-cells. MGDO13 preclinical data was presented at the AACR Annual Meeting, in April.

The other candidate for which we expect to submit an IND is MGD014. MGD014 is expected to be our first infectious disease DART molecule plan for clinical testing. We are developing this molecule to eliminate latent HIV infection under our contract award is in MacroGenics by the National Institute of Allergy and Infectious Diseases, for up to $24.5 million. We believe we have struck a nice balance of advancing our current pipeline access, while also identifying and researching new clinical candidates to add to our growing pipeline.

From a corporate standpoint, we ended the quarter with a strong balance sheet, having sufficient capital to advance the many listed clinical developments included in our pipeline. We intend to remain highly focused on execution and we look forward to providing you updates on our ongoing clinical studies and operations through the second half of 2016.

This concludes my prepared comments, and we would now be glad to discuss questions that callers may have. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Michael Schmidt of Leerink Partners. Your line is now open.

Jonathan Chang

Hi. This is Jonathan Chang stepping in for Michael. Thanks for taking my questions. First on enoblituzumab. When might we see data from the combination studies with ipilimumab and pembrolizumab?

Scott Koenig

Thank you, Jonathan for the question. As I mentioned earlier, we will present later this year the update on the monotherapy studies. We’ve advanced the combination studies with ipilimumab and pembrolizumab quite nicely. As you recall, it's in dose escalation at [indiscernible] we're getting close to completing the dose escalation phase of this study. And then we will once completed, we will then move on to expanding in the case of ipilimumab into three different tumor types in the case of pembrolizumab four tumor types in the expansion cohorts. As I had mentioned earlier, if there is sufficient data that is meaningful. We will try to present it with the same time of the monotherapy data, but it's more likely that the data will be presented sometime in 2017.

Jonathan Chang

Great. Thank you. That's helpful. And secondly on margetuximab, for the Sophia study. You mentioned that three quarters of the anticipated study sites have been activated. Can you provide more color here? Is this in line or not in line with where you guys expected?

Scott Koenig

Well, as I mentioned on our previous call, I had anticipated by midyear that we would have most of the sites up enrolling. As you recall that was between a 190 and 200 sites. We’re a little behind the expectations now is that within approximately one quarter more, we should have those sites based on the guidance of our CRO. And at that time, we will have a better idea of where things are going. So it’s a little bit behind but not too far.

Jonathan Chang

Okay, great. Thanks for that. And maybe just last question, can you talk about how we should be thinking about the upcoming '06 data in AML and all seven data in colorectal cancer.

Scott Koenig

Yes, I have nothing really in terms of previewing that at this time. As I indicated previously for all six, we initially start the trial with Phase 1 Study, with the Feedback from regulatory agencies, identifying an initial dose that we could treat this patient, the AML patient. And then we subsequently the patients with MDF. After identify a starting dose. we were also able with good safety data to expand that study to continue treating of patients longer than a month. We then went further long and began to do interpatient dose escalation. And as you recall, initially this study was designed as four day on therapy, three-day off therapy and then reaching on a weekly basis. We have now expanded that study somewhat. We were looking at continuing the interpatient dose escalation with a four-day on, three-day off schedule. But we were also in parallel, looking at treating patients continuously over the course of the month. So we hope that by -- and we expect by the end of the year or so, to give you a little update on where the trial stands for that study and nothing more at this point. The point of course we have not hit the dose limiting toxicities for the study.

With regards to 007, as I pointed out previously, that we saw this as a particularly challenging target GPA33, given that the antigen is expressed both on the normal GI tract as well as on colorectal cancers and other GI. Tumors. And what we’re trying to identify is the dose that would give us the best therapeutic index with the lowest toxicities as a result of those -- this targeting of normal tissues. Right now we are looking at fine-tuning the dosing of the drug. And again, we hope to have additional patients treated, identifying a dose by the end of the year and at that time we will provide you updates where we’re on that trial.

Jonathan Chang

Great. Thank you.

Operator

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

Stephen Willey

Yes, hi. Thanks for taking the questions and Congrats on the progress. Just a question, I guess on the ongoing work that Janssen is conducting with the CD19 Dart and I understand that the answer is obviously, kind of steering the ship. But just wonder you can maybe just give us a little bit of an overview as to how Janssen is thinking about this dose escalation study right now?. I think if you go to ClinicalTrials.gov, I think they’ve made a number of amendments in terms of it being as classified as a Phase 1 or Phase 2 and I think patient numbers in terms of targeted enrollment have kind of been all over the place in the last couple of months. And then, specifically it also looks like there -- because valuating the utilization of a priming dose. Just wondering if you could also provide some kind of rationale for that as well.

