MacroGenics
Annual Report 2017

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2017OR ☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 For the transition period from to Commission File Number 001-36112MACROGENICS, INC.(Exact name of registrant) Delaware 06-1591613(State of organization) (I.R.S. Employer Identification Number)9704 Medical Center Drive, Rockville, Maryland 20850(Address of principal executive offices and zip code) (301) 251-5172(Registrant's telephone number)Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon stock, par value $0.01 per share The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files).Yes ☑ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the bestof the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ☑ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See thedefinitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☑Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☑ The aggregate market value of the registrant's common stock, par value $0.01 per share, held by non-affiliates of the registrant on June 30, 2017, the lastbusiness day of the registrant's most recently completed second fiscal quarter, was approximately $642 million based on the closing price of the registrant'scommon stock on the Nasdaq Global Select Market on that date. Exclusion of shares held by any person should not be construed to indicate that such personpossesses the power, direct or indirect, to direct or cause the direction of management or policies of the registrant, or that such person is controlled by orunder common control with the registrant.The number of shares of the registrant's common stock outstanding on February 23, 2018 was 36,918,852. DOCUMENTS INCORPORATED BY REFERENCEPortions of MacroGenics, Inc.'s definitive proxy statement for the 2018 annual meeting of stockholders are incorporated by reference into Part III of thisAnnual Report.MACROGENICS, INC.ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTSPART IItem 1BusinessItem 1ARisk FactorsItem 1BUnresolved Staff CommentsItem 2PropertiesItem 3Legal ProceedingsItem 4Mine Safety Disclosures PART IIItem 5Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6Selected Financial DataItem 7Management's Discussion and Analysis of Financial Condition and Results of OperationsItem 7AQuantitative and Qualitative Disclosures about Market RiskItem 8Financial Statements and Supplementary DataItem 9Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9AControls and ProceduresItem 9BOther Information PART IIIItem 10Directors, Executive Officers and Corporate GovernanceItem 11Executive CompensationItem 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13Certain Relationships and Related Transactions, and Director IndependenceItem 14Principal Accountant Fees and Services PART IVItem 15Exhibits and Financial Statement SchedulesItem 16Form 10-K Summary SIGNATURESFORWARD-LOOKING STATEMENTSThis report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, futurerevenues or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, inparticular, under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". Forward-looking statements can often be identified by the use of terminology such as "subject to", "believe", "anticipate", "plan", "expect", "intend", "estimate","project", "may", "will", "should", "would", "could", "can", the negatives thereof, variations thereon and similar expressions, or by discussions of strategy.All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our currentexpectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently uncertain. We may notrealize our expectations, and our beliefs may not prove correct. Actual results could differ materially from those described or implied by such forward-lookingstatements. The following uncertainties and factors, among others (including those set forth under "Risk Factors"), could affect future performance and causeactual results to differ materially from those matters expressed in or implied by forward-looking statements:•our plans to develop and commercialize our product candidates;•the outcomes of our ongoing and planned clinical trials and the timing of those outcomes;•the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;•our ability to enter into new collaborations or to identify additional products or product candidates with significant commercial potential that areconsistent with our commercial objectives;•our ability to recover the investment in our manufacturing capabilities;•the rate and degree of market acceptance and clinical utility of our products;•our commercialization, marketing and manufacturing capabilities and strategy;•significant competition in our industry;•costs of litigation and the failure to successfully defend lawsuits and other claims against us;•economic, political and other risks associated with our international operations;•our ability to receive research funding and achieve anticipated milestones under our collaborations;•our ability to protect and enforce patents and other intellectual property;•costs of compliance and our failure to comply with new and existing governmental regulations including, but not limited to, tax regulations;•loss or retirement of key members of management;•failure to successfully execute our growth strategy, including any delays in our planned future growth; and•our failure to maintain effective internal controls.Consequently, forward-looking statements speak only as of the date that they are made and should be regarded solely as our current plans, estimates andbeliefs. You should not place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance orachievements. Except as required by law, we do not undertake and specifically decline any obligation to update, republish or revise forward-lookingstatements to reflect future events or circumstances or to reflect the occurrences of unanticipated events.PART IITEM 1. BUSINESSExcept as otherwise indicated herein or as the context otherwise requires, references in this annual report on Form 10-K to "MacroGenics," the "company,""we," "us" and "our" refer to MacroGenics, Inc. and its consolidated subsidiaries. MacroGenics, the MacroGenics logo, DART(R), TRIDENTTM and the phrase"Breakthrough Biologics, Life-Changing Medicines" are our trademarks or registered trademarks. The other trademarks, trade names and service marksappearing in this report are the property of their respective owners.OverviewWe are a biopharmaceutical company focused on discovering and developing innovative antibody-based therapeutics designed to modulate thehuman immune response for the treatment of cancer. We currently have a pipeline of product candidates in human clinical testing that have been createdprimarily using our proprietary technology platforms, which also have broad applicability across other therapeutic domains, including autoimmune disordersand infectious disease. We believe our programs have the potential to have a meaningful effect on treating patients' unmet medical needs as monotherapy or,in some cases, in combination with other therapeutic agents.Our most advanced clinical product candidate is margetuximab, a monoclonal antibody directed against human epidermal growth factor receptor 2,or HER2, that has been enhanced using our proprietary "Fc Optimization" platform described in greater detail below. The HER2 protein is expressed bycertain breast, gastroesophageal and other cancers. We have an ongoing Phase 3 clinical trial, which we call SOPHIA, to study margetuximab in patients withHER2 positive metastatic breast cancer that has progressed despite treatment with other HER2-directed therapeutic agents. In January 2018, we announcedthe completion of a pre-planned interim futility analysis with the recommendation of an independent data safety monitoring committee to continue SOPHIAas planned without modification. This analysis was based on a pre-specified assessment of progression-free survival as determined by independent centralreview. We anticipate that a successful outcome from the SOPHIA study would allow us to seek approval of the product from the U.S. Food and DrugAdministration, or FDA. We are also conducting a Phase 2 clinical trial by treating patients with HER2-positive gastric or gastroesophageal junction cancerwith margetuximab in combination with an anti-PD-1 monoclonal antibody, an immune checkpoint inhibitor molecule that plays a critical role inmodulation of the immune system's response to cancer. Encouraging interim clinical data from this study were presented in January 2018.Flotetuzumab is one of several clinical-stage molecules developed using our proprietary platform technology for making DART® molecules, whichis described in greater detail below. Unlike standard monoclonal antibodies, DART molecules are bispecific, which means they can be directed against twodifferent biological targets, and therefore lend themselves to a variety of different applications. Flotetuzumab is a bispecific, humanized DART molecule thatrecognizes both CD123 and CD3. CD123, the Interleukin-3 receptor alpha chain, has been reported to be over-expressed on cancer cells in a wide range ofhematological malignancies, including acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). AML and MDS are thought to arise in and beperpetuated by a small population of leukemic stem cells (LSCs) that generally resist conventional chemotherapeutic agents. LSCs are characterized by highlevels of CD123 expression that is low or absent in the corresponding hematopoietic progenitors and stem cell populations in normal human bone marrow.Flotetuzumab was designed to redirect T lymphocytes to kill CD123-expressing cells. To achieve this, the DART molecule combines an arm that recognizesCD123 on the target cancer cells, with a portion of an antibody recognizing CD3, an activating protein expressed by normal T cells, which are specializedwhite blood cells in the human immune system.Updated dose expansion data from an ongoing Phase 1 study of flotetuzumab were presented at a scientific conference in December 2017.Consistent with dose escalation data that had previously been presented, flotetuzumab demonstrated acceptable tolerability as well as evidence of anti-leukemic activity, with three of eight evaluable patients in the dose expansion cohort experiencing complete remission with or without platelet recovery(CR/CRi) or morphologic leukemia-free (MLF) state as of the data cut-off date. Our collaborator, Les Laboratoires Servier and Institut de Recherches Servier,or, collectively, Servier, has development and commercialization rights outside North America, Japan, Korea and India for flotetuzumab.We are pursuing multiple approaches for targeting an immune system protein known as programmed cell death protein 1 (PD-1). Marketedantibodies targeting this checkpoint molecule have shown clinical efficacy in the treatment of various tumors by releasing the "brakes" on the immunesystem which is often seen when tumors evade detection by the immune system. In 2016, we commenced a Phase 1 clinical study of MGA012, a humanized,monoclonal antibody directed against PD-1. MGA012 is being developed for use as monotherapy as well as in combination with other potential cancertherapeutics. We licensed MGA012 to Incyte Corporation in 2017 under a global collaboration and license agreement. We retain the right to develop ourown pipeline assets in combination with MGA012.1In addition to MGA012, we use the anti-PD-1 specificity as we continue to develop additional bispecific and trispecific molecules that engage thistarget together with other immune regulatory molecules. Monoclonal antibodies that target the immune checkpoints PD-1 and lymphocyte-activation gene 3(LAG-3) have shown enhanced clinical antitumor activity when given in combination. Recognizing the therapeutic potential of dual checkpoint blockade,we have engineered MGD013, a bispecific DART molecule, to bind PD-1 and LAG-3 concomitantly or independently and disrupt these non-redundantinhibitory pathways to further restore exhausted T-cell function. We anticipate that MGD013, if approved, could be used for the treatment of a wide range ofcancers, including both solid tumors and hematological malignancies. MGD013 has demonstrated an acceptable preclinical safety and toxicological profileand is currently being evaluated in a Phase 1 dose escalation study.Approved monoclonal antibodies that target the immune checkpoints PD-1 and cytotoxic T-lymphocyte-associated protein 4 (CTLA-4) have shownenhanced clinical antitumor activity when given in combination in various cancers, including renal cell carcinoma and non-small cell lung cancer with hightumor mutational burden. MGD019, a second DART molecule in our pipeline designed to enable co-blockade of two immune checkpoint molecules co-expressed on T cells, recognizes both PD-1 and CTLA-4. We anticipate submitting an Investigational New Drug (IND) application for MGD019 in 2018.We are also developing several product candidates targeting B7-H3, a protein in the B7 family of immune regulator proteins. B7-H3 is widelyexpressed by a number of different tumor types and may play a key role in regulating the immune response to various types of cancer. There are no currentlyapproved therapeutic agents directed against B7-H3. We have two clinical product candidates directed against B7-H3, enoblituzumab and MGD009, and wealso have ongoing research efforts underway to advance MGC018, an antibody-drug conjugate, or ADC, directed against B7-H3. Our most advancedcandidate in this franchise, enoblituzumab, is a monoclonal antibody that has also been enhanced using our Fc Optimization platform. Enoblituzumab isbeing evaluated clinically in multiple studies either as monotherapy, or in combination with an anti-PD-1 antibody across multiple tumor types.MGD009 is directed to both B7-H3 expressed on tumor cells as well as CD3, expressed on normal T cells. In preclinical models, MGD009 has re-directed T cells to reduce or eliminate B7-H3 expressing tumors. We are currently conducting a Phase 1 clinical trial with MGD009 in patients with B7-H3positive tumors and in a separate study that combines MGD009 and MGA012.Two additional CD3-targeting DART molecules, MGD007 and PF-06671008, are currently in Phase 1 clinical testing, with each targeting a specifictumor antigen known to be expressed on certain cancers. MGD007, which recognizes glycoprotein A33 (gpA33) and CD3, is being tested in patients withcolorectal cancer. Our collaborator, Servier, has an option to gain development and commercialization rights for MGD007 outside North America, Japan,Korea and India. PF-06671008, which targets p-cadherin and CD3, is being advanced by our collaborator Pfizer, Inc. (Pfizer) and is being studied in certainundisclosed solid tumors. The DART molecules that redirect T cells against cancer targets are manufactured using a conventional antibody platform withoutthe complexity of having to genetically modify T cells from individual patients, as would be required by approaches such as chimeric antigen receptor (CAR)T cells.Beyond oncology, we believe our antibody-based technology platforms have broad applicability across other therapeutic domains. For example,MGD010, a clinical-stage DART molecule, has a different mechanism of action than the other DART molecules currently in development. MGD010recognizes two proteins expressed by B cells, which are specialized white blood cells that play a role in modulating the human immune system'sinflammatory response. We believe that MGD010 may be able to reduce the harmful inflammatory effects seen in a variety of autoimmune and inflammatorydisorders by modulating the function of human B cells while avoiding their depletion. In 2017, we completed a Phase 1 clinical study in healthy volunteersand observed acceptable safety and pharmacodynamic activity consistent with the expected mechanism of action of MGD010.As another example of our DART platform's versatility, MGD014 is the first DART molecule designed to target an infectious agent. MGD014 targetsthe envelope protein of HIV-infected cells (Env) and T cells, via their CD3 component, to redirect the immune system’s T cells to kill HIV-infected cells. AnIND for MGD014 was cleared by FDA in 2017 and we expect to commence the Phase 1 study in 2018.We continue to invest in our clinical-stage programs, advance additional preclinical product candidates, primarily using our proprietary technologyplatforms, and expand the potential of our platforms using our antibody and protein engineering expertise. We develop new therapeutic product candidatesinternally using our proprietary platforms and also in collaboration with other biopharmaceutical companies, when such relationships are advantageous forstrategic or financial reasons. These arrangements have allowed us to expand and accelerate the breadth of our product candidates and also have generated asignificant portion of the funding we have received to date. We also have our own manufacturing facility, primarily2for generation of earlier-stage clinical trial material, and have been investing in expanding our manufacturing capacity to meet later-stage clinical and futurepotential commercial requirements.We estimate that in 2017, 2016 and 2015, we spent approximately $147.2 million, $122.1 million and $98.3 million on research and developmentactivities, respectively.Our StrategyOur goal is to be a fully integrated biotechnology company leading in the discovery, development and commercialization of breakthroughbiologics for the treatment of patients with cancer.Key elements of our strategy are as follows:•Therapeutic focus, science driven. We create therapeutic biological products primarily to treat various types of cancers, including both solidtumors and hematological malignancies. Our proprietary DART and Fc Optimization technology platforms are particularly useful for targetingand harnessing specific elements of the human immune system, allowing us to design molecules that (1) directly target cancer cells andenhance the ability of the immune system to destroy those cells, (2) re-direct effector cells to attack tumors or (3) affect mechanisms thatregulate the immune response to cancer, either by stimulating pathways that enhance this response or by blocking pathways that inhibit thisresponse, including checkpoint molecules. This field of scientific discovery, broadly known as immuno-oncology, has been developingrapidly in the last few years, and most therapeutic products to date are largely focused on affecting individual biological pathways. We believethat cancers are sufficiently complex that effective treatments must simultaneously affect more than one pathway. We believe that we are well-positioned, particularly through the adaptability of our DART platform, to be able to create and develop therapeutic molecules designed tosimultaneously target more than one pathway.This same flexibility in our platforms allows us to create therapeutic molecules that may be useful for other unmet medical needs beyondcancer, such as for autoimmune disorders and infectious diseases. Our core strategic focus is on development of cancer therapeutics, but wemay also opportunistically pursue such possibilities when they arise.•Fully integrated with a deep pipeline. Our objective is to be a fully-integrated biotechnology company, and we intend to continue to growand establish all necessary functions from early-stage research through commercialization in at least the United States. At our current stage ofdevelopment as a company, we have established early-stage discovery, process development, clinical development and clinical-stagemanufacturing functions, we are completing the build-out of a facility that will support commercial manufacturing, and we intend to build aU.S.-based sales and marketing infrastructure as our development pipeline matures.We have a broad portfolio of product candidates and we are not dependent upon the success of any one of them for the overall success of thecompany. We continue to augment our pipeline through the discovery and development of new product candidates, primarily throughutilization of our internal scientific expertise and strategically seeking external collaborations that can augment our own skills. From 2015 to2017, we advanced four programs into clinical development. Our goal is to continue to advance one or more programs into clinicaldevelopment per year to ensure a robust pipeline and to replace product candidates that fail to progress.•Leveraging collaborations. Throughout our company's history, we have entered into collaborations with other biopharmaceutical companiesand intend to continue to do so. We enter into collaborations when there is a strategic advantage to us to do so and when we believe thefinancial terms of the collaboration are favorable for meeting our short-term and long-term strategic objectives. We are not dependent upon anyone of these collaborations, but in many cases we have rights to receive sales royalties and other significant financial payments if the partneredproduct candidates achieve certain development and sales milestones. Some of the collaborations also preserve our right to participate infuture commercialization, for example by securing co-promotion or profit-sharing rights under certain circumstances.•Investments in talent and culture. One of our most valuable assets is the quality of our employee base. We invest significant effort in selectingand retaining high caliber, talented individuals who reflect our values. As we continue to grow, we continue to seek and develop employeeswho are strongly committed to delivering life-changing medicines for unmet medical needs through a collaborative work environment.3Therapeutic Areas We TargetCancerCancer is a broad group of diseases in which cells divide and grow in an uncontrolled fashion, forming malignancies that can invade other parts ofthe body. In normal tissues, the rates of new cell growth and cell death are tightly regulated and kept in balance. In cancerous tissues, this balance is disruptedas a result of mutations, causing unregulated cell growth that leads to tumor formation and growth. While tumors can grow slowly or rapidly, the dividingcells will nevertheless accumulate and the normal organization of the tissue will become disrupted. Cancers subsequently can spread throughout the body byprocesses known as invasion and metastasis. Once cancer spreads to sites beyond the primary tumor, it generally becomes more difficult to treat and may beincurable. Cancer cells that arise in the lymphatic system and bone marrow are referred to as hematological malignancies. Cancer cells that arise in othertissues or organs are referred to as solid tumors. Cancer can arise in virtually any part of the body, with the most common types arising in the prostate gland,breast, lung, colon and skin. We believe that our platforms position us very well strategically to actively develop approaches for the treatment of both solidtumors and hematologic malignancies.Cancer is the second leading cause of death in the United States, exceeded only by heart disease. An increasing number of people are also livinglonger with cancer. The American Cancer Society has estimated that by January 2026, the population of cancer survivors in the United States will increase toalmost 20.3 million people.Other Therapeutic AreasWe believe our proprietary technology platforms also have broad applicability across other therapeutic areas, including autoimmune disorders andinfectious disease.Autoimmune disorders, including rheumatoid arthritis, Crohn's disease, systemic lupus erythematosus and multiple sclerosis, collectively affectmore than 20 million people in the United States. Autoimmune disorders involve self-reactivity and destruction by T cells, B cells and antibodies due to alack of self-tolerance. Anti-inflammatory therapies, such as tumor necrosis factor inhibitors, have been able to improve diseases like rheumatoid arthritis. However, in addition to T cells, more evidence indicates that B cells play an important role in many common autoimmune and allergic disorders by initiatingand amplifying the pathological disease processes. Current B cell targeted therapies either cause depletion of B cells, thus limiting their applicability due tothe potential for infections (e.g., rituximab), or exhibit a delayed onset of action and limited efficacy across patient populations (e.g., belimumab).There are a wide variety of infectious diseases, and the epidemiology for each varies significantly with the type of pathogen and patients who areaffected. However, in order to avoid being recognized as foreign by the human immune system, many infectious agents have found ways to evade detection.In this way, they may behave similarly, at a biological level, to certain types of cancer. Accordingly, our expertise in designing protein-based therapeuticsthat are designed to activate the human immune system to eliminate foreign substances may have applicability to various types of infectious diseases, and weexplore those possibilities opportunistically.Our Product CandidatesThe table below depicts the current status of product candidates that are in or near human clinical development and for which we retain all or somecommercial rights:4Oncology•Margetuximab is a monoclonal antibody that targets HER2-expressing tumors, including certain types of breast and gastroesophageal cancers.HER2 is critical for the growth of many types of tumors. Using our Fc Optimization platform, we have engineered the constant region, or Fcregion, of margetuximab to increase its ability to kill tumor cells through an Fc-dependent mechanism, including antibody dependent cell-mediated cytotoxicity, or ADCC.Our Phase 1 data for margetuximab, in addition to demonstrating margetuximab was well-tolerated at the dose levels studied, demonstratedthat anti-tumor activity had been observed at a range of doses tested, including the lowest dose level of margetuximab, even in patients whowere heavily pre-treated (frequently with other anti-HER2 agents). We are currently studying margetuximab in a Phase 3 clinical trial, whichwe call SOPHIA, in patients with metastatic breast cancer expressing HER2 at the 3+ level by immunohistochemistry (IHC) or 2+ level by IHCwith gene amplification whose tumors have progressed despite therapy with other HER2-directed therapeutic agents. In January 2018, weannounced the completion of a pre-planned interim futility analysis with the recommendation of an independent data safety monitoringcommittee to continue SOPHIA as planned without modification. This analysis was based on a pre-specified assessment of progression-freesurvival as determined by independent central review. The FDA has granted Fast Track designation for the investigation of margetuximab fortreatment of patients with metastatic or locally advanced HER2 positive breast cancer who have previously been treated with anti-HER2-targeted therapy.We are also conducting a Phase 2 clinical trial combining margetuximab with an anti-PD-1 antibody in patients with HER2-positive gastric orgastroesophageal junction (GEJ) cancer. In January 2018, MacroGenics presented interim clinical data from this study, including acceptabletolerability and an objective response rate (ORR) that was higher in patients with gastric vs. GEJ cancer (32% vs. 4%). ORR across all patientsin the study was 18% (six confirmed and three unconfirmed patients). Similarly, disease control rate (DCR), which includes partial responsesand stable disease, was higher in patients with gastric vs. GEJ cancer (72% vs. 38%). Median progression-free survival was also higher inpatients with gastric vs. GEJ cancer (5.5 vs. 1.4 months). Based on these results, MacroGenics is expanding the study by enrolling 25additional gastric cancer patients and will continue to evaluate biomarkers, including HER2 and PD-L1 expression, to determine the patientswho are most likely to benefit from margetuximab plus anti-PD-1 therapy.5•Flotetuzumab is a DART molecule that targets both CD123 and CD3. CD123, the Interleukin-3 receptor alpha chain, is expressed on leukemiaand leukemic stem cells, but only at very low levels or not at all on normal hematopoietic stem cells. T cells, which express CD3, can destroytumor cells. In preclinical studies, we have demonstrated the ability of flotetuzumab to recruit, activate, and expand T cell populations toeliminate leukemia cells. In a Phase 1 dose escalation study of flotetuzumab, acceptable tolerability and evidence of anti-leukemic activitywere demonstrated. We are currently enrolling patients in the United States and Europe in a Phase 1 dose expansion study of flotetuzumab inpatients with AML or MDS and expect to commence a combination study with flotetuzumab and MGA012, an anti-PD-1 antibody, in 2018.Under the terms of our collaboration with Servier, Servier has the exclusive right to develop and commercialize flotetuzumab in all countriesoutside North America, Japan, Korea and India, and MacroGenics retains exclusive rights in those countries. The FDA granted orphan drugdesignation to flotetuzumab for the treatment of AML.