Scott Koenig

So Steve, I love to [indiscernible] help you here. But frankly, I’m only able to disclose based on our agreements with what is now in the public setting and ClinicalTrials.gov. And I’ve said previously, they were interested in looking at utility of this request, [indiscernible] some malignancies, they were looking at the opportunity to potentially combine with [indiscernible]. And at this point, with the noted increased numbers of patients that they’ve at ClinicalTrials.gov, I know the trial is ongoing, but I have no ability to provide any further insight in terms of even their strategy or actual data at this point, sorry.

Stephen Willey

Can you provide some kind of theoretical rational for why they would you choose you to planning dose or is that also off limits?

Scott Koenig

Well, I can't comment too well on why they chose priming [ph] doses. I mean, what I can say in the context of many of our studies, where we’ve got an experience with the redirected CD3 targeted DART molecules, we had anticipated depending on the tumor density and expression patterns, various degree of cytokine release and which we have developed treatment regimens either through pre-treat patients or treat them at first time in any CRF. I’ve actually manage this quite well. From many of these cases what we had noted is that, if we see the CRS it is typically associated with the first dose or possibly a second dose. So, if they are thinking the same way, they may be providing and priming dose to modify either the incidents or severity of cytokine release, that it’s speculations, this has not been discussed with us. But I presume that maybe a reason why they’ve gone in that direction.

Stephen Willey

Okay. And then just follow-up to the prior question regarding the fine tuning of the ’07 dosing is -- did that -- is that fine tuning with respect to dosing schedule or is that just fine tuning with respect to dosage strength?

Scott Koenig

And so, fine tuning expected dosing we’re right now the particle is set up as a once every three week dosing regimen.

Stephen Willey

Okay. Thank you for the color.

Scott Koenig

Thank you.

Operator

Thank you. And our next question comes from Debjit Chattopadhyay of Janney. Your line is now open.

Debjit Chattopadhyay

Hi, good afternoon guys. Firstly on margetuximab, so and based on your prior guidance, you had expected to enroll the study by end of 2017 and have data in 2018. Are you still in that ballpark or is this getting pushed out into 2019 at this point?

Scott Koenig

So, Debjit, I don’t think you’re correct with the assumption on 2017 in terms of enrolling the patients. Our guidance has been to have data in 2018 to be able to read out. And at this point we are not modifying our plan -- the plan at this time. And as I said, our plan is once we have all the sites fully initiated and we have a better sense of the trajectory of patient enrolment, I think we can get a little more finer guidance with regard to when the study would end. But I don’t believe we’ve ever said anything about our 2017 completion.

Debjit Chattopadhyay

Great. And then on to enoblituzumab, the mono-therapy expansion cohort. I think I may have missed it, but anytime guidance in terms of when we might see the data from the expansion cohorts and the expressing tumors [indiscernible]?

Scott Koenig

[Indiscernible] on the expansion cohorts.

Jim Karrels

The monotherapy cohorts?

Debjit Chattopadhyay

Yes, the monotherapy cohort.

Scott Koenig

Yes, I mean, our plan is to present it by the end of the year. We have enrolled the full padre of patients, and remember there were five additional expansion cohorts that we had initiated and had completed at the end of last year about -- enrolment about half of those patients. So what I’m referring to would be, those five remaining cohorts we’ve essentially completed enrolment, I think we have one more patient that we need to enroll. So we’ll update folks at the end of the year on that part of the trial. Well we did announce though on our last earnings call is that, we decided to expand to two new additional cohorts of patients with bladder cancer and prostate cancer. And for that we know we’ll provide updates of what we have, but we don’t expect by the end of the year to have those two new cohorts completely enrolled.

Debjit Chattopadhyay

Great. And just one last question on the CD123 program. There was a plan to expand, open up new sites in Europe to push the enrolment. Is that still on cards or until you’ve come to some sort of an understanding in terms of the dosing schedule you are holding off on the Europe expansion?

Scott Koenig

No, not at all that in fact we are -- we had to go through regulatory submission and approval, ethics committee of approval and site initiation. And what I can say is that, we see regulatory approval in two other countries. We expect a third one to be approved very shortly this month. We have two ethics committees approved. We expect a third one to be approved very shortly. And we’ve completed site initiation basis at a couple of sites. So, there is projected enrolment in Europe in the course of the next quarter.