•MGA012 is a monoclonal antibody targeting PD-1. Antibodies targeting PD-1 have shown efficacy against various tumors by releasing the"brakes" on the immune system that are often seen when tumors evade detection by the immune system. MGA012 is being developed for use asmonotherapy as well as in combination with other potential cancer therapeutics. We licensed MGA012 to Incyte Corporation in 2017 under aglobal collaboration and license agreement. We retain the right to develop our own pipeline assets in combination with MGA012. Patientswith a variety of different solid tumors are currently being enrolled in the dose expansion portion of a Phase 1 clinical trial of MGA012. Weanticipate that MGA012 will be used in combination studies with several of our other product candidates.•MGD013 is a DART molecule that is intended to enable the co-blockade with a single recombinant agent of two immune checkpointmolecules, PD-1 and LAG-3, which may be co-expressed on T cells. We anticipate that MGD013, if approved, could be used for the treatmentof a wide range of cancers, including both solid tumors and hematological malignancies. MGD013 is currently being evaluated in a Phase 1dose escalation study.•MGD019 is a preclinical DART molecule designed to recognize the immune checkpoints PD-1 and CTLA-4, which have shown enhancedclinical antitumor activity in various cancers when given in combination. We anticipate submitting an IND application for MGD019 in 2018.•Enoblituzumab is a monoclonal antibody that targets B7-H3. We engineered enoblituzumab to utilize the same Fc Optimization enhancementsthat we incorporated in margetuximab to target B7-H3 that is over-expressed on differentiated tumor cells, cancer stem cells and supportingtumor vasculature and underlying tissues. We are currently evaluating enoblituzumab in patients with multiple solid tumor types in anongoing Phase 2 clinical trial in combination therapy with an anti-PD-1 antibody.•MGD009 is the second molecule in our B7-H3 franchise. This DART molecule recognizes B7-H3 and CD3, and has an Fc domain, which isdesigned to provide extended pharmacokinetic properties. We have demonstrated that this molecule is able to mediate T cell killing of cancercells in preclinical experiments. We are currently enrolling patients with a variety of solid tumor types in a Phase 1 clinical trial of MGD009and in a separate study that combines MGD009 and MGA012.•MGC018 is a B7-H3 ADC for which we have completed IND-enabling activities. MGC018 is based on a MacroGenics proprietary B7-H3antibody and a duocarmycin-based, linker-drug technology licensed from Synthon Biopharmaceuticals B.V. We expect to submit an IND forMGC018 in 2018.•MGD007 is a DART molecule that targets both gpA33 and CD3, and has an Fc domain, which is designed to provide extendedpharmacokinetic properties and convenient intermittent dosing. gpA33 is expressed on gastrointestinal tumors, including more than 95% ofhuman colon cancers. We have demonstrated that this molecule is able to mediate T cell killing of gpA33-expressing cancer cells and cancerstem cells in preclinical experiments. We are currently enrolling patients with colorectal cancer in a Phase 1 clinical trial of MGD007 and planto commence a combination study of MGD007 and MGA012 in 2018. Under the terms of our collaboration with Servier, Servier has an optionto obtain exclusive rights to develop and commercialize MGD007 in all countries outside North America, Japan, Korea and India. If the optionis exercised, MacroGenics would still retain exclusive rights in those countries.Autoimmune Disorders•Teplizumab is an anti-CD3 monoclonal antibody being developed for the treatment of type 1 diabetes. Teplizumab has been engineered toalter the function of the T cells that mediate the destruction of the insulin-producing beta cells of the islets of the pancreas. Teplizumabpotentially represents an advance in the treatment6of type 1 diabetes by addressing the underlying disorder, rather than treating the symptoms through insulin replacement therapy. Teplizumabis being evaluated in a Phase 2 clinical trial for potential application to patients at risk of developing Type 1 diabetes. We have elected tocollaborate with NIDDK/TrialNet to execute this clinical trial.•MGD010 is a DART molecule designed to address limitations of existing B cell-targeted therapies by binding to the CD32B and CD79Bproteins found on human B cells. In preclinical studies, this DART molecule modulated the function of human B cells without B celldepletion. In normal conditions, B cells utilize CD32B as one of the key checkpoints or negative regulators to ensure that tolerance to self ismaintained and autoimmune disease does not occur. MGD010 is designed to further exploit this mechanism by triggering this inhibitory"immune checkpoint" loop. We believe this molecule preferentially blocks those B cells that are activated to produce the pathogenicantibodies that promote the autoimmune process. In 2017, we completed a Phase 1 clinical study in healthy volunteers and observedacceptable safety and pharmacodynamic activity consistent with the expected mechanism of action of MGD010.Infectious Diseases•MGD014 is a DART molecule that targets the envelope protein of human immunodeficiency virus, or HIV-infected cells (Env) and CD3-expressing T cells. We are developing MGD014 under contract number HHSN272201500032C awarded to us in September 2015 by theNational Institute of Allergy and Infectious Diseases, or NIAID, part of the National Institutes of Health. In 2017, NIAID exercised the first ofits two options, pursuant to which NIAID will fund our advancement of MGD014 into Phase 1 clinical trials as well as the development andtesting of a second DART molecule. MGD014 is our first DART molecule targeting an infectious agent that is planned for clinical testing.The work under this contract will build on preclinical studies demonstrating that DART molecules targeting the Env and T cells, via theirCD3 component, are able to redirect the immune system's T cells to kill HIV-infected cells. DART molecules could be used independently orbecome a key part of a "shock-and-kill" strategy in conjunction with HIV latency-reversing agents currently under development. Our INDsubmission for MGD014 was cleared by FDA in 2017 and we anticipate that a first patient will be dosed in 2018.Our Platforms and Technology ExpertiseWe apply our understanding of disease biology, immune-mediated mechanisms and next generation antibody technologies to design specificallytargeted antibody-based product candidates based on our DART and Fc Optimization platforms. Through these platforms we have designed antibody-basedproduct candidates that have the potential to improve on standard treatments by having one or more of the following attributes: (1) multiple specificities;(2) increased abilities to interact with the body's immune system to fight tumors; (3) capacity to bind more avidly to antigen targets: (4) increased potency;(5) reduced immunogenicity or (6) the ability to target cancer cells that are resistant to standard treatments. Moreover, these technology platforms arecomplementary and can be combined.DART and TRIDENTTM Platforms: Our Proprietary Approach to Engineer Multi-Specific AntibodiesWe use our DART platform to create derivatives of antibodies with the ability to bind to two distinct targets instead of a single one found intraditional monoclonal antibodies. DART product candidates are therefore bispecific. An example of a bispecific molecule is illustrated below:7Because cancer cells have developed ways to escape the immune system, we have created DART molecules, which are alternative antibody-likestructures with more potent immune properties than the parent antibody molecules from which they are derived. The two variable regions of an antibody aremono-specific and are able to target only a single type structural component of an antigen. For many years, researchers have sought to create recombinantmolecules that are capable of targeting two antigens or epitopes (i.e., specific part of an antigen bound by the antibody) within the same molecule. Thechallenges in creating such molecules have been the instability of the resulting bispecific molecules and their inherently short half-lives, as well as theinefficiencies in manufacturing these compounds. We believe our DART platform has overcome these engineering challenges by incorporating proprietarycovalent di-sulfide linkages and particular amino acid sequences that efficiently pair the chains of the DART molecule. This is designed to provide astructure with enhanced manufacturability, long-term structural stability and the ability to tailor the half-lives of the DART molecules to their clinical needs.This engineered antibody-like protein has a compact and stable structure and enables the targeting of two different antigens with a single recombinantmolecule.The DART platform has been specifically engineered to accommodate virtually any variable region sequence with predictable expression, foldingand antigen recognition. We believe our multi-specific platforms may provide a significant advantage over current biological interventions in cancer,autoimmune disorders and infectious disease by enabling a range of modalities, including those described below.We have also advanced beyond our DART platform to establish a TRIDENT platform, which reflects the continuing evolution of our multi-specificantibody-based targeting expertise. Built on the DART module, the trivalent TRIDENT platform incorporates in an Ig-like format an additional domaincapable of engaging an independent antigen. With the inclusion of a third targeting arm, TRIDENT molecules enable a broader range of mechanisms ofaction than bispecific targeting, allowing, for instance, the engagement of multiple antigens on a single or on different cells or enabling enhanced targetselectivity by modulating the avidity of one of two antigens.8• Redirected T cell activation and killing. In this version of the DART molecule, we are enabling the cancer-fightingproperties of the immune effector cells, such as T lymphocytes to: (1) recognize and bind to structures expressed on acancer cell (e.g., CD123, the first specificity in the example on the right), (2) enable the recruitment of all types ofcytotoxic, or cell killing, T cells, irrespective of their ability to recognize cancer cells (e.g., CD3, a common componentof the T cell antigen receptor, is the second specificity in the example on the right) and (3) trigger T cell activation,expansion, and cell killing mechanisms to destroy a cancer cell. The outcome is that any of the body's T cells, in theory,could be recruited to destroy a cancer cell and thus, are not limited to the small numbers of specific T cells that mighthave been generated in response to cancer to kill tumor cells. Furthermore, since any T cell could be recruited for thiskilling process, only small amounts of a DART molecule are required to trigger this potent immune response.Additionally, the compact structure of the DART protein makes it well suited for maintaining cell-to-cell contact, whichwe believe contributes to the high level of target cell killing. Similarly, DART molecules targeting CD3 and a viralantigen can be used to recruit T cells to eliminate cells infected by a virus, such as HIV-infected cells.• Simultaneous targeting of multiple co-inhibitory receptors or checkpoints, such as those involved in inhibiting T cellresponses and B cell responses. The immune system generally prevents the development of autoimmune phenomena byregulating activated immune cells that have responded to non-self or foreign antigens. This negative feedback loop istriggered by the interactions of co-inhibitory receptors, or checkpoint molecules, expressed on the immune cells withligands expressed by other cells, such as antigen-presenting cells. This phenomenon is exploited by cancer, wherebytumor cells express checkpoint ligands that block the development of an immune response against the tumor.Antibodies that block the interaction of checkpoint molecules with their ligands have been shown to significantlyimprove the clinical outcomes of patients with certain advanced cancers. Because of the diversity of immunecheckpoint pathways, blockade of a single axis, while clinically significant, as shown in the case of the blockade of thePD-1/PD-L1 axis with pembrolizumab or nivolumab, will not benefit all patients. In fact, combinations of checkpointinhibitors, such as nivolumab and ipilimumab, a CTLA-4 blocker, have resulted in significantly enhanced benefitcompared to ipilimumab or nivolumab alone. We believe that DART molecules targeting two immunoregulatorypathways, such as two checkpoints in a single molecule, could afford the clinical benefit of the combination togetherwith the potential for synergistic activity, as well as significant advantages in manufacturing, simplified clinicaldevelopment, and enhanced patient convenience.• Modulation of receptor signaling. In another configuration of the DART molecule, we have taken advantage of the twodifferent specificities engineered in a DART structure to bind to particular cells involved in autoimmune processes, suchas autoimmune B cells, and to usurp the immune checkpoint signaling pathways programmed within the cells to impedethe pathogenic autoimmune responses. Our MGD010 product candidate targets both CD32B, a co-inhibitory molecule,and CD79B, part of the B cell antigen receptor complex, two proteins expressed on the immune system's B cells. Using asingle DART molecule, we attempt to promote the interaction of these two receptors, a step required to interrupt the Bcell activation and immune response that single antibodies directed against CD32B, CD79B or both cannot accomplishindependently.• Enhanced effector cell selectivity. T lymphocytes with lytic effector function belong preferentially to the CD8 lineage,while CD4-positive T cells preferentially provide immune regulatory function, such as the secretion of cytokines or thedifferentiation into regulatory T cells. Greater selectivity in the recruitment of effector T cells is an example of the rangeof applications of our TRIDENT technology. By encoding a CD8 recognition arm in addition to the CD3- and tumorantigen-specific arms, our TRIDENT technology allows the preferential engagement of CD8-positive T lymphocytesand redirects them against tumor cells. This strategy allows for retention of lytic effector function, while limiting theCD4 cell engagement and associated effects, such as inflammatory cytokine release.9In addition to the ability to tailor a DART molecule's valency, we have the capacity to modify the strength by which the binding sites attach to theirtargets and the molecule's half-life in the blood circulation after delivery to a patient. Furthermore, when an Fc domain is coupled with a DART molecule,additional changes can be included that can modulate the DART molecule's engagement with different immune cells.We are developing specific product candidates using this technology, including flotetuzumab, MGD009, MGD007, MGD010, MGD013 andMGD014, among others.Fc Optimization Platform: Our Proprietary Approach to Enhance Immune-Mediated Cancer Cell KillingTo enhance the body's immune ability, we developed our Fc Optimization platform which introduces certain mutations into the Fc region of anantibody and is able to modulate antibody interaction with immune effector cells. Such interaction enhances the body's immune ability to mediate the killingof cancer cells through ADCC.ADCC The Fc region mediates the function of IgG antibodies by binding to different activating and inhibitory receptors, referred to as FcγRs, on immuneeffector cells found within the innate immune system. By engineering Fc regions to bind with an increased affinity to the activating FcγRs and with a reducedaffinity to the inhibitory FcγRs, we have been able to impart a more effective immune response and improve effector functions, such as ADCC. This is anotherexample in which small changes in antibody structure can confer improvements on normal immune processes.We have established a proprietary platform to engineer, screen, identify and test antibodies' Fc regions with customizable activity. In particular, wehave licenses to use transgenic mice that express human FcγRs. These mice can be used for in vivo testing of antibodies that incorporate Fc domain variants,including those antibodies intended for cancer therapy.To date, we have successfully incorporated our Fc variants in two of our clinical-stage antibody product candidates, margetuximab andenoblituzumab. We have preclinical data demonstrating that these Fc variants have substantially improved the activity of these antibodies.Our CollaborationsWe pursue a balanced approach between product candidates that we develop ourselves and those that we develop with our collaborators. Under ourstrategic collaborations to date, we have received significant non-dilutive funding and continue to have rights to additional funding upon completion ofcertain research, achievement of key product development milestones and royalties and other payments upon the commercial sale of products. Each of ourcollaborations has a unique set of terms and conditions, but in general, they fall into two categories:•MacroGenics-Originated Programs. We have a number of collaborations relating to product candidates that we have created from our internalresearch efforts. These include Incyte for MGA012; Servier for flotetuzumab and MGD007 and Green Cross Corp., or Green Cross, formargetuximab. In the case of these product candidates, we entered into collaborations because we believed that our collaborator could furtherenable development of the program or provide additional capabilities and funding to supplement MacroGenics' investment, or both. We obtainedfinancial terms and retained certain rights that we believed were beneficial to us. For example, under the Incyte agreement, we retained the right todevelop our pipeline assets in combination with MGA012 and to manufacture a portion of the global clinical and commercial supply needs ofMGA012. Under the Servier agreement, we retain full commercialization and development rights in the United States, Canada, Mexico, Japan,South Korea and India, and regain worldwide10rights if Servier opts not to continue co-developing MGD007. Under the Green Cross agreement, we retain full commercialization rights worldwideexcept for South Korea.•Joint Research Programs. We have several programs under which collaborators have sought to utilize some aspect of our protein engineeringplatforms with new product concepts that are jointly directed, sometimes employing a collaborator's own proprietary technology. Thesecollaborations give us the ability to expand the breadth of our potential products, develop greater scientific expertise and obtain additionalfunding for research. F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or Roche, and Pfizer, Inc. are currently advancing projects in theirown pipelines based on these types of programs. With these collaborators, we have more limited development or commercial rights related to theproduct candidates that may emerge from joint research programs, although we are eligible to receive royalties from these programs as well as otherconsideration upon the occurrence of specified development and sales milestones.Intellectual PropertyWe strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patents intendedto protect, for example, the composition of matter of our product candidates, their methods of use, the technology platforms used to generate them, relatedtechnologies and/or other aspects of the inventions that are important to our business. We also rely on trade secrets, confidentiality and invention assignmentagreements and careful monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not considerappropriate for, patent protection.Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially importanttechnology, inventions and know-how related to our business. In addition, there is cost and risk to our business in defending and enforcing our patents,maintaining our licenses to use intellectual property owned by third parties and preserving the confidentiality of our trade secrets and operating withoutinfringing the valid and enforceable patents and other proprietary rights of third parties. We also rely on know-how, continuing technological innovation andin-licensing opportunities to develop, strengthen and maintain our proprietary positions. We currently use multiple industry-standard patent monitoringsystems to monitor new United States Patent and Trademark Office, or USPTO, filings for any applications by third parties that may infringe on our patents.The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. Inaddition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted by the courtsafter issuance. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by enforceable patents. Wecannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of anyissued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, narrowed, circumvented orinvalidated by third parties.A third party may hold patents or other intellectual property rights that are important to or necessary for the development of our product candidatesor use of our technology platforms. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our productcandidates, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could beharmed, possibly materially. For example, certain patents held by third parties cover Fc engineering methods and mutations in Fc regions to enhance thebinding of Fc regions to Fc receptors on immune cells. Although we believe that these patents are not infringed, invalid, and unenforceable, should a courtfind that they cover margetuximab or enoblituzumab and we are unable to invalidate them, or if licenses for them are not available on commerciallyreasonable terms, our business could be harmed, perhaps materially.Because patent applications in the United States and certain other jurisdictions can be maintained in secrecy for 18 months or potentially evenlonger, and because publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority ofinventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the USPTO to determinepriority of invention. In the ordinary course of business we participate in post-grant challenge proceedings, such as oppositions, that challenge thepatentability of third party patents. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.Pipeline Patent ProtectionAs of December 31, 2017, we held 87 patents in the United States with 41 patent applications pending and 349 patents in other countries of theworld with 528 patent applications pending. In addition to patents and patent applications generally providing protection for various aspects of our FcOptimization, DART, and TRIDENT platforms, we have patent and patent applications for the composition of matter of each of our clinical pipeline productcandidates and, in some cases, we also have11other patents and patent application related to various aspects of the technology underlying these product candidates or their methods of use.Patent terms may be adjusted or extended, as described in greater detail below, in certain circumstances. However, assuming no adjustments orextensions, the primary composition of matter patent for each of our clinical pipeline product candidates is expected to expire in the following timeframes:Product CandidateExpiration Datemargetuximab2029enoblituzumab2031flotetuzumab2034MGD0072034*MGD0102034*MGD0092036*MGA0122036*MGD0132036*MGD0192036*MGC0182037** pendingPatent Term Extension and Reference Product ExclusivityThe Hatch-Waxman Act permits a patent term extension for FDA-approved drugs, including biological products, of up to five years beyond theexpiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannotextend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug maybe extended. Similar provisions are available in Europe and other jurisdictions to extend the term of a patent that covers an approved drug. In the future, ifand when our pharmaceutical product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those products.We intend to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that theapplicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even ifgranted, the length of such extensions.The Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act, collectively theACA, created a regulatory scheme authorizing the FDA to approve biosimilars via an abbreviated licensure pathway. In many cases, this allows biosimilars tobe brought to market without conducting the full suite of clinical trials typically required of originators. Under the ACA, a manufacturer may submit anapplication for licensure of a biologic product that is "biosimilar to" or "interchangeable with" a previously approved biological product or "referenceproduct." The "biosimilar" application must include specific information demonstrating biosimilarity based on data derived from: (1) analytical studies, (2)animal studies, and (3) a clinical study or studies that are sufficient to demonstrate safety, purity, and potency in one or more appropriate conditions of use forwhich the reference product is licensed, except that FDA may waive some of these requirements for a given application. Under this new statutory scheme, anapplication for a biosimilar product may not be submitted to the FDA until four years after the date of first licensure. The FDA may not approve a biosimilarproduct until 12 years from the date on which the reference product was first licensed. The law does not change the duration of patents granted on biologicalproducts. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of thatproduct if the FDA approves a full Biologics License Application, or BLA, for such product containing the sponsor's own preclinical data and data fromadequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. There have been recent proposals to repeal ormodify the ACA and it is uncertain how any of those proposals, if approved, would affect these provisions.Trade SecretsWe also rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our proprietaryinformation and trade secrets, including through contractual means with our employees and consultants, third parties may independently developsubstantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not beable to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchersand other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These12agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during thecourse of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case ofemployees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research anddevelopment or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In manycases our confidentiality and other agreements with consultants, outside scientific collaborators, sponsored researchers and other advisors require them toassign or grant us licenses to inventions they invent as a result the work or services they render under such agreements or grant us an option to negotiate alicense to use such inventions.In-Licensed Intellectual PropertyWe have entered into patent and know-how license agreements that grant us the rights to use certain technologies related to biologicalmanufacturing for our clinical product candidates. We anticipate using these technologies for future product candidates. These licensors have businessesdedicated to licensing this type of technology and we anticipate that licenses to use these technologies for our future products will be available. The licensestypically include yearly maintenance payments and sales royalties, and may also include upfront payments or milestone payments.ManufacturingWe currently manufacture our drug substance for our clinical trials at our manufacturing facility located in Rockville, Maryland. For our antibodyproduct candidates, we have supplemented our drug substance manufacturing capacity through an arrangement with AGC Biologics, Inc., or AGC (formerlyCMC Biologics, Inc.), a contract manufacturing organization, and plan to commercially produce margetuximab at AGC assuming the success of the Phase 3SOPHIA clinical trial on the expected timeline. We are also completing the build-out of a manufacturing suite at our headquarters building in Rockville,Maryland, which has been designed to increase our internal capacity to manufacture more drug substance lots, at larger scale and in full compliance withcurrent Good Manufacturing Practices (cGMP) to be able to sell commercial product. In addition, we currently rely on and will continue to rely on contractfill-finish service providers, primarily Ajinomoto Althea, Inc. and Baxter Healthcare Corporation, to fulfill our fill-finish needs for our current and futureproduct candidates.Most of the principal materials we use in our manufacturing operations are available from more than one source. However, we obtain certain rawmaterials principally from only one source. In the event one of these suppliers was unable to provide the materials or product, we generally seek to maintainsufficient inventory to supply the market until an alternative source of supply can be implemented. However, in the event of an extended failure of a supplier,it is possible that we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes.Production processes for biological therapeutic products are complex, highly regulated, and vary widely from product to product. Shifting or addingmanufacturing capacity can be a very lengthy process requiring significant capital expenditures, process modifications, and regulatory approvals.Accordingly, if we were to experience extended plant shutdowns at one of our own facilities, extended failure of a contract supplier or contract manufacturingorganization, or extraordinary unplanned increases in demand, we could experience an interruption in supply of certain products or product shortages untilproduction could be resumed or expanded.CommercializationWe cannot market or promote a new product until a marketing application has been approved by the FDA. We currently have no approved productsin the United States. We have not yet established a sales, marketing or product distribution infrastructure. We believe that it will be possible for us to accessthe United States oncology market through a specialty sales force. Subject to receiving marketing authorization in the United States, we expect to commencecommercialization via our then-in-place sales and marketing organizations. We believe that these organizations will be able to serve the oncologycommunity in treating the patient populations for which our oncology product candidates are being developed. Outside the United States, we expect to enterinto arrangements with third-party commercial partners for any of our product candidates that obtain marketing approval.CompetitionThere are a large number of companies developing or marketing treatments for cancer and autoimmune disorders, including many majorpharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, as well as biologic therapeutics that work byusing next-generation antibody technology platforms to address specific cancer targets. In particular, margetuximab is directed against HER2 and severalcompanies have cancer therapeutics directed against HER2 marketed or in development, such as Roche, particularly through its affiliate, Genentech, Inc., aswell as Puma Biotechnology, Inc., Daiichi Sankyo Company, Limited, and Cascadian Therapeutics. Market competition may limit the13utilization of margetuximab as a therapeutic, even if market approval and adequate reimbursement is obtained, and competition among development-stageprograms for patients enrolling in clinical trials for HER2-directed therapies may delay expected timelines for our clinical trials.In addition, the immuno-oncology field is competitive, with treatments currently approved and on the market or in development for various tumortypes and patient populations from a variety of different companies such as Merck & Co., Inc., or Merck, The Bristol Myers Squibb Company, or BMS, andRoche, all of which have significantly greater resources than we do. Many of our pipeline programs, if successful, will likely face significant competitionboth by therapeutics that are already being marketed as well as those that will be approved for marketing before our programs. In particular, we aredeveloping a franchise of PD-1-directed product candidates, which includes a monoclonal antibody and two DART molecules. Merck, BMS and Roche allhave approved products that target either the PD-1 receptor or its ligand, PD-L1, and there are several other companies that have anti-PD-1 or anti-PD-L1antibodies in clinical development, all of which would compete with our PD-1-directed programs.Finally, several companies are also developing therapeutics that work by targeting multiple specificities using a single recombinant molecule.Amgen Inc. has obtained marketing approval for one product that works by targeting antigens both on immune effector cell populations and those expressedon certain cancer cells, and has other product candidates in development that use this mechanism. In addition, other companies are developing newtreatments for cancer and autoimmune diseases that utilize multi-specific approaches, including Roche, Genmab A/S, Merus B.V., Abbvie Inc., AffimedTherapeutics AG Corporation, Eli Lilly and Company and Xencor, Inc.Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than wedo. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among asmaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies. These competitors also compete with us in recruiting and retaining top qualified scientific andmanagement personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to,or necessary for, our programs.The key competitive factors affecting the success of all of our therapeutic product candidates, if approved, are likely to be their efficacy, safety,dosing convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic or biosimilarcompetition and the availability of reimbursement from government and other third-party payors. In addition, the standard of medical care provided tocancer patients continues to evolve as more scientific and medical information becomes available. These changes in medical care relate to pharmaceuticalproducts, but are also affected by other factors, and such changes can positively or negatively affect the prospects of our product candidates as well as thoseof our competitors.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, havefewer or less severe effects, are more convenient or are less expensive than any products that we may develop, or the standards of care for cancer patientschange while our clinical trials are ongoing. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we mayobtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, ourability to compete may be affected in many cases by insurers or other third party payors seeking to encourage the use of biosimilar products. Biosimilarproducts are expected to become available over the coming years. For example, a trastuzumab biosimilar has been approved in the U.S. by FDA.The most common methods of treating patients with cancer are surgery, radiation and drug therapy. There are a variety of available drug therapiesmarketed for cancer. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third party payors. Inmany cases, these drugs are administered in combination to enhance efficacy. While our product candidates may compete with many existing drug and othertherapies, to the extent an approved drug is ultimately used in combination with or as an adjunct to these therapies, our product candidates will not becompetitive with the approved drug.Government Regulation and Product ApprovalGovernment authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, theresearch, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and exportof pharmaceutical products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries,along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.14FDA RegulationAll of our current product candidates are subject to regulation in the United States by the FDA as biological products, or biologics. The FDAsubjects biologics to extensive pre- and post-market regulation. The Public Health Service Act, the Federal Food, Drug, and Cosmetic Act and other federaland state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling,promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of biologics. Failure to comply withapplicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending BLAs,withdrawal of approvals, clinical holds, warning letters, product recalls, product seizures, total or partial suspension of production or distribution,injunctions, fines, civil penalties, or criminal penalties.Preclinical Studies. Drug development in our industry is complex, challenging and risky; failure rates are high. Product development cycles arelong - approximately 10 to 15 years from discovery to market. A potential new biological product must undergo many years of preclinical and clinical testingto establish it is pure, potent and safe.Preclinical studies include laboratory evaluation of product chemistry, formulation and toxicity, pharmacology, as well as animal trials to assess thecharacteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirementsincluding FDA's good laboratory practice, or GLP, regulations and the U.S. Department of Agriculture's regulations implementing the Animal Welfare Act.After laboratory analysis and preclinical testing in animals, we file an IND with FDA to begin human testing. An IND sponsor must submit the results of thepreclinical tests, together with manufacturing information, analytical data, any available clinical data or literature, and a proposed clinical trial protocol,among other things, to the FDA as part of an IND application. Certain preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, maycontinue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raisesconcerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold or agrees on an alternate approach with us.In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND maynot result in the FDA allowing clinical trials to commence. Clinical Development. Clinical trials involve the administration of the investigational new drug to human subjects (healthy volunteers or patients)under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with all applicable federal regulations and guidance,including those pertaining to good clinical practice, or GCP, standards that are meant to protect the rights, safety, and welfare of human subjects and to definethe roles of clinical trial sponsors, investigators, and monitors; as well as (ii) under protocols detailing, among other things, the objectives of the trial, theparameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing of a new drug in the United States(whether in patients or healthy volunteers) must be included in the IND submission, and FDA must be notified of subsequent protocol amendments. Inaddition, the protocol must be reviewed and approved by an institutional review board, or IRB, and all study subjects must provide informed consent prior toparticipating in the study. Typically, each institution participating in the clinical trial will require review of the protocol before any clinical trial commencesat that institution. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for publicdissemination on their ClinicalTrials.gov website. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDAand there are additional, more frequent reporting requirements for suspected unexpected serious adverse events.A study sponsor might choose to discontinue a clinical trial or a clinical development program for a variety of reasons. The FDA may impose atemporary or permanent clinical hold, or other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDArequirements or presents an unacceptable risk to the clinical trial subjects. An IRB may also require the clinical trial at the site to be halted, either temporarilyor permanently, for failure to comply with the IRB's requirements, or may impose other conditions.Clinical trials to support BLAs for marketing approval are typically conducted in three pre-approval phases, but the phases may overlap or becombined, particularly in testing for oncology indications. In Phase 1, testing is conducted in a small group of subjects who may be patients with the targetdisease or condition or healthy volunteers, to evaluate its safety, determine a safe dosage range, and identify side effects. In Phase 2, the drug is given to alarger group of subjects with the target condition to further evaluate its safety and gather preliminary evidence of efficacy. Phase 3 studies typically lastmultiple years for oncology indications. In Phase 3, the drug is given to a large group of subjects with the target disease or condition (several hundred toseveral thousand), often at multiple geographical sites, to confirm its effectiveness, monitor side effects, and collect data to support drug approval. In somecases, FDA may require post-market studies, known as Phase 4 studies, to be conducted as a condition of approval in order to gather additional informationon the drug's effect in various populations and any side effects associated with long-term use. Depending on the risks posed by the drugs, other post-marketrequirements may be imposed. Only a small percentage of investigational drugs complete all three phases and obtain marketing approval.15Product Approval. After completion of the required clinical testing, a BLA can be prepared and submitted to the FDA. FDA approval of the BLA isrequired before marketing of the product may begin in the United States. The BLA must include the results of preclinical, clinical and other testing and acompilation of data relating to the product's chemistry, manufacture and controls. The cost of preparing and submitting a BLA is substantial. Under federallaw, the submission of most BLAs is additionally subject to a substantial application user fee, and annual product and establishment user fees also apply.These fees are typically increased annually.The FDA has 60 days from its receipt of a BLA to determine whether the application will be accepted for filing based on the FDA's thresholddetermination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins a substantive review,and the review period under the Prescription Drug User Fee Act begins. The standard for reviewing a BLA is whether the product is safe, pure and potent,which has been interpreted to include that the product is safe and effective and has a favorable benefit-risk profile. FDA's current performance goals call forFDA to complete review of 90 percent of standard (non-priority) BLAs within 10 months of receipt and within six months for priority BLAs, which is 12months and eight months, respectively, if the 60-day review of the initial application is included in the timeline. In addition, the FDA has developedapproaches intended to make certain qualifying products available to patients rapidly - Priority Review, Breakthrough Therapy, Accelerated Approval, andFast Track. While the timelines for approval under these pathways may be shorter, there are requirements and conditions associated with each pathway, andthere can be no assurance that any of our investigational products will be able to meet the conditions or requirements necessary to receive any suchdesignation or be able to receive the review or approval benefits associated with such designations.The FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee,typically a panel that includes outside clinicians and other experts, for review, evaluation and a recommendation as to whether sufficient data exist in theapplication to support product approval. The FDA is not bound by the recommendation of an advisory committee, but it generally follows suchrecommendations.Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA willtypically inspect the facility or the facilities at which the drug is manufactured. FDA will not approve the product unless compliance with cGMPs issatisfactory. FDA also reviews the proposed labeling submitted with the BLA and typically requires changes in the labeling text.After the FDA evaluates the BLA and the manufacturing and testing facilities, it issues either an approval letter or a complete response letter.Complete response letters generally outline the deficiencies in the submission and delineate the additional testing or information needed in order for the FDAto reconsider the application. If and when those deficiencies have been addressed to the FDA's satisfaction in a resubmission of the BLA, the FDA will issuean approval letter. The FDA has committed to reviewing 90 percent of resubmissions within two or six months from receipt depending on the type ofinformation included.An approval letter authorizes commercial marketing of the drug for the approved indication or indications and the other conditions of use set out inthe approved prescribing information. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained orproblems are identified following initial marketing.As a condition of BLA approval, the FDA may require substantial post-approval testing and surveillance to monitor the drug's safety or efficacy andmay impose other conditions, including labeling restrictions that can materially affect the potential market and profitability of the product. As a condition ofapproval, or after approval, the FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to mitigate any identified orsuspected serious risks. The REMS may include medication guides, physician communication plans, assessment plans, and elements to assure safe use, suchas restricted distribution methods, patient registries, or other risk minimization tools.Other U.S. Post-Marketing Regulatory Requirements. Once a BLA is approved, a product will be subject to certain post-approval requirements,including those relating to advertising, promotion, adverse event reporting, recordkeeping, and cGMPs, as well as registration, listing, and inspection. Therealso are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as newapplication fees for supplemental applications with clinical data.FDA regulates the content and format of prescription drug labeling, advertising, and promotion, including direct-to-consumer advertising andpromotional Internet communications. FDA also establishes parameters for permissible non-promotional communications between industry and the medicalcommunity, including industry-supported scientific and educational activities. The FDA and other agencies actively enforce the laws and regulationsprohibiting the promotion for uses not consistent with the approved labeling, and a company that is found to have improperly promoted off-label uses orotherwise not to have met applicable promotion rules may be subject to significant liability under both the FDCA and other statutes, including the FalseClaims Act. See "Other Healthcare Laws and Compliance Requirements" below for more information.16All aspects of pharmaceutical manufacture must conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors arerequired to register their establishments with FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA during whichthe FDA inspects manufacturing facilities to assess compliance with cGMPs. Changes to the manufacturing process are strictly regulated and often requireprior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMPs and imposereporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs.Products may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of theconditions established in an approved application, including changes in indications, labeling, product formulation or manufacturing processes or facilities,require submission and FDA approval of a new BLA or BLA supplement, in some cases before the change may be implemented. A BLA supplement for a newindication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLAsupplements as it does in reviewing BLAs.Manufacturers are subject to requirements for adverse event reporting and submission of periodic reports following FDA approval of a BLA. Laterdiscovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes,or failure to comply with regulatory requirements, or failure of Phase 4 studies to meet their specified endpoints, may result in revisions to the approvedlabeling to add new safety information, the need to conduct additional post-market studies or clinical trials to assess new safety risks, imposition ofdistribution or other restrictions under a REMS program, or recall of the product and withdrawal of the BLA.Noncompliance with postmarket requirements can result in one or more of the following consequences:• Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;• Warning letters;• Holds on post-approval clinical trials;• Refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product license approvals;• Product seizure or detention, or refusal to permit the import or export of products; or• Injunctions or the imposition of civil or criminal penalties.In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulatesthe distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by thestates. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountabilityin distribution.Approval of Biosimilars. The ACA authorized the FDA to approve biosimilars via a separate, abbreviated pathway. In many cases, this allowsbiosimilars to be brought to market without conducting the full suite of clinical trials typically required of originators. The law establishes a period of 12years of data exclusivity for reference products in order to preserve incentives for future innovation and outlines statutory criteria for science-based biosimilarapproval standards that take into account patient safety considerations. Under this framework, data exclusivity protects the data in the innovator's regulatoryapplication by prohibiting others, for a period of 12 years, from granting FDA approval based in part on reliance on or reference to the innovator's data intheir application to the FDA. The law does not change the duration of patents granted on biological products. There have been recent proposals to repeal ormodify the ACA and it is uncertain how any of those proposals, if approved, would affect the provisions governing biosimilars.Other Healthcare Laws and Compliance RequirementsIn the United States, our activities are potentially subject to regulation by federal, state, and local authorities in addition to the FDA, including theCenters for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), theU.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, and state and local governments.17For example, certain financial interactions with healthcare professionals may be subject to the anti-kickback and fraud and abuse provisions of theSocial Security Act and the False Claims Act, and in addition our activities may be affected by the privacy regulations issued under the Health InsurancePortability and Accountability Act, as amended, and similar state laws.International RegulationIn addition to regulations in the United States, a variety of foreign regulations govern clinical trials, commercial sales, distribution of productcandidates and other areas outlined above. These regulations can vary between jurisdictions and can be more onerous than regulations in the United States. Penalties for violating such regulations also exist in these jurisdictions. The approval process varies from country to country and the time to approval may belonger or shorter than that required for FDA approval.Pharmaceutical Coverage, Pricing, and ReimbursementIn the United States and other countries, sales of any future products for which we receive regulatory approval for commercial sale will depend inpart on the availability of adequate reimbursement from third-party payors, including government health administrative authorities, managed care providers,private health insurers, and other organizations. Third-party payors are increasingly examining the medical necessity and cost effectiveness of medicalproducts and services in addition to safety and efficacy and, accordingly, significant uncertainty exists as to the reimbursement status of newly approvedtherapeutics. Third-party reimbursement adequate to enable us to realize an appropriate return on our investment in research and product development maynot be available for our products.Drug prices have become a subject of increased focus in recent years. Although there are currently no direct government price controls over privatesector purchases in the U.S., federal law requires pharmaceutical manufacturers to pay prescribed rebates on certain Medicaid-reimbursed drugs to enablethem to be eligible for reimbursement under certain public healthcare programs such as Medicaid and Medicare Part B. Various states have adopted furthermechanisms that seek to control drug prices, including by disfavoring certain higher priced drugs or by seeking supplemental rebates from manufacturers.Managed care has also become a potent force in the market place that increases downward pressure on the prices of pharmaceutical products.Public and private healthcare payers control costs and influence drug pricing through a variety of mechanisms, including through negotiatingdiscounts with the manufacturers and through the use of tiered formularies and other mechanisms that provide preferential access to certain drugs over otherswithin a therapeutic class. Payers also set other criteria to govern the uses of a drug that will be deemed medically appropriate and therefore reimbursed orotherwise covered.FacilitiesOur headquarters building, located in Rockville, Maryland, currently houses laboratory and office space and we are also completing the build-out ofa suite for manufacturing at commercial quantities and scale. This space is occupied under a lease that expires in 2027 and may be extended for up to twoadditional seven-year terms. We also have a smaller-scale manufacturing facility, also in Rockville. The lease for a portion of that facility expires on March31, 2023 and may be extended for a five-year term, and the lease for the remainder of that facility expires on December 31, 2019 and may be extended for upto two additional five-year terms. Finally, we have additional laboratory and office space in Rockville under two leases that each expire in 2020, and each ofthose leases may be extended for a five-year term.We also lease office and laboratory space in South San Francisco, California under a lease that expires on February 28, 2018. In December 2017, wemoved the South San Francisco operations into different space in Brisbane, California, which is leased until 2023.EmployeesAs of February 27, 2018, we had 330 full-time employees, 274 of whom were primarily engaged in research and development activities and 60 ofwhom had an M.D. or Ph.D. degree.Legal ProceedingsFrom time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are not currently aparty to any material legal proceedings.Available Information18Our website address is www.macrogenics.com. We post links to our website to the following filings as soon as reasonably practicable after they areelectronically filed with or furnished to the Securities and Exchange Commission, or the SEC: annual reports on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934, as amended. All such filings are available through our website free of charge. Our filings may also be read and copied at the SEC'sPublic Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by callingthe SEC at 1-800-SEC-0330. The SEC also maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and otherinformation regarding issuers that file electronically with the SEC.19ITEM 1A. RISK FACTORSOur business and results of operations are subject to numerous risks, uncertainties and other factors that you should be aware of, some of which aredescribed below.Any of the risks, uncertainties and other factors described below could have a materially adverse effect on our business, financial condition or results ofoperations and could cause the trading price of our common stock to decline substantially.Risks Related to Our Business and the Development and Commercialization of Our Product Candidates.All of our product candidates are in preclinical or clinical development. Clinical drug development is expensive, time consuming and uncertain and wemay ultimately not be able to obtain regulatory approvals for the commercialization of some or all of our product candidates.The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation bythe U.S. Food and Drug Administration, or FDA, and non-U.S. regulatory authorities, which regulations differ from country to country. We are not permittedto market our product candidates in the United States or in other countries until we receive approval of a Biologics License Application, or BLA, from theFDA or marketing approval from applicable regulatory authorities outside the United States. Our product candidates are in various stages of development andare subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for any of ourproduct candidates. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approvalby the FDA. Obtaining approval of a BLA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and non-U.S.regulatory requirements may, either before or after product approval, if any, subject our company to administrative or judicially imposed sanctions,including:•restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;•restrictions on the products, manufacturers, manufacturing facilities or manufacturing process;•warning letters;•civil and criminal penalties;•injunctions;•suspension or withdrawal of regulatory approvals;•product seizures, detentions or import bans;•voluntary or mandatory product recalls and publicity requirements;•total or partial suspension of production;•imposition of restrictions on operations, including costly new manufacturing requirements; and•refusal to approve pending BLAs or supplements to approved BLAs or analogous marketing approvals outside the United States.The FDA and foreign regulatory authorities also have substantial discretion in the drug approval process. The number of preclinical studies andclinical trials that will be required for regulatory approval varies depending on the product candidate, the disease or condition that the product candidate isdesigned to address, and the regulations applicable to any particular drug candidate. Regulatory agencies can delay, limit or deny approval of a productcandidate for many reasons, including:•a product candidate may not be deemed safe or effective;•the results may not confirm the positive results from earlier preclinical studies or clinical trials;•regulatory agencies may not find the data from preclinical studies and clinical trials sufficient;•regulatory agencies might not approve or might require changes to our manufacturing processes or facilities; or•regulatory agencies may change their approval policies or adopt new regulations.Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability to generate revenue from the particularproduct candidate, which likely would result in significant harm to our financial position and adversely impact our stock price. Furthermore, any regulatoryapproval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size ofthe market for the product.20If clinical trials for our product candidates are prolonged, delayed or stopped, we may be unable to obtain regulatory approval and commercialize ourproduct candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any product revenue.We are currently enrolling patients in clinical trials for margetuximab, enoblituzumab, flotetuzumab, MGD007, MGD009, MGA012 and MGD013,and anticipate initiating or continuing clinical trials for these product candidates as monotherapies or in combination with other product candidates in 2018.In addition, our collaborators are currently enrolling patients in clinical trials for PF-06671008 and teplizumab. The commencement of new clinical trialscould be substantially delayed or prevented by several factors, including:•further discussions with the FDA or other regulatory agencies regarding the scope or design of our clinical trials;•the limited number of, and competition for, suitable sites to conduct our clinical trials, many of which may already be engaged in other clinicaltrial programs, including some that may be for the same indication as our product candidates;•any delay or failure to obtain regulatory approval or agreement to commence a clinical trial in any of the countries where enrollment is planned;•inability to obtain sufficient funds required for a clinical trial;•clinical holds on, or other regulatory objections to, a new or ongoing clinical trial;•delay or failure to manufacture sufficient supplies of the product candidate for our clinical trials;•delay or failure to reach agreement on acceptable clinical trial agreement terms or clinical trial protocols with prospective sites or clinicalresearch organizations, CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different sites orCROs; and•delay or failure to obtain institutional review board, or IRB, approval to conduct a clinical trial at a prospective site.The completion of our clinical trials could also be substantially delayed or prevented by several factors, including:•slower than expected rates of patient recruitment and enrollment;•failure of patients to complete the clinical trial;•unforeseen safety issues, including severe or unexpected drug-related adverse effects experienced by patients, including possible deaths;•lack of efficacy during clinical trials;•termination of our clinical trials by one or more clinical trial sites;•inability or unwillingness of patients or clinical investigators to follow our clinical trial protocols;•inability to monitor patients adequately during or after treatment by us and/or our CROs; and•the need to repeat or terminate clinical trials as a result of inconclusive or negative results or unforeseen complications in testing.Changes in regulatory requirements and guidance may also occur and we may need to significantly amend clinical trial protocols to reflect thesechanges with appropriate regulatory authorities. Amendments may require us to renegotiate terms with CROs or resubmit clinical trial protocols to IRBs forre-examination, which may impact the costs, timing or successful completion of a clinical trial. Our clinical trials may be suspended or terminated at any timeby the FDA, other regulatory authorities, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or us, due to anumber of factors, including:•failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;•unforeseen safety issues or any determination that a clinical trial presents unacceptable health risks;•lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions; and•upon a breach or pursuant to the terms of any agreement with, or for any other reason by, current or future collaborators that have responsibilityfor the clinical development of any of our product candidates.Any failure or significant delay in completing clinical trials for our product candidates would adversely affect our ability to obtain regulatoryapproval and our commercial prospects and ability to generate product revenue will be diminished.The results of previous clinical trials may not be predictive of future results, and the results of our current and planned clinical trials may not satisfy therequirements of the FDA or non-U.S. regulatory authorities.21Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any of ourcurrent and future collaborators may decide, or regulators may require us, to conduct additional clinical or preclinical testing. Success in early clinical trialsdoes not mean that future larger registration clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstratesufficient safety and efficacy to the satisfaction of the FDA and non-U.S. regulatory authorities despite having progressed through initial clinical trials. Anumber of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks inadvanced clinical trials, even after obtaining promising results in earlier clinical trials.Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials or registration trials. TheFDA or other non-U.S. regulatory authorities may disagree with our trial design and our interpretation of data from preclinical studies and clinical trials. Inaddition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing commentsor advice on a protocol for a pivotal Phase 3 clinical trial. In addition, any of these regulatory authorities may also approve a product candidate for fewer ormore limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials. The FDA or other non-U.S. regulatory authorities may not approve the labeling claims that we believe would be necessary or desirable for the successful commercialization of ourproduct candidates.We use new technologies in the development of our product candidates and the FDA and other regulatory authorities have not approved products thatutilize these technologies.Our products in development are based on new technologies, such as Fc Optimization, DART molecules and TRIDENT molecules. Given thenovelty of our technologies, we intend to work closely with the FDA and other regulatory authorities to perform the requisite scientific analyses andevaluation of our methods to obtain regulatory approval for our product candidates. The validation process takes time and resources, may requireindependent third-party analyses, and may not be accepted by the FDA and other regulatory authorities. For some of our product candidates that are based onthese technology platforms, the regulatory approval path and requirements may not be clear or evolve as more data becomes available for this productcandidates, which could add significant delay and expense. Delays or failure to obtain regulatory approval of any of the product candidates that we developwould adversely affect our business.We may not be successful in our efforts to use and expand our technology platforms to build a pipeline of product candidates. We may expend our limitedresources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable orfor which there is a greater likelihood of success.A key element of our strategy is to use and expand our technology platforms to build a pipeline of product candidates and progress these productcandidates through clinical development for the treatment of a variety of different types of diseases. Although our research and development efforts to datehave resulted in a pipeline of product candidates directed at various cancers, as well as autoimmune disorders and infectious diseases, we may not be able todevelop product candidates that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that weidentify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicatethat they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not continue to successfully develop andbegin to commercialize product candidates, we will face difficulty in obtaining product revenues in future periods, which could result in significant harm toour financial position and adversely affect our stock price.Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specificindications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greatercommercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.Our spending on current and future research and development programs and product candidates for specific indications may not yield any commerciallyviable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuablerights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous forus to retain sole development and commercialization rights.Even if we obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize our products outside of the UnitedStates, which would limit our ability to realize their full market potential.In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements ofother countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, andregulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countriesand may require additional preclinical studies or clinical trials or additional administrative review periods, which could result in significant22delays, difficulties and costs for us. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process forregulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and wedo not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international marketsor to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of our products will beharmed.Our product candidates may have undesirable side effects which may delay or prevent marketing approval, or, if approval is received, require them to betaken off the market, require them to include safety warnings or otherwise limit their sales.Although all of our product candidates have undergone or will undergo safety testing, not all adverse effects of drugs can be predicted oranticipated. Unforeseen side effects from any of our product candidates could arise either during clinical development or, if approved by regulatoryauthorities, after the approved product has been marketed. All of our product candidates are still in clinical or preclinical development. While our clinicaltrials for our initial product candidates to date have demonstrated an acceptable safety profile, the results from future trials may not support this conclusion.The results of future clinical or preclinical trials may show that our product candidates cause undesirable or unacceptable side effects, which could interrupt,delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or result inmarketing approval from the FDA and other regulatory authorities with restrictive label warnings or potential product liability claims.If any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by suchproducts:•regulatory authorities may require us to take our approved product off the market;•regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians andpharmacies;•we may be required to change the way the product is administered, impose other risk-management measures, conduct additional clinical trials orchange the labeling of the product;•we may be subject to limitations on how we may promote the product;•sales of the product may decrease significantly;•we may be subject to litigation or product liability claims; and•our reputation may suffer.Any of these events could prevent us, our collaborators or our potential future partners from achieving or maintaining market acceptance of theaffected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significantrevenue from the sale of our products.Even if approved, if any of our product candidates do not achieve broad market acceptance among physicians, patients, the medical community, and third-party payors our revenue generated from their sales will be limited.The commercial success of our product candidates will depend upon their acceptance among physicians, patients and the medical community. Thedegree of market acceptance of our product candidates will depend on a number of factors, including:•limitations or warnings contained in the approved labeling for a product candidate;•changes in the standard of care for the targeted indications for any of our product candidates;•limitations in the approved clinical indications for our product candidates;•demonstrated clinical safety and efficacy compared to other products;•lack of significant adverse side effects;•sales, marketing and distribution support;•availability and extent of reimbursement from managed care plans and other third-party payors;•timing of market introduction and perceived effectiveness of competitive products;•the degree of cost-effectiveness of our product candidates;•availability of alternative therapies at similar or lower cost, including generic and over-the-counter products;•the extent to which the product candidate is approved for inclusion on formularies of hospitals and managed care organizations;23•whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particulardiseases;•adverse publicity about our product candidates or favorable publicity about competitive products;•convenience and ease of administration of our products; and•potential product liability claims.If any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, patients and the medicalcommunity, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, efforts to educate themedical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.The manufacture of our product candidates is complex, and we may encounter difficulties in production. If we encounter any such difficulties, our abilityto supply our product candidates for clinical trials or, if approved, for commercial sale could be delayed or halted entirely.The process of manufacturing our product candidates is extremely susceptible to product loss due to a variety of factors, including but not limited tocontamination, equipment failure or improper installation or operation of equipment, vendor or operator error, contamination and inconsistency in yields,variability in product characteristics, and difficulties in scaling the production process. Even minor deviations from manufacturing processes could result inreduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our product candidatesor in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period oftime to investigate and remedy the contamination. Any adverse developments affecting manufacturing operations for our product candidates, if any areapproved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products.We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediationefforts or seek more costly manufacturing alternatives.We are in the process of completing the build-out of a manufacturing suite that could support future commercial production of our product candidates, ifand when any are commercialized. We have no experience in large-scale or commercial manufacturing, and there can be no assurance that we will be ableto complete our manufacturing facility or, if completed, we will be able to manufacture commercial products.We are in the process of expanding our manufacturing capacity to support future commercial production and are building a suite with additionalcapacity at our current headquarters for this purpose.Although some of our employees have experience in the manufacturing of pharmaceutical products from prior employment at other companies, weas a company have no prior experience in large-scale or commercial manufacturing. Designing and building a manufacturing facility is time-consuming,expensive, and may be subject to delays or cost overruns. In addition, government approvals will be required for us to operate a commercial manufacturingfacility and can be time-consuming to obtain, and there can be no assurance that such approval will be obtained. As a manufacturer of pharmaceuticalproducts, we also will be required to demonstrate and maintain compliance with cGMPs which include requirements related to production processes, qualitycontrol and assurance and recordkeeping. Furthermore, establishing and maintaining commercial manufacturing operations may require a reallocation ofother resources, particularly the time and attention of certain of our senior management. Any failure or delay in the development of our commercialmanufacturing capabilities could adversely impact the commercialization of our product candidates or one or more of our collaborations.Our manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverseconsequences to our business if we fail to comply with the regulations or maintain the approvals.We must comply with the FDA's current Good Manufacturing Practice, or cGMP, requirements, as set out in statute, regulations and guidance. Wemay encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We are subject toinspections by the FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. See "Other U.S. Post-Marketing Regulatory Requirements" above for additional information. Any failure to follow cGMP or other regulatory requirements or delay, interruption orother issues that arise in the manufacture, fill-finish, packaging, or storage of our product candidates as a result of a failure of our facilities or the facilities oroperations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability todevelop and commercialize our product candidates, including leading to significant delays in the availability of drug product for our clinical trials or thetermination or hold on a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our product candidates. Significantnoncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory authorities to grantmarketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or24recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatorycompliance, we may not be permitted to market our product candidates and/or may be subject to product recalls, seizures, injunctions, or criminalprosecution.We currently have no marketing, sales or distribution infrastructure. If we are unable to develop sales, marketing and distribution capabilities on our ownor through collaborations, we will not be successful in commercializing our product candidates.We currently have no marketing, sales and distribution infrastructure and we have limited sales and marketing experience within our organization. Ifany of our product candidates are approved, we intend to establish a sales and marketing organization with technical expertise and supporting distributioncapabilities to commercialize our product candidates in the United States and, potentially, to outsource this function to a third party outside of the UnitedStates. Both of these options would be expensive and time consuming. These costs may be incurred in advance of any approval of our product candidates. Inaddition, we may not be able to engage a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that weintend to target. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact thecommercialization of our products.With respect to certain of our existing and future product candidates, we have entered into collaboration or other licensing arrangements with thirdparty collaborators that have direct sales forces and established distribution systems. To the extent that we enter into additional collaboration agreements, ourproduct revenue may be lower than if we directly marketed or sold any approved products. In addition, any revenue we receive will depend in whole or inpart upon the efforts of these third party collaborators, which may not be successful and are generally not within our control. If we are unable to enter intoadditional arrangements on acceptable terms or at all, we may not be able to successfully commercialize certain approved products. If we are not successful incommercializing approved products, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and wemay incur significant additional losses.We face significant competition and if our competitors develop and market products that are more effective, safer or less expensive than our productcandidates, our commercial opportunities will be negatively impacted.The life sciences industry is highly competitive and subject to rapid and significant technological change. We are currently developing therapeuticsthat will compete with other drugs and therapies that currently exist or are being developed. Products we may develop in the future are also likely to facecompetition from other drugs and therapies, some of which we may not currently be aware. We have competitors both in the United States andinternationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies,universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, drug development,technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatoryapprovals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research and marketingcapabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in ourtarget markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery anddevelopment of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. As a result of all ofthese factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing products inour field before we do.Specifically, there are a large number of companies developing or marketing treatments for cancer and autoimmune disorders, including many majorpharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, as well as biologic therapeutics that work byusing next-generation antibody technology platforms to address specific cancer targets. In addition, several companies are developing therapeutics that workby targeting multiple specificities using a single recombinant molecule. See "Competition" above for additional information.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer or less severe effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA orother regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strongmarket position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third partypayors seeking to encourage the use of biosimilar products. Biosimilar products are expected to become available over the coming years. For example,certain HER2 biosimilar products are approved in certain countries and others may be approved prior to margetuximab. Even if our product candidatesachieve marketing approval, they may be priced at a significant premium over competitive biosimilar products if any have been approved by then.Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with largeand established companies. These third parties compete with us in recruiting and25retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiringtechnologies complementary to, or necessary for, our programs. In addition, the biopharmaceutical industry is characterized by rapid technological change. Ifwe fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by ourcompetitors may render our technologies or product candidates obsolete, less competitive or not economical.Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement forour products, it is less likely that our products will be widely used.Even if our product candidates are approved for sale by the appropriate regulatory authorities, market acceptance and sales of these products willdepend on reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third-party payors, such as privatehealth insurers and health maintenance organizations, decide which drugs they will reimburse and establish payment levels and, in some cases,utilization management strategies, such as tiered formularies and prior authorization. We cannot be certain that reimbursement will be available for anyproducts that we develop or that the reimbursement level will be adequate to allow us to operate profitably. Also, we cannot be certain that reimbursementpolicies will not reduce the demand for, or the price paid for, our products. Our ability to commercialize our products may depend, in part, on the extent towhich reimbursement for the products will be available from government authorities and third-party payors. If reimbursement for our products is not availableor is available on a limited basis, or if the reimbursement amount for our products is inadequate, we may not be able to successfully commercialize any of ourapproved products.Actual or anticipated changes to the laws and regulations governing the health care system may have a negative impact on cost and access to healthinsurance coverage and reimbursement of healthcare items and services.The United States and several foreign jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals tochange the healthcare system in ways that could affect our ability to sell any of our future approved products profitably. Among policy makers and payors inthe United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,improving quality and/or expanding access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and hasbeen significantly affected by major legislative initiatives, including the Patient Protection and Affordable Care Act, as amended by the Healthcare andEducation Affordability Reconciliation Act, collectively the ACA, which became law in 2010. While it is difficult to assess the impact of the ACA inisolation, either in general or on our business specifically, it is widely thought that the ACA increases downward pressure on pharmaceutical reimbursement,which could negatively affect market acceptance of, and the price we may charge for, any products we develop that receive regulatory approval. Further, theUnited State and foreign governments regularly consider reform measures that affect healthcare coverage and costs. Such reforms may include changes to thecoverage and reimbursement of healthcare services and products. In particular, there have been recent judicial and Congressional challenges to the ACA,which could have an impact on coverage and reimbursement for healthcare services covered by plans authorized by the ACA, and we expect there will beadditional challenges and amendments to the ACA in the future.In September 2017, members of the United States Congress introduced legislation with the announced intention to repeal major provisions of theACA. Although it is unclear whether such legislation will ultimately become law, executive or legislative branch attempts to repeal, reform or to repeal andreplace the ACA will likely continue. In addition, various other healthcare reform proposals have also emerged at the federal and state level. In addition,recent changes to United States tax laws could negatively impact the ACA. We cannot predict what healthcare initiatives, if any, will be implemented at thefederal or state level, however, government and other regulatory oversight and future regulatory and government interference with the healthcare systemscould adversely impact our business and results of operations.We expect to experience pricing pressures in connection with the sale of any products that we develop, due to the trend toward managed healthcare,the increasing influence of health maintenance organizations and additional legislative proposals.If any product liability lawsuits are successfully brought against us or any of our collaborators, we may incur substantial liabilities and may be required tolimit commercialization of our product candidates.We face an inherent risk of product liability lawsuits related to the testing of our product candidates in seriously ill patients, and will face an evengreater risk if product candidates are approved by regulatory authorities and introduced commercially. Product liability claims may be brought against us orour collaborators by participants enrolled in our clinical trials, patients, health care providers or others using, administering or selling any of our futureapproved products. If we cannot successfully defend ourselves against any such claims, we may incur substantial liabilities. Regardless of their merit oreventual outcome, liability claims may result in:26•decreased demand for our future approved products;•injury to our reputation;•withdrawal of clinical trial participants;•termination of clinical trial sites or entire trial programs;•increased regulatory scrutiny;•significant litigation costs;•substantial monetary awards to or costly settlement with patients or other claimants;•product recalls or a change in the indications for which they may be used;•loss of revenue;•diversion of management and scientific resources from our business operations; and•the inability to commercialize our product candidates.If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety andquality of our products. We could be adversely affected if we are subject to negative publicity. We could also be adversely affected if any of our products orany similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Because of our dependence upon consumerperceptions, any adverse publicity associated with illness or other adverse effects resulting from patients' use or misuse of our products or any similarproducts distributed by other companies could have a material adverse impact on our financial condition or results of operations.We currently hold $20 million in product liability insurance coverage in the aggregate, with a per incident limit of $20 million, which may not beadequate to cover all liabilities that we may incur. We may need to increase our insurance coverage when we begin the commercialization of our productcandidates. Insurance coverage is becoming increasingly expensive. As a result, we may be unable to maintain or obtain sufficient insurance at a reasonablecost to protect us against losses that could have a material adverse effect on our business. A successful product liability claim or series of claims broughtagainst us, particularly if judgments exceed any insurance coverage we may have, could decrease our cash resources and adversely affect our business,financial condition and results of operation.The contract with the National Institute of Allergy and Infectious Diseases (NIAID) makes us a government contractor. Laws and regulations affectinggovernment contracts may make it more costly and difficult for us to successfully conduct our business. We must comply with numerous laws and regulations relating to the procurement, formation, administration and performance of governmentcontracts. Failure to comply with these laws could result in significant civil and criminal penalties. Among the most significant government contractingregulations that may affect our business are: the Federal Acquisition Regulation, or FAR, and NIH-NIAID-specific regulations supplemental to the FAR,which comprehensively regulate the procurement, formation, administration and performance of government contracts; business ethics and public integrityobligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbyingactivities and incorporate other requirements such as the Anti-Kickback Act, the Procurement Integrity Act, and the False Claims Act; export and importcontrol laws and regulations; and laws, regulations and executive orders restricting the use and dissemination of sensitive information we may receivepursuant to our performance of the government contract. U.S. government agencies routinely audit and investigate government contractors for compliancewith applicable laws and standards. If we are audited, such audit could result in disallowance of expected cost reimbursement, or if such audit were to uncoverimproper or illegal activities, we could be subject to civil and criminal penalties, administrative sanctions, including suspension or debarment fromgovernment contracting and significant reputational harm.Comprehensive tax reform legislation could adversely affect our business and financial condition.On December 22, 2017, Public Law no. 115-97 (the Tax Act), was signed into law. The Tax Act introduced significant changes to the InternalRevenue Code of 1986, as amended.The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a topmarginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain smallbusinesses), limitation of the deduction for net operating losses to 80% of27current year taxable income in respect of losses arising in taxable years beginning after 2017 and elimination of net operating loss carrybacks, one timetaxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead ofdeductions for depreciation expense over time, and modifying or repealing many business deductions and credits.Although we have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future, wecontinue to examine the impact the Tax Act may have on our business. As a result, the overall impact of the Tax Act is uncertain and our business andfinancial condition could be adversely affected.Risks Related to Our Financial Position and Need for Additional CapitalWe have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We have no productsapproved for commercial sale, and to date we have not generated any revenue or profit from product sales. We may never achieve or sustain profitability.We are a clinical-stage biopharmaceutical company. We have incurred significant losses since our inception. As of December 31, 2017, ouraccumulated deficit was approximately $312.3 million. We expect to continue to incur losses for the foreseeable future, and we expect these losses toincrease as we continue our research and development of, and seek regulatory approvals for, our product candidates, prepare for and begin to commercializeany approved products, and add infrastructure and personnel to support our product development efforts and operations as a public company. The net lossesand negative cash flows incurred to date, together with expected future losses, have had, and likely will continue to have, an adverse effect on ourstockholders' deficit and working capital. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability togenerate revenue.Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict thetiming or amount of increased expenses or when, or if, we will be able to achieve profitability. For example, our expenses could increase if we are required bythe FDA to perform trials in addition to those that we currently expect to perform, or if there are any delays in completing our currently planned clinical trialsor in the development of any of our product candidates.To become and remain profitable, we must succeed in developing and commercializing products with significant market potential. This will requireus to be successful in a range of challenging activities for which we are only in the preliminary stages, including developing product candidates, obtainingregulatory approval for them, and manufacturing, marketing and selling those products for which we may obtain regulatory approval. We may never succeedin these activities and may never generate revenue from product sales that is significant enough to achieve profitability. Even if we achieve profitability inthe future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress our market value andcould impair our ability to raise capital, expand our business, develop other product candidates, or continue our operations. A decline in the value of ourcompany could also cause you to lose all or part of your investment.We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available, may require us todelay, scale back, or cease our product development programs or operations.We are advancing our product candidates through clinical development. Developing pharmaceutical products, including conducting preclinicalstudies and clinical trials, is expensive. In order to obtain such regulatory approval, we will be required to conduct clinical trials for each indication for eachof our product candidates. We will continue to require additional funding beyond what was raised in our public offerings and through our collaborations andlicense agreements to complete the development and commercialization of our product candidates and to continue to advance the development of our otherproduct candidates, and such funding may not be available on acceptable terms or at all. Although it is difficult to predict our funding requirements, basedupon our current operating plan, we anticipate that our cash, cash equivalents and marketable securities as of December 31, 2017, combined with theproceeds from collaboration payments we anticipate receiving, will enable us to fund our operations for approximately two years, assuming all of ourprograms and collaborations advance as currently contemplated. Because successful development of our product candidates is uncertain, we are unable toestimate the actual funds we will require to complete research and development and to commercialize our product candidates.Our future funding requirements will depend on many factors, including but not limited to:•the number and characteristics of other product candidates and indications that we pursue;•the scope, progress, timing, cost and results of research, preclinical development, and clinical trials;28•the costs, timing and outcome of seeking and obtaining FDA and non-U.S. regulatory approvals;•the costs associated with manufacturing our product candidates and establishing sales, marketing, and distribution capabilities;•our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any paymentswe may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual propertyrights;•our need and ability to hire additional management, scientific, and medical personnel;•the effect of competing products that may limit market penetration of our product candidates;•our need to implement additional internal systems and infrastructure, including financial and reporting systems; and•the economic and other terms, timing of and success of our existing collaborations, and any collaboration, licensing, or other arrangements intowhich we may enter in the future, including the timing of receipt of any milestone or royalty payments under these agreements.Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance futurecash needs primarily through a combination of public or private equity offerings, debt financings, strategic collaborations, and grant funding. If sufficientfunds on acceptable terms are not available when needed, or at all, we could be forced to significantly reduce operating expenses and delay, scale back oreliminate one or more of our development programs or our business operations.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish substantial rights.To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, andthe terms of these new securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, ifavailable at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt,making capital expenditures, or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements withthird parties, we may have to relinquish valuable rights to our technologies, product candidates, or future revenue streams, or grant licenses on terms that arenot favorable to us. We cannot assure you that we will be able to obtain additional funding if and when necessary. If we are unable to obtain adequatefinancing on a timely basis, we could be required to delay, scale back or eliminate one or more of our development programs or grant rights to develop andmarket product candidates that we would otherwise prefer to develop and market ourselves.Our ability to use our net operating loss carryforwards and other tax attributes may be limited.Our ability to utilize our federal net operating losses, or NOLs, and federal tax credits is currently limited, and may be limited further, under Sections382 and 383 of the Internal Revenue Code of 1986, as amended. The limitations apply if an ownership change, as defined by Section 382, occurs. Generally,an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage points over their lowest ownershippercentage in a testing period, which is typically three years or since the last ownership change. We are already subject to Section 382 limitations due toacquisitions we made in 2002 and 2008. As of December 31, 2017, we had federal and state NOL carryforwards of $239.7 million and research anddevelopment tax credit carryforwards of $42.8 million available. Future changes in stock ownership may also trigger an ownership change and, consequently,another Section 382 limitation. Any limitation may result in expiration of a portion of the net operating loss or tax credit carryforwards before utilizationwhich would reduce our gross deferred income tax assets and corresponding valuation allowance. As a result, if we earn net taxable income, our ability to useour pre-change net operating loss carryforwards and tax credit carryforwards to reduce United States federal income tax may be subject to limitations, whichcould potentially result in increased future cash tax liability to us.Risks Related to Our Dependence on Third PartiesOur existing therapeutic collaborations are important to our business, and future collaborations may also be important to us. If we are unable to maintainany of these collaborations, or if these collaborations are not successful, our business could be adversely affected.We have limited capabilities for drug development and do not yet have any capability for sales, marketing or distribution. We have entered intocollaborations with other companies that we believe can provide such capabilities, including our collaboration and license agreements with, for example, LesLaboratoires Servier and Institut de Recherches Servier, or29collectively Servier, Pfizer, Inc., or Pfizer, Green Cross Corp., or Green Cross, Incyte Corporation or Incyte, and F. Hoffman La Roche Ltd and Hoffman-LaRoche, Inc, or Roche. These collaborations also have provided us with important funding for our development programs and technology platforms and weexpect to receive additional funding under these collaborations in the future. Our existing therapeutic collaborations, and any future collaborations we enterinto, may pose a number of risks, including the following:•collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;•collaborators may not perform their obligations as expected;•collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect notto continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators' strategic focus oravailable funding, or external factors, such as an acquisition, that divert resources or create competing priorities;•collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a productcandidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;•collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products orproduct candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercializedunder terms that are more economically attractive than ours;•product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates orproducts, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;•a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commitsufficient resources to the marketing and distribution of such product or products;•disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course ofdevelopment, might cause delays or termination of the research, development or commercialization of product candidates, might lead toadditional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;•collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as toinvite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;•collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and•collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital topursue further development or commercialization of the applicable product candidates. For example, each of our collaboration and licenseagreements may be terminated for convenience upon the completion of a specified notice period.If our therapeutic collaborations do not result in the successful development and commercialization of products or if one of our collaboratorsterminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do notreceive the funding we expect under these agreements, our development of our technology platforms and product candidates could be delayed and we mayneed additional resources to develop product candidates and our technology platforms. All of the risks relating to product development, regulatory approvaland commercialization described in this report also apply to the activities of our program collaborators.Additionally, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination, the collaborator mightdeemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates itsagreement with us, we may find it more difficult to attract new collaborators.For some of our product candidates, we may in the future determine to collaborate with additional pharmaceutical and biotechnology companies fordevelopment and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability toreach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the termsand conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. These factors may include the design orresults30of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject productcandidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existenceof uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of thechallenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similarindications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent businesscombinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. If we are unable to reachagreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduceor delay one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, orincrease our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development orcommercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptableterms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development andcommercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our technologyplatforms and our business may be materially and adversely affected.We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potentialcollaborators. Aside from our agreement with Green Cross, subject to certain specified exceptions, each of our existing therapeutic collaborations contains arestriction on our engaging in activities that are the subject of the collaboration with third parties for specified periods of time.Independent clinical investigators and CROs that we engage to conduct our clinical trials may not devote sufficient time or attention to our clinical trialsor be able to repeat their past success.We expect to continue to depend on independent clinical investigators and CROs to conduct our clinical trials. CROs may also assist us in thecollection and analysis of data. There is a limited number of third-party service providers that specialize or have the expertise required to achieve ourbusiness objectives. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays inour development programs. These investigators and CROs will not be our employees and we will not be able to control, other than by contract, the amount ofresources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficientresources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval andcommercialization of any product candidates that we develop. In addition, the use of third-party service providers requires us to disclose our proprietaryinformation to these parties, which could increase the risk that this information will be misappropriated. Further, the FDA requires that we comply withstandards, commonly referred to as current Good Clinical Practice, or GCP, for conducting, recording and reporting clinical trials to assure that data andreported results are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Failure of clinical investigators orCROs to meet their obligations to us or comply with GCP procedures could adversely affect the clinical development of our product candidates and harm ourbusiness.Failure of third-party contractors to successfully develop and commercialize companion diagnostics for use with our product candidates could harm ourability to commercialize our product candidates.We plan to develop companion diagnostics for our product candidates where appropriate. We expect that, at least in some cases, the FDA and similarregulatory authorities outside the United States may require the development and regulatory approval of a companion diagnostic as a condition to approvingour product candidates. We do not have experience or capabilities in developing or commercializing diagnostics and plan to rely in large part on third partiesto perform these functions.In most cases, we will likely outsource the development, production and commercialization of companion diagnostics to third parties. Byoutsourcing these companion diagnostics to third parties, we become dependent on the efforts of our third party contractors to successfully develop andcommercialize these companion diagnostics. Our contractors:•may not perform their obligations as expected;•may encounter production difficulties that could constrain the supply of the companion diagnostic;•may have difficulties gaining acceptance of the use of the companion diagnostic in the clinical community;31•may not commit sufficient resources to the marketing and distribution of such product; and•may terminate their relationship with us.If any companion diagnostic for use with one of our product candidates fails to gain market acceptance, our ability to derive revenues from sales ofsuch product candidate could be harmed. If our third party contractors fail to commercialize such companion diagnostic, we may not be able to enter intoarrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use in connection with such product candidate or do soon commercially reasonable terms, which could adversely affect and delay the development or commercialization of such product candidate.We expect to contract with third parties for the manufacture of some of our product candidates for clinical testing in the future and expect to continue todo so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates orproducts or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.We currently have a manufacturing facility located in Rockville, Maryland. We manufacture drug substance at this facility that we use for researchand development purposes and for clinical trials of our product candidates. We believe we currently have capacity to produce some but not all of the materialrequired for our clinical trials. Our current facility will be insufficient to support our needs for our Phase 3 clinical trials for our antibody product candidatesand for commercial quantities of such candidates. We are also completing the build-out of a manufacturing suite at our headquarters building in Rockville,Maryland, which has been designed to increase our internal capacity to manufacture more drug substance lots, at larger scale and in full compliance withcurrent Good Manufacturing Practices (cGMP) to be able to sell commercial product. We do not have experience in manufacturing products at commercialscale.We have entered into agreements with contract manufacturing organizations to supplement our clinical supply and internal capacity as we advanceour product candidate pipeline. We expect to use third parties for the manufacture of certain of our product candidates for clinical testing, as well as forcommercial manufacture of some of our product candidates that receive marketing approval and that are not manufactured by one of our third partycollaborators. We have entered into two long-term supply agreements with manufacturers for commercial supply, and may in the future enter into one or moreadditional supply agreements for our product candidates. We may be unable to reach agreement with any of these contract manufacturers, or to identify andreach arrangements on satisfactory terms with other contract manufacturers, to manufacture any of our product candidates. Additionally, the facilities used byany contract manufacturer to manufacture any of our product candidates must be the subject of a satisfactory inspection before the FDA and other regulatoryauthorities approve a BLA or marketing authorization for the product candidate manufactured at that facility. We will depend on these third-partymanufacturing partners for compliance with the FDA's requirements for the manufacture of our finished products. If our manufacturers cannot successfullymanufacture material that conforms to our specifications and the FDA and other regulatory authorities' cGMP requirements, our product candidates will notbe approved or, if already approved, may be subject to recalls.Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves,including:•the possibility of a breach of the manufacturing agreements by the third parties because of factors beyond our control;•the possibility of termination or nonrenewal of the agreements by the third parties before we are able to arrange for a qualified replacementthird-party manufacturer; and•the possibility that we may not be able to secure a manufacturer or manufacturing capacity in a timely manner and on satisfactory terms in orderto meet our manufacturing needs.Any of these factors could cause the delay of approval or commercialization of our product candidates, cause us to incur higher costs or prevent usfrom commercializing our product candidates successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail todeliver the required commercial quantities of finished product on a timely basis and at commercially reasonable prices, and we are unable to find one or morereplacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on a timely basis,we would likely be unable to meet demand for our products and could lose potential revenue. It may take several years to establish an alternative source ofsupply for our product candidates and to have any such new source approved by the FDA or any other relevant regulatory authorities.32A disruption in our computer networks, including those related to cybersecurity, could adversely affect our financial performance.We rely on our computer networks and systems, some of which are managed by third parties, to manage and store electronic information (includingsensitive data such as confidential business information and personally identifiable data relating to employees, customers and other business partners), and tomanage or support a variety of critical business processes and activities. We may face threats to our networks from unauthorized access, security breaches andother system disruptions. Despite our security measures, our infrastructure may be vulnerable to external or internal attacks. Any such security breach maycompromise information stored on our networks and may result in significant data losses or theft of sensitive or proprietary information. In addition, acybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cyber security protection costs,lost revenue, regulatory actions or litigation. Any disruption could also have a material adverse impact on our operations.Risks Related to Our Intellectual PropertyOur commercial success depends significantly on our ability to operate without infringing the valid patents and other proprietary rights of third parties.Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Other entities may have or obtainpatents or proprietary rights that could limit our ability to make, use, sell, offer for sale or import our future approved products or impair our competitiveposition. For example, certain patents held by third parties cover Fc engineering methods and mutations in Fc regions to enhance the binding of Fc regions toFc receptors on immune cells. Although we believe that these patents are not infringed, invalid, and unenforceable, if a court should find that they covermargetuximab or enoblituzumab and we are unable to invalidate their patents, or if licenses for them are not available on commercially reasonable terms, ourbusiness could be harmed, perhaps materially.Patents that we may ultimately be found to infringe could be issued to third parties. Third parties may have or obtain valid and enforceable patentsor proprietary rights that could block us from developing product candidates using our technology. Our failure to obtain a license to any technology that werequire may materially harm our business, financial condition and results of operations. Moreover, our failure to maintain a license to any technology that werequire may also materially harm our business, financial condition, and results of operations. Furthermore, we would be exposed to a threat of litigation.In the pharmaceutical industry, significant litigation and other proceedings regarding patents, patent applications, trademarks and other intellectualproperty rights have become commonplace. The types of situations in which we may become a party to such litigation or proceedings include:•we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those thirdparties or to obtain a judgment that our products or processes do not infringe those third parties' patents;•if our competitors file patent applications that claim technology also claimed by us or our licensors, we or our licensors may be required toparticipate in interference or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights andpotentially provide a third party with a dominant patent position;•if third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we and ourcollaborators will need to defend against such proceedings; and•if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe ormisappropriate their patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we andour collaborators would need to defend against such proceedings.These lawsuits would be costly and could affect our results of operations and divert the attention of our management and scientific personnel. Thereis a risk that a court would decide that we or our collaborators are infringing the third party's patents and would order us or our collaborators to stop theactivities covered by the patents. In that event, we or our collaborators may not have a viable alternative to the technology protected by the patent and mayneed to halt work on the affected product candidate or cease commercialization of an approved product. In addition, there is a risk that a court will order us orour collaborators to pay the other party damages. An adverse outcome in any litigation or other proceeding could subject us to significant liabilities to thirdparties and require us to cease using the technology that is at issue or to license the33technology from third parties. We may not be able to obtain any required licenses on commercially acceptable terms or at all. Any of these outcomes couldhave a material adverse effect on our business.The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industryparticipants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts,and the interpretation is not always uniform or predictable. If we are sued for patent infringement, we would need to demonstrate that our products or methodseither do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity isdifficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validityenjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and divert management's time and attention inpursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may berequired to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. Wemay not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may incur substantial monetarydamages, encounter significant delays in bringing our product candidates to market and be precluded from manufacturing or selling our product candidates.The cost of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able tosustain the cost of such litigation and proceedings more effectively than we can because of their substantially greater resources. Uncertainties resulting fromthe initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.Patent litigation and other proceedings may also absorb significant management time.If we are unable to obtain and enforce patent protection for our product candidates and related technology, our business could be materially harmed.Issued patents may be challenged, narrowed, invalidated or circumvented. In addition, court decisions may introduce uncertainty in theenforceability or scope of patents owned by biotechnology companies. The legal systems of certain countries do not favor the aggressive enforcement ofpatents, and the laws of foreign countries may not allow us to protect our inventions with patents to the same extent as the laws of the United States. Becausepatent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, andbecause publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventionsclaimed in our issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patents or patentapplications. As a result, we may not be able to obtain or maintain protection for certain inventions. Therefore, the enforceability and scope of our patents inthe United States and in foreign countries cannot be predicted with certainty and, as a result, any patents that we own or license may not provide sufficientprotection against competitors. We may not be able to obtain or maintain patent protection from our pending patent applications, from those we may file inthe future, or from those we may license from third parties. Moreover, even if we are able to obtain patent protection, such patent protection may be ofinsufficient scope to achieve our business objectives.Our strategy depends on our ability to identify and seek patent protection for our discoveries. This process is expensive and time consuming, and wemay not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions whereprotection may be commercially advantageous. Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and useinformation that we regard as proprietary.The issuance of a patent does not ensure that a court or agency finds or will find the patent valid or enforceable, so even if we obtain patents, theymay not be valid or enforceable against third parties. In addition, the issuance of a patent does not give us the right to practice the patented invention. Thirdparties may have blocking patents that could prevent us from marketing our own patented product and practicing our own patented technology. Third partiesmay also seek to market biosimilar versions of any approved products. Alternatively, third parties may seek approval to market their own products similar toor otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits allegingpatent infringement. In any of these types of proceedings, a court or agency with jurisdiction may find our patents invalid and/or unenforceable. Even if wehave valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our businessobjectives.The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factualconsiderations. The standards which the United States Patent and Trademark Office, or USPTO, and its foreign counterparts use to grant patents are not alwaysapplied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted orallowable in pharmaceutical or34biotechnology patents. The laws of some foreign countries do not protect proprietary information to the same extent as the laws of the United States, andmany companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries. Outside the UnitedStates, patent protection must be sought in individual jurisdictions, further adding to the cost and uncertainty of obtaining adequate patent protectionoutside of the United States. Accordingly, we cannot predict whether additional patents protecting our technology will issue in the United States or in foreignjurisdictions, or whether any patents that do issue will have claims of adequate scope to provide competitive advantage. Moreover, we cannot predictwhether third parties will be able to successfully obtain claims or the breadth of such claims. The allowance of broader claims may increase the incidence andcost of patent interference proceedings, opposition proceedings, and/or reexamination proceedings, the risk of infringement litigation, and the vulnerabilityof the claims to challenge. On the other hand, the allowance of narrower claims does not eliminate the potential for adversarial proceedings, and may fail toprovide a competitive advantage. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies orproducts, or provide us with any competitive advantage.We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.Even after they have been issued, our patents and any patents which we license may be challenged, narrowed, invalidated or circumvented. If ourpatents are invalidated or otherwise limited or will expire prior to the commercialization of our product candidates, other companies may be better able todevelop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.The following are examples of litigation and other adversarial proceedings or disputes that we could become a party to involving our patents orpatents licensed to us:•we or our collaborators may initiate litigation or other proceedings against third parties to enforce our patent rights;•third parties may initiate litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratoryjudgment that their product or technology does not infringe our patents or patents licensed to us;•third parties may initiate opposition, reexamination or inter partes review proceedings challenging the validity or scope of our patent rights,requiring us or our collaborators and/or licensors to participate in such proceedings to defend the validity and scope of our patents;•there may be a challenge or dispute regarding inventorship or ownership of patents currently identified as being owned by or licensed to us;•the U.S. Patent and Trademark Office may initiate an interference between patents or patent applications owned by or licensed to us and those ofour competitors, requiring us or our collaborators and/or licensors to participate in an interference proceeding to determine the priority ofinvention, which could jeopardize our patent rights; or•third parties may seek approval to market biosimilar versions of our future approved products prior to expiration of relevant patents owned by orlicensed to us, requiring us to defend our patents, including by filing lawsuits alleging patent infringement.These lawsuits and proceedings would be costly and could affect our results of operations and divert the attention of our managerial and scientificpersonnel. There is a risk that a court or administrative body would decide that our patents are invalid or not infringed by a third party's activities, or that thescope of certain issued claims must be further limited. An adverse outcome in a litigation or proceeding involving our own patents could limit our ability toassert our patents against these or other competitors, affect our ability to receive royalties or other licensing consideration from our licensees, and may curtailor preclude our ability to exclude third parties from making, using and selling similar or competitive products. Any of these occurrences could adverselyaffect our competitive business position, business prospects and financial condition.The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequatelyprotect our rights or permit us to gain or keep our competitive advantage. For example:•others may be able to develop a platform that is similar to, or better than, ours in a way that is not covered by the claims of our patents;•others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of our patents;•we might not have been the first to make the inventions covered by patents or pending patent applications;35•we might not have been the first to file patent applications for these inventions;•any patents that we obtain may not provide us with any competitive advantages or may ultimately be found invalid or unenforceable; or•we may not develop additional proprietary technologies that are patentable.If we fail to comply with our obligations under our intellectual property licenses with third parties, we could lose license rights that are important to ourbusiness.We are currently party to various intellectual property license agreements. These license agreements impose, and we expect that future licenseagreements may impose, various diligence, milestone payment, royalty, insurance and other obligations on us. For example, we have entered into patent andknow-how license agreements that grant us the right to use certain technologies related to biological manufacturing to manufacture our clinical productcandidates. These licenses typically include an obligation to pay yearly maintenance payments and royalties on sales, and may also include upfront andmilestone payments. If we fail to comply with our obligations under the licenses, the licensors may have the right to terminate their respective licenseagreements, in which event we might not be able to market any product that is covered by the agreements. Termination of the license agreements or reductionor elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, which could adversely affectour competitive business position and harm our business.If we are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely affected.In addition to patent protection, we also rely on other proprietary rights, including protection of trade secrets, and other proprietary information. Tomaintain the confidentiality of trade secrets and proprietary information, we enter into confidentiality agreements with our employees, consultants,collaborators and others upon the commencement of their relationships with us. These agreements require that all confidential information developed by theindividual or made known to the individual by us during the course of the individual's relationship with us be kept confidential and not disclosed to thirdparties. Our agreements with employees and our personnel policies also provide that any inventions conceived by the individual in the course of renderingservices to us shall be our exclusive property. However, we may not obtain these agreements in all circumstances, and individuals with whom we have theseagreements may not comply with their terms. Thus, despite such agreement, such inventions may become assigned to third parties. In the event ofunauthorized use or disclosure of our trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection,particularly for our trade secrets or other confidential information. To the extent that our employees, consultants or contractors use technology or know-howowned by third parties in their work for us, disputes may arise between us and those third parties as to the rights in related inventions. To the extent that anindividual who is not obligated to assign rights in intellectual property to us is rightfully an inventor of intellectual property, we may need to obtain anassignment or a license to that intellectual property from that individual, or a third party or from that individual's assignee. Such assignment or license maynot be available on commercially reasonable terms or at all.Adequate remedies may not exist in the event of unauthorized use or disclosure of our proprietary information. The disclosure of our trade secretswould impair our competitive position and may materially harm our business, financial condition and results of operations. Costly and time consuminglitigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to maintain trade secret protection could adverselyaffect our competitive business position. In addition, others may independently discover or develop our trade secrets and proprietary information, and theexistence of our own trade secrets affords no protection against such independent discovery.As is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously or concurrently employed atresearch institutions and/or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject toclaims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers,or that patents and applications we have filed to protect inventions of these employees, even those related to one or more of our product candidates, arerightfully owned by their former or concurrent employer. Litigation may be necessary to defend against these claims. Even if we are successful in defendingagainst these claims, litigation could result in substantial costs and be a distraction to management.Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to the USPTOand various foreign patent offices at various points over the lifetime of our patents and/or applications. We have systems in place to remind us to pay thesefees, and we rely on our outside counsel to pay these fees when due. Additionally, the USPTO and various foreign patent offices require compliance with anumber of procedural,36documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to helpus comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to theparticular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resultingin partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.In addition, we are responsible for the payment of patent fees for patent rights that we have licensed from other parties. If any licensor of these patents doesnot itself elect to make these payments, and we fail to do so, we may be liable to the licensor for any costs and consequences of any resulting loss of patentrights.If we do not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation for extending the term of patents covering each ofour product candidates, our business may be materially harmed.Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may beeligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-WaxmanAmendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensationfor effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail toapply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, thelength of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than werequest, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to marketcompeting products sooner. As a result, our revenue from applicable products could be reduced, possibly materially.Risks Related to Legal Compliance MattersIf we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.Our research and development involves, and may in the future involve, the use of potentially hazardous materials and chemicals. Our operationsmay produce hazardous waste products. Although we believe that our safety procedures for handling and disposing of these materials comply with thestandards mandated by local, state and federal laws and regulations, the risk of accidental contamination or injury from these materials cannot be eliminated.If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health andworkplace safety laws and regulations and fire and building codes, including those governing laboratory procedures, exposure to blood-borne pathogens, useand storage of flammable agents and the handling of biohazardous materials. Although we maintain workers' compensation insurance as prescribed by theStates of Maryland and California to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials,this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claimsthat may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incursubstantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.If we market products in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject tocivil or criminal penalties.In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws commonly referredto as "fraud and abuse" laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include falseclaims and anti-kickback statutes.Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment or knowingly making, or causing to be made, a false statement to get a claim paid. The federal healthcare program anti-kickback statuteprohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing,ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financedhealthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers,purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain commonactivities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing,purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. In addition, under the Sunshine Act provisionsof the ACA, pharmaceutical manufacturers with one or more products for which payment is available under a federal health care program are subject to federalreporting and disclosure requirements with regard to payments or other transfers of value made to37physicians and teaching hospitals. Most states also have statutes or regulations similar to the federal anti-kickback law and federal false claims laws, whichmay apply to items such as pharmaceutical products and services reimbursed by private insurers. Some state laws also prohibit certain gifts to healthcareproviders, require pharmaceutical companies to report payments to healthcare professionals, and/or require companies to adopt compliance programs orcodes of conduct. Administrative, civil and criminal sanctions may be imposed under these federal and state laws.Over the past few years, a number of pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety ofpromotional and marketing activities, such as: providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers;reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-labelpromotion; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. At such time, if ever, aswe market any of our future approved products and these products are paid for by governmental programs, it is possible that some of our business activitiescould also be subject to challenge under one or more of these "fraud and abuse" laws.We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws. If we fail to comply with these laws, we could be subject to civil orcriminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, results of operations and financial condition.Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws thatapply in countries where we do business. The FCPA and these other laws generally prohibit us and our employees and intermediaries from bribing, beingbribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. Weand our commercial partners operate in a number of jurisdictions that pose a risk of potential FCPA violations, and we participate in collaborations andrelationships with third parties whose actions could potentially subject us to liability under the FCPA or other anti-corruption laws. There is no assurance thatwe will be completely effective in ensuring our compliance with all applicable anti-corruption laws. If we violate provisions of the FCPA or other anti-corruption laws or are subject to an investigation or audit pursuant to these laws, we may be subject to criminal and civil penalties, disgorgement and othersanctions and remedial measures and legal expenses, which could have an adverse impact on our business, financial condition and results of operations.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insidertrading.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA or other agencies, to comply with federal and state health care fraud and abuse laws and regulations,to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in thehealth care industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctionsand serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter employee misconduct, and theprecautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us fromgovernmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are institutedagainst us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, includingthe imposition of significant fines or other sanctions.Risks Relating to Employee Matters and Managing GrowthOur future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.We are highly dependent on the research and development, clinical and business development expertise of Scott Koenig, M.D., Ph.D., our Presidentand Chief Executive Officer, as well as the other members of our senior management, scientific and clinical team. Although we have entered into employmentagreements with certain of our executive officers, each of them may terminate their employment with us at any time. The loss of the services of our executiveofficers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our abilityto successfully implement our business strategy.Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. Inaddition, we will need to expand and effectively manage our managerial, operational, financial, development and other resources in order to successfullypursue our research, development and commercialization efforts for our existing and future product candidates. Furthermore, replacing executive officers andkey employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth ofskills and38experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense,and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical andbiotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities andresearch institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research anddevelopment and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments underconsulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high qualitypersonnel, our ability to pursue our growth strategy will be limited.We will need to grow our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.As of February 27, 2018, we had 330 full-time employees. As our development and commercialization plans and strategies develop, we expect toexpand our employee base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant addedresponsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. Also, ourmanagement may need to divert a disproportionate amount of their attention away from our day-to-day activities and devote a substantial amount of time tomanaging these growth activities. We may not be able to effectively manage the expansion of our operations which may result in weaknesses in ourinfrastructure, give rise to operational errors, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Ourexpected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of existingand additional product candidates. If our management is unable to effectively manage our expected growth, our expenses may increase more than expected,our ability to generate and/or grow revenue could be reduced and we may not be able to implement our business strategy. Our future financial performanceand our ability to commercialize our product candidates and compete effectively with others in our industry will depend, in part, on our ability to effectivelymanage any future growth.Risks Relating to Our Common StockOur stock price may be volatile and fluctuate substantially, which may subject us to securities class action litigation.Our stock price is likely to be volatile. The stock market has experienced significant volatility, particularly with respect to pharmaceutical,biotechnology, and other life sciences company stocks. The volatility of pharmaceutical, biotechnology, and other life sciences company stocks often doesnot relate to the operating performance of the companies represented by the stock.In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against thecompany that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit and divert thetime and attention of our management, which could seriously harm our business.Provisions of our charter, bylaws, third-party agreements and Delaware law may make an acquisition of us or a change in our management more difficult.Certain provisions of our restated certificate of incorporation and amended and restated bylaws could discourage, delay, or prevent a merger,acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium foryour shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, therebydepressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so.Furthermore, since our board of directors is responsible for appointing the members of our management team, these provisions could prevent or frustrateattempts by our stockholders to replace or remove our management by making it more difficult for stockholders to replace members of our board of directors.These provisions:•allow the authorized number of directors to be changed only by resolution of our board of directors;•establish a classified board of directors, providing that not all members of the board of directors be elected at one time;•authorize our board of directors to issue without stockholder approval blank check preferred stock that, if issued, could operate as a "poisonpill" to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our board of directors;39•require that stockholder actions must be effected at a duly called stockholder meeting and prohibit stockholder action by written consent;•establish advance notice requirements for stockholder nominations to our board of directors or for stockholder proposals that can be acted on atstockholder meetings;•limit who may call stockholder meetings; and•require the approval of the holders of 75% of the outstanding shares of our capital stock entitled to vote in order to amend certain provisions ofour restated certificate of incorporation and restated bylaws.Furthermore, in the ordinary course of our business, from time to time we discuss and enter into collaborations, licenses and other transactions withvarious third parties, including other pharmaceutical companies and biotechnology companies. When we deem it appropriate, our agreements with such thirdparties may include standstill provisions. These standstill provisions, several of which may be in force from time-to-time, typically prohibit such parties fromacquiring our securities for a period of time, which may discourage such parties from acquiring MacroGenics even if doing so would be beneficial to ourstockholders.In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law,which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from mergingor combining with us for a prescribed period of time. This provision could have the effect of delaying or preventing a change of control, whether or not it isdesired by or beneficial to our stockholders.ITEM 1B.UNRESOLVED STAFF COMMENTSNot applicable.ITEM 2.PROPERTIESWe lease approximately 200,000 square feet of manufacturing, office and laboratory space in Rockville, Maryland under five leases that have termsthat expire between 2019 and 2027 unless renewed. We also lease office and laboratory space in South San Francisco, California under a lease that expires inFebruary 2018. In December 2017, we moved the South San Francisco operations into different space in Brisbane, CA which is leased until 2023. We believethat our properties are generally in good condition, well maintained, suitable and adequate to carry on our business. We believe our capital resources aresufficient to lease any additional facilities required to meet our expected growth needs.ITEM 3.LEGAL PROCEEDINGSIn the ordinary course of business, we are involved in various legal proceedings, including, among others, patent oppositions, patent revocations,patent infringement litigation and other matters incidental to our business. We are not currently a party to any material legal proceedings.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.40PART IIITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket InformationOur common stock has been listed on the Nasdaq Global Select Market under the symbol "MGNX" since October 10, 2013. On February 23, 2018, the closing price for our common stock as reported on the Nasdaq Global Select Market was $23.46. The following table setsforth the high and low intra-day sale prices per share of our common stock as reported on the Nasdaq Global Select Market for the periods indicated. High Low2017 First Quarter$22.00 $17.29Second Quarter$22.31 $16.63Third Quarter$19.30 $14.36Fourth Quarter$21.50 $16.122016 First Quarter$30.66 $14.84Second Quarter$28.37 $16.28Third Quarter$33.30 $25.25Fourth Quarter$31.85 $18.22ShareholdersAs of February 23, 2018, we had 36,918,852 shares of common stock outstanding held by approximately 79 holders of record, which include sharesheld by a broker, bank or other nominee. We have never declared or paid any cash dividends. We do not anticipate declaring or paying cash dividends forthe foreseeable future. Instead, we will retain our earnings, if any, for the future operation and expansion of our business.41Performance GraphThe following graph compares the performance of our common stock to the performance of the Nasdaq Composite Index (U.S.) and the NasdaqBiotechnology Index since October 10, 2013 (the first date that shares of our common stock were publicly traded). The comparison assumes a $100investment on October 10, 2013 in our common stock, the stocks comprising the Nasdaq Composite Index, and the stocks comprising the NasdaqBiotechnology Index, and assumes reinvestment of the full amount of all dividends, if any. Historical stockholder return is not necessarily indicative of theperformance to be expected for any future periods.The performance graph shall not be deemed to be incorporated by reference by means of any general statement incorporating by reference this Form10-K into any filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that we specifically incorporate such informationby reference, and shall not otherwise be deemed filed under such acts.ITEM 6.SELECTED FINANCIAL DATAThe consolidated statement of operations and comprehensive loss data for the years ended December 31, 2017, 2016 and 2015 and the consolidatedbalance sheet data as of December 31, 2017 and 2016 presented below have been derived from our audited consolidated financial statements and footnotesincluded elsewhere in this Annual Report on Form 10-K. The consolidated statement of operations and comprehensive loss data for the years endedDecember 31, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015, 2014 and 2013 have been derived from our auditedconsolidated financial statements which are not included herein. Historical results are not necessarily indicative of future results. The following data shouldbe read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidatedfinancial statements and related notes included elsewhere in this Annual Report on Form 10-K.42 Year Ended December 31, 2017 2016 2015 2014 2013 (in thousands, except share and per share data)Consolidated Statement of Operations and ComprehensiveLoss: Total revenues$157,742 $91,880 $100,854 $47,797 $58,035Costs and expenses: Research and development147,232 122,091 98,271 70,186 46,582General and administrative32,653 29,831 22,765 15,926 11,087Total costs and expenses179,885 151,922 121,036 86,112 57,669Income (loss) from operations(22,143) (60,042) (20,182) (38,315) 366Other income (expense)2,517 1,514 42 2 (627)Net loss(19,626) (58,528) (20,140) (38,313) (261)Other comprehensive loss: Unrealized loss on investments(21) (77) (5) — —Comprehensive loss$(19,647) $(58,605) $(20,145) $(38,313) $(261)Basic and diluted net loss per common share$(0.54) $(1.69) $(0.63) $(1.40) $(0.04)Basic and diluted weighted average number of common shares36,095,080 34,685,274 31,801,645 27,384,990 6,847,697 As of December 31, 2017 2016 2015 2014 2013 (in thousands)Consolidated Balance Sheet Data: Cash, cash equivalents and marketable securities$305,121 $284,982 $339,049 $157,591 $116,481Total assets373,883 311,263 359,269 173,886 125,782Deferred revenue20,839 14,306 18,497 30,720 27,403Total stockholders' equity299,238 268,751 313,337 121,286 78,91443ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read together with our selected consolidated financial data and theconsolidated financial statements and related notes included elsewhere herein. This discussion contains forward-looking statements that involve risks anduncertainties. As a result of many factors including, but not limited to, those set forth under the sections entitled "Risk Factors" and "Forward-LookingStatements", our actual results may differ materially from those anticipated in such forward-looking statements.OverviewWe are a biopharmaceutical company focused on discovering and developing innovative antibody-based therapeutics to modulate the humanimmune response for the treatment of cancer. We currently have a pipeline of product candidates in human clinical testing that have been created primarilyusing our proprietary technology platforms, which also have broad applicability across other therapeutic domains, including autoimmune disorders andinfectious disease. We believe our programs have the potential to have a meaningful effect on treating patients' unmet medical needs as monotherapy or, insome cases, in combination with other therapeutic agents.We commenced active operations in 2000, and have since devoted substantially all of our resources to staffing our company, developing ourtechnology platforms, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, developing collaborations,business planning and raising capital. We have not generated any revenues from the sale of any products to date. We have financed our operations primarilythrough the public and private offerings of our securities, collaborations with other biopharmaceutical companies, and government grants and contracts. Although it is difficult to predict our funding requirements, based upon our current operating plan, we anticipate that our cash, cash equivalents andmarketable securities as of December 31, 2017, combined with collaboration payments we anticipate receiving, will enable us to fund our operations forapproximately two years based on our current business plan.Through December 31, 2017, we had an accumulated deficit of $312.3 million. We expect that over the next several years this deficit will increaseas we increase our expenditures in research and development in connection with our ongoing activities with several clinical trials. Strategic CollaborationsWe pursue a balanced approach between product candidates that we develop ourselves and those that we develop with our collaborators. Under ourstrategic collaborations to date, we have received significant non-dilutive funding and continue to have rights to additional funding upon completion ofcertain research, achievement of key product development milestones and royalties and other payments upon the commercial sale of products. Currently, ourmost significant strategic collaborations include the following:•Incyte. In October 2017, we entered into an exclusive global collaboration and license agreement with Incyte Corporation (Incyte) for MGA012,an investigational monoclonal antibody that inhibits programmed cell death protein 1 (PD-1). Incyte has obtained exclusive worldwide rightsfor the development and commercialization of MGA012 in all indications, while we retain the right to develop our pipeline assets incombination with MGA012. The transaction closed in the fourth quarter of 2017 and we received a $150.0 million upfront payment from Incyteupon the closing.Under the terms of the collaboration, Incyte will lead global development of MGA012. Assuming successful development andcommercialization by Incyte, we could receive up to approximately $420.0 million in development and regulatory milestones, and up to $330.0million in commercial milestones. If commercialized, we would be eligible to receive tiered royalties of 15% to 24% on any global net sales andwe have the option to co-promote with Incyte. We retain the right to develop our pipeline assets in combination with MGA012, with Incytecommercializing MGA012 and MacroGenics commercializing our asset(s), if any such potential combinations are approved. In addition, weretain the right to manufacture a portion of both companies' global clinical and commercial supply needs of MGA012, through utilization of ourcommercial-scale GMP facility, which is expected to be fully operational in 2018.Finally, Incyte will fund our activities related to our ongoing monotherapy clinical study until such time as we can transfer the InvestigationalNew Drug application (IND) to Incyte.