Debjit Chattopadhyay

Scott, from -- on a technical basis, if you were to compare the DART CD123 program versus the CAR-T CD123 program, and knowing the relatively farther nature of these relapse of factory AML patients, what are you thinking about it whether, if they are given a choice between a DART program and a CAR-T program?

Scott Koenig

It's too early for us to speculate on efficacy. As I indicated, we still endorse escalation we haven’t done to the dose that we would like to move into later stage studies. So it's obviously too early to begin to speculate either activity or safety, these are the CAR-T. Having said that, as we’ve discussed before, we’re seeing pre-clinically very robust activity of all our DART molecules, and if you actually looked comparatively, the data that's been induced for CAR-T versus that of the DART, they’re quite comparable. And given the ease and the control and the delivery, the ease of manufacturing here and the cost associated with this, we think that there is great opportunities to have a very favorable both efficacy and safety outcome as compared to CAR-Ts, but we’re way too early to begin to make those comparisons.

Operator

Thank you. And our next question comes from Yigal Nochomovitz of Citi. Your line is now open.

Unidentified Analyst

Hi. This is [indiscernible] for Yigal. Thanks for taking the question. So my first question is about MGD015. This is one for best you guys presented at Asia this year, and are you able to give any more detail on beyond just generally hematological and solid tumors what cancers express the target of ’15?

Scott Koenig

I would like to help you out here again, but unfortunately we’re precluded from discussing the specific target involved here or giving any guidance there. All we can say as we publicly disclosed that it is a dark molecule that’s hard exceeding three and an antigen that's expressed both on hematological and solid tumors.

Unidentified Analyst

Okay. Fair enough. So just to clarify going forward, the updates from this program will be similar to the previous partnership with 011 where you guys won't be able to present any data at medical meetings etc?

Scott Koenig

Now that's correct, and even further when we [technical difficulty] MGD011 we had completed the preclinical studies and had far behind the youngest molecule, and then transfer the IND over to Janssen. For MGD015, this is a preclinical molecule and they will be responsible for all the preclinical development going forward. We’re obviously bridging and completing some studies that we agreed to. But they are ultimately responsible for making, manufacturing the molecule and ultimately clinically testing it. So, we’re a little more even removed compared to MGD011.

Unidentified Analyst

Okay. And if I could just switch gears completely, there’s a recent article a week or two ago [indiscernible] DART technology to make chemically programmed eye specific antibodies. It didn’t look like you were collaborators or sort of funded the work. I’m just curious if this is something you’re working on it early, or if you’re aware of academic groups like what is the scope of academic work out there independent of pathogenic using the DART technology?

Scott Koenig

Well, thank you very much for telling us that, because I didn’t know about these scripts, the initiative and certainly we appreciate for you to forward any information about that. We have many academics that have reached out to us. Usually it's a situation where they have a particular antigen of interest that they would like to use our technology. Clearly we obviously have multiple publications in patents out there where they can do that independent of us. But we are always interested in working with new investigators both in industry as well as in the academic community to, as the end supplier form.

Unidentified Analyst

Okay, great. And I can follow-up after, there was a paper in JBC just a couple of weeks back, very recent but, if I could …

Scott Koenig

Thank you so much.

Unidentified Analyst

If I could slide one more in, I don’t imagine you’ll have much more detail here, but I have to ask. MGD012, can you provide any more detail on the target for that anybody?

Scott Koenig

Actually it's MGA012. The A stands for antibody. As we said, this is not a dark molecule. Stay tuned we’re on target for filing an IND and initiating clinical study and we will update folks later this year about the molecule.

Unidentified Analyst

Okay. Thanks very much for taking the question.

Operator

[Operator Instructions] And our next question comes from Matthew Harrison of Morgan Stanley. Your line is now open.

David Lebowitz

Hello, this is David Lebowitz in for Matthew Harrison. A quick question on the MGD010, I’m just curious given the data that you had this summer. What are your thoughts on next step? Which autoimmune diseases might we see you move towards?

Scott Koenig

David, thank you very much for the question. We’re very excited about MGD010, which is our -- as I -- we noted is our lead or autoimmune DART program. As I pointed out today and previously presented at the UR meeting [ph] we had very exciting data showing a very clean safety profile, beautiful T-cell targeting, without T-cell depletion and ex vivo the T cells has marked decrease in T cell activation, and this was accompanied by a reduction in many of the markers of, that are on the surface of T cell. And it was also accompanied after a single dose in these normal volunteers of reduction in IGM which would be expected because of the dual expression of 32B and 79B on plasma glass. So we’re very excited about the prospects of this molecule. As you know we have an option based deal with Takeda currently, and was anticipated then when we completed all the clinical data and provided to them they would have a clear plan to evaluate it and then opt in if they plan to pursue for conducting Phase IB and later studies for various autoimmune diseases. We’ve had discussions with them specifically about particular autoimmune diseases, many different types of autoimmune diseases. But you should also note last week, Takeda had a press release where they have indicated a refocus of their clinical and pre-clinical initiatives which doesn’t have a large effort at least as seen in the press release for autoimmune diseases. So right now we don’t know what their state of interest on pursing that irrespective of the very favorable data. As I have said, given the results of the data and presuming that this continues to look favorably, we would like to find a way to advance this in testing in autoimmune diseases either by ourselves or potentially in partnership with others if Takeda decides not to pursue it. Obviously given the importance of T cells in many different autoimmune diseases which include obviously RA, lupus, other top [technical difficulty] autoimmune diseases like [indiscernible]. We see that there are many different avenues that we could potentially explore with this molecule either alone or in combinations with other therapies. So, given the unique mechanism of action of this molecule and a quite favorable safety data we’ve seen to date and very good form of kinetics, we’re excited about the prospects of moving this forward in different autoimmune diseases.

David Lebowitz

Thank you for that. Just jumping over to the margetuximab gastric cancer data, is that still on pace for 2017?

Scott Koenig

So, thanks for the questions, David on that. As you recall the study was designed initially to test margetuximab at 10mgs/kg and 15mgs/kg in combination with pembrolizumab, and then when the dose escalation was complete we then flip over into expanding into patients after for a second line treatment, patients with gastric cancer we’re just about at that point to expand into that population. We anticipate in the U.S. to enroll approximately 30 patients for this study. We have multiple sites up and ready to go. And so we think we’re on target sometime next year to be able to update on the targets we have in this 30 patient expanded cohort. As I mentioned earlier, we are also looking at an additional trial in Asia in particular filing the regulatory papers in Korea and Taiwan. The expectation is that we would have the approval to start studies sometime late this year or early next year, and there again we expect to enroll approximately 30 patients in Asia. So sometime at 2017 we hope to be able to give us a fairly comprehensive update on the studies, most likely in the later part of 2017, but stay tuned, let us get going on the expansion part of the study.

David Lebowitz

Thanks again for that. One more quick question, more housekeeping. What should we think about for R&D spent going forward, because it did have an uptick in the second quarter?

Jim Karrels

Yes. Thanks, David. This is Jim. We’ve not provided guidance with that. But you did know correctly that there was an uptick. We would expect as we’ve been telling [indiscernible] we do expect higher burn going forward. So, I can’t tell you more than that other than this was in line with our expectations.

David Lebowitz

Thank you.

Operator

Thank you. And our next question comes from David Nierengarten of Wedbush Securities. Your line is now open.

David Nierengarten

Hi. Thanks for taking my question, maybe just a quick follow-up on 010. Is there a drop that date for Takeda to decided to option the -- the molecule or ...

Scott Koenig

Yes. David, so thanks for the question. So, it's actually still in our ballpark, we have one additional cohort that we had planned from the beginning to conduct in this study. So post UR [ph], we had initiated our last cohort of patients that we wanted to test. That's right in the middle of enrolling those patients. We expect some time in the next quarter to complete that enrolment, and then follow-up those patients will come soon thereafter, and then we need to provide them with a report. So my -- so they don’t have any obligation right now until we provide them the final reports of the study, should come back with an answer. If possible they may tell us sooner given their recent announcements about realigning their programs. So the earliest I would expect anything from them would be either very late this year or early next year in terms of their obligation.

David Nierengarten

And is there a time limit after you present them the data then, is it ...

Scott Koenig

Yes. There’s a contractual defined time period that they have to come back to us.

David Nierengarten

That's six weeks.

Jim Karrels

We did not disclose that [multiple speakers].

David Nierengarten

Okay.

Scott Koenig

It's some small reasonable period of time for them to review the data and come back to us.

David Nierengarten

Okay. All right. Thanks.

Operator

Thank you. And I’m showing no further questions at this time. I’d like to turn the conference back over to Dr. Koenig for any closing remarks.

Scott Koenig

Thank you operator, and thanks to everyone listening and participating. As always we appreciate your interest and look forward to providing updates throughout the quarter. Have a good afternoon.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Have a great day everyone.

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