•Servier. In September 2012, we entered into an agreement with Les Laboratoires Servier and Institut de Recherches Servier (Servier) to developand commercialize three DART® molecules in all countries other than44the United States, Canada, Mexico, Japan, South Korea and India. We received a $20.0 million upfront option fee. In addition, we will beeligible to receive up to approximately $700 million in additional license fees and clinical, development, regulatory and sales milestonepayments if Servier exercises its remaining options and successfully develops, obtains regulatory approval for, and commercializes a productunder each license. Additionally, assuming exercise of its options, Servier may share Phase 2 and Phase 3 development costs and would beobligated to pay us low double-digit to mid-teen royalties on product sales in its territories.In February 2014, Servier exercised its option to develop and commercialize flotetuzumab, for which we received a $15.0 million license optionfee. We also received two $5.0 million milestone payments from Servier in 2014 in connection with the IND applications for flotetuzumab andMGD007 clearing the 30-day review period by the U.S. Food and Drug Administration (FDA). As of December 31, 2017, Servier still retains anoption to obtain a license for MGD007, but has notified us that they have terminated their rights to license the third DART molecule.In addition, we have sought to complement our internal expertise and capabilities with collaborators that may help us advance our programs. Forexample, in December 2017, we entered into a research collaboration and license agreement with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.(collectively, Roche) to jointly discover and develop novel bispecific molecules to undisclosed targets. During the research term, both companies willleverage their respective platforms, including our DART platform and Roche's CrossMAb and DutaFab technologies, to select a bispecific format and leadproduct candidate. Roche would then further develop and commercialize any such product candidate.Financial Operations OverviewRevenueOur revenue consists primarily of collaboration revenue, including amounts recognized relating to upfront nonrefundable payments for licenses oroptions to obtain future licenses, research and development funding and milestone payments earned under our collaboration and license agreements with ourstrategic collaborators. In addition, we have earned revenues through several grants and/or contracts with the U.S. government and other research institutionson behalf of the U.S. government, primarily with respect to research and development activities related to infectious disease product candidates.Research and Development ExpenseResearch and development expense consists of expenses incurred in performing research and development activities. These expenses includeconducting preclinical experiments and studies, clinical trials, manufacturing efforts and regulatory filings for all product candidates, and other indirectexpenses in support of our research and development activities. We capture research and development expense on a program-by-program basis for ourproduct candidates that are in clinical development and recognize these expenses as they are incurred. The following are items we include in research anddevelopment expense:•Employee-related expenses, such as salaries and benefits;•Employee-related overhead expenses, such as facilities and other allocated items;•Stock-based compensation expense to employees engaged in research and development activities;•Depreciation of laboratory equipment, computers and leasehold improvements;•Fees paid to consultants, subcontractors, clinical research organizations (CROs) and other third party vendors for work performed under ourpreclinical and clinical trials including, but not limited to, investigator grants, laboratory work and analysis, database management, statisticalanalysis, and other items;•Amounts paid to vendors and suppliers for laboratory supplies;•Costs related to manufacturing clinical trial materials, including vialing, packaging and testing;•License fees and other third party vendor payments related to in-licensed product candidates and technology; and•Costs related to compliance with regulatory requirements.It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of ourproduct candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtainregulatory approval. We may never succeed in45achieving regulatory approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidateswill depend on a variety of factors, including the uncertainties of future clinical trials and preclinical studies, uncertainties in clinical trial enrollment ratesand significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors,including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund eachprogram in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate's commercialpotential.General and Administrative ExpensesGeneral and administrative expenses consist of salaries and related benefit costs for employees in our executive, finance, legal and intellectualproperty, business development, human resources and other support functions, travel expenses and other legal and professional fees.Other Income (Expense)Other income (expense) consists of interest income earned on our cash, cash equivalents and marketable securities, offset by other expenses.Critical Accounting Policies and Significant Judgments and EstimatesOur management's discussion and analysis of financial conditions and results of operations is based on our consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidatedfinancial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities as of the date of the balance sheets and the reported amount of the revenue and expenses recorded during the reportingperiod. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. We review and evaluate theseestimates on an on-going basis. These assumptions and estimates form the basis for making judgments about the carrying values of assets and liabilities andamounts that have been recorded as revenues and expenses. Actual results and experiences may differ from these estimates. The results of any materialrevisions would be reflected in the consolidated financial statements prospectively from the date of the change in estimate.While a summary of significant accounting policies is described fully in Note 2 in our consolidated financial statements, we believe that thefollowing accounting policies are the most critical to assist you in fully understanding and evaluating our financial results and the effect of the estimates andjudgments we used in preparing our consolidated financial statements.Revenue RecognitionWe enter into collaboration and license agreements with collaborators for the development of monoclonal antibody-based therapeutics to treatcancer and other complex diseases. The terms of these agreements contain multiple deliverables which may include (i) licenses, or options to obtain licenses,to our technological platforms, such as our Fc engineering and DART technologies, (ii) rights to future technological improvements, (iii) research anddevelopment activities to be performed on behalf of the collaborator or as part of the collaboration, and (iv) the manufacture of preclinical or clinicalmaterials for the collaborator. Payments to us under these agreements may include nonrefundable license fees, option fees, exercise fees, payments forresearch and development activities, payments for the manufacture of preclinical or clinical materials, license maintenance payments, payments based uponthe achievement of certain milestones and royalties on product sales. Other benefits to us from these agreements include the right to sell products resultingfrom the collaborative efforts of the parties in specific geographic territories. We follow the provisions of the Financial Accounting Standards Board (FASB)Accounting Standards Codification (ASC) Topic 605-25, Revenue Recognition–Multiple-Element Arrangements, and ASC Topic 605-28, RevenueRecognition–Milestone Method, in accounting for these agreements. In order to account for these agreements, we must identify the deliverables includedwithin the agreement and evaluate which deliverables represent separate units of accounting based on the achievement of certain criteria, including whetherthe delivered element has stand-alone value to the collaborator. The consideration received is allocated among the separate units of accounting, and theapplicable revenue recognition criteria are applied to each of the separate units.As of December 31, 2017, we had two types of agreements: i) exclusive development and commercialization licenses to use our technology and/orcertain other intellectual property to develop compounds against specified targets, which we refer to as exclusive licenses; and ii) option/research agreementsto secure on established terms development and commercialization licenses to therapeutic product candidates to collaborator-selected targets developed byus during an option period, which we refer to as right-to-develop agreements. 46Exclusive LicensesThe deliverables under an exclusive license agreement generally include the exclusive license to our technology with respect to a specified antigentarget, and may also include deliverables related to rights to future technological improvements, research and preclinical development activities to beperformed on behalf of the collaborator. In some cases, we may have an option to participate in the co-development of product candidates that result fromsuch agreements. Generally, exclusive license agreements contain nonrefundable terms for payments and, depending on the terms of the agreement, provide that wewill (i) at the collaborator's request, provide research and preclinical development services at negotiated prices which are generally consistent with what otherthird parties would charge, (ii) earn payments upon the achievement of certain milestones, (iii) earn royalty payments, and (iv) in some cases, grant us anoption to participate in the development and commercialization of products that result from such agreements. Royalty rates may vary over the royalty termdepending on our intellectual property rights and whether we exercise any co-development and co-commercialization rights. We do not directly controlwhen any collaborator will achieve milestones or become liable for royalty payments.In determining the separate units of accounting, management evaluates whether the exclusive license has stand-alone value from the undeliveredelements to the collaborator based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determinationinclude the research and development capabilities of the collaborator and the availability of technology platform and product research expertise in thegeneral marketplace. In addition, we consider whether or not (i) the collaborator could use the license for its intended purpose without the receipt of theremaining deliverables, (ii) the value of the license was dependent on the undelivered items and (iii) the collaborator or other vendors could provide theundelivered items. If we conclude that the license has stand-alone value and therefore will be accounted for as a separate unit of accounting, we thendetermine the estimated selling prices of the license and all other units of accounting based on market conditions, similar arrangements entered into by thirdparties, and entity-specific factors such as the terms of our previous collaboration agreements, recent preclinical and clinical testing results of therapeuticproduct candidates that use our technology platforms, our pricing practices and pricing objectives, the likelihood that technological improvements will bemade, the likelihood that technological improvements made will be used by our collaborators and the nature of the research services to be performed onbehalf of our collaborators and market rates for similar services. The upfront payment is recognized upon delivery of the license if facts and circumstancesdictate that the license has stand-alone value from the undelivered elements.Upfront payments on exclusive licenses are deferred if facts and circumstances dictate that the license does not have stand-alone value, and revenueis then recognized throughout the period of performance. We reassess the period of performance over which we recognize deferred upfront license fees andmake adjustments as appropriate. In the event a collaborator elects to discontinue development of a specific product candidate under a single target license,but retains its right to use our technology to develop an alternative product candidate to the same target or a target substitute, we would cease amortization ofany remaining portion of the upfront fee until there is substantial preclinical activity on another product candidate and its remaining period of substantialinvolvement can be estimated. In the event that a single target license were to be terminated, we would recognize as revenue any portion of the upfront feethat had not previously been recorded as revenue, but was classified as deferred revenue, at the date of such termination or through the remaining substantialinvolvement in the wind down of the agreement. We recognize revenue related to research and preclinical development services that represent separate units of accounting as they are performed, aslong as there is persuasive evidence of an arrangement, the fee is fixed or determinable, and collection is reasonably assured. We recognize revenue related tothe rights to future technological improvements over the estimated term of the applicable license. We typically perform research activities and preclinical development services, including generating and engineering product candidates, on behalfof our licensees during the early evaluation and preclinical testing stages of drug development under our exclusive licenses. We record amounts received forresearch materials produced or services performed as revenue from collaborative agreements. Our license agreements have milestone payments which for reporting purposes are aggregated into three categories: (i) development milestones, (ii)regulatory milestones, and (iii) sales milestones. Development milestones are typically payable when a product candidate initiates or advances into differentclinical trial phases. Regulatory milestones are typically payable upon submission for marketing approval with the FDA or other countries' regulatoryauthorities or on receipt of actual marketing approvals for the compound or for additional indications. Sales milestones are typically payable when annualsales reach certain levels. At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both partieson the basis of the contingent nature of the milestone. This evaluation includes an47assessment of whether (i) the consideration is commensurate with either (1) our performance to achieve the milestone, or (2) the enhancement of the value ofthe delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) the consideration relates solely to pastperformance and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. We evaluate factors such asthe scientific, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required toachieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement inmaking this assessment. Non-refundable development and regulatory milestones that are expected to be achieved as a result of our efforts during the period of substantialinvolvement are considered substantive and are recognized as revenue upon the achievement of the milestone, assuming all other revenue recognitioncriteria are met. Milestones that are not considered substantive because we did not contribute effort to their achievement are generally recognized as revenueupon achievement of the milestone, as there are no undelivered elements remaining and no continuing performance obligations, assuming all other revenuerecognition criteria are met. Right-to-Develop Agreements Our right-to-develop agreements provide collaborators with an exclusive option to obtain licenses to develop and commercialize in specifiedgeographic territories product candidates developed by us under agreed upon research and preclinical development programs. The product candidatesresulting from each program are all directed to a specific target selected by the collaborator. Under these agreements, fees may be due to us (i) at the inceptionof the arrangement (referred to as "upfront" fees or payments), (ii) upon the selection of a target for a program, (iii) upon the exercise of an option to acquire adevelopment and commercialization license, referred to as exercise fee, for a program, or (iv) some combination of all of these fees. The accounting for right-to-develop agreements is dependent on the nature of the options granted to the collaborator. Options are consideredsubstantive if, at the inception of a right-to-develop agreement, we are at risk as to whether the collaborator will choose to exercise the options to securedevelopment and commercialization licenses. Factors that are considered in evaluating whether options are substantive include the overall objective of thearrangement, the benefit the collaborator might obtain from the agreement without exercising the options, the cost to exercise the options relative to the totalupfront consideration, and the additional financial commitments imposed on the collaborator as a result of exercising the options. For right-to-develop agreements where the options to secure development and commercialization licenses to a product program are consideredsubstantive, we do not consider the development and commercialization licenses to be a deliverable at the inception of the agreement, and therefore deferany upfront payments received and recognize this revenue over the period during which the collaborator could elect to exercise options for development andcommercialization licenses. These periods are specific to each collaboration agreement. If a collaborator selects a target for a product program, anysubstantive option fee is deferred and recognized over the life of the option. If a collaborator exercises an option and acquires a development andcommercialization license to a product program, we attribute the exercise fee to the development and commercialization license. Upon exercise of an option to acquire a development and commercialization license, we would also attribute any remaining deferred option fee, inaddition to the consideration received for the license upon exercise of the option, to the development and commercialization license. We then apply themultiple-element revenue recognition criteria to the development and commercialization license and other deliverables, if any, to determine the appropriaterevenue recognition method. This method is consistent with our accounting policy for upfront payments on exclusive licenses (discussed above). In the eventa right-to-develop agreement were to be terminated, we would recognize as revenue any portion of the upfront fee that had not previously been recorded asrevenue, but was classified as deferred revenue, at the date of such termination. For right-to-develop agreements where the options to secure development and commercialization licenses to product programs are not consideredsubstantive, we consider the development and commercialization licenses to be a deliverable at the inception of the agreement and apply the multiple-element revenue recognition criteria to determine the appropriate revenue recognition. All of our right-to-develop agreements have been determined tocontain substantive options. We do not directly control when any collaborator will exercise its options for development and commercialization licenses. Research and Development Expense and related Accrued Expenses As part of the process of preparing our consolidated financial statements, we may be required to estimate accrued expenses. In order to obtainreasonable estimates, we review open contracts and purchase orders. In addition, we communicate with applicable personnel in order to identify services thathave been performed, but for which we have not yet been invoiced.48In most cases, our vendors provide us with monthly invoices in arrears for services performed. We confirm our estimates with these vendors and makeadjustments as needed. The following are examples of our accrued expenses:•Fees paid to CROs for services performed on clinical trials;•Fees paid to investigator sites for performance on clinical trials;•Fees paid for professional services; and•Development expenses incurred by our collaborators that we share. The majority of expenses related to clinical trials performed by our CROs are dependent on the successful enrollment of patients. These expensescan vary from site to site and contract to contract. We base our estimated accruals on the time period over which the services are to be performed and the levelof effort to be expended in each period based on the estimated enrollment of patients in each trial. We also receive estimates from our collaborators when weare sharing development expenses. We use these estimates to record an increase or decrease in research and development expense, depending on how muchwe have each spent during the period. We will adjust accordingly should the estimates vary from the actual expenses. However, we do not anticipate that ouractual expenses will differ materially from our estimates. Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and aremeasured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assetsand liabilities of a change in tax rates is recognized as income in the period that such tax rate changes are enacted. The measurement of a deferred tax asset isreduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Financialstatement recognition of a tax position taken or expected to be taken in a tax return is determined based on a more-likely-than-not threshold of that positionbeing sustained. If the tax position meets this threshold, the benefit to be recognized is measured as the largest amount that is more than 50% likely to berealized upon ultimate settlement. Our policy is to record interest and penalties related to uncertain tax positions as a component of income tax expense. We recorded net deferred tax assets of $0.8 million as of December 31, 2017, which have been fully offset by a valuation allowance due touncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily comprised of federal and state tax net operating loss(NOL) carryforwards and research and development tax credit carryforwards. As of December 31, 2017, we had federal and state NOL carryforwards of $239.7million and research and development tax credit carryforwards of $42.8 million available. The federal NOL carryforwards will begin to expire at various datesstarting in 2025. We are already subject to Section 382 limitations due to acquisitions we made in 2002 and 2008. Future changes in stock ownership mayalso trigger an ownership change and, consequently, another Section 382 limitation. Any limitation may result in expiration of a portion of the net operatingloss or tax credit carryforwards before utilization which would reduce our gross deferred income tax assets and corresponding valuation allowance. As aresult, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and tax credit carryforwards to reduce United Statesfederal income tax may be subject to limitations, which could potentially result in increased future cash tax liability to us. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law making significant changes to the Internal RevenueCode, which included how the U.S. imposes income tax on multinational corporations. Key changes in the Tax Act which are relevant to us, and generallyeffective January 1, 2018, include a flat corporate income tax rate of 21% to replace the marginal rates that range from 15% to 35% and the elimination of thecorporate alternative minimum tax. The Tax Act also imposes limits on executive compensations and interest expense deductions, while permitting theimmediate expensing for the cost of new investments in certain property acquired after September 27, 2017.On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when aregistrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accountingfor certain income tax effects of the Tax Act. SAB 118 allows registrants to include a provisional amount to account for the implications of the Tax Act wherea reasonable estimate can be made and requires the completion of the accounting no later than one year from the date of the enactment of the Tax Act, orDecember 22, 2018.ASC 740 requires changes in tax rates and tax laws to be accounted for in the period of enactment in continuing operations. Accordingly, ofsignificance, we recorded a provisional estimate for the re-measurement of our U.S. deferred tax assets and liabilities to 21%. This change in value of thesedeferred tax assets and liabilities, which is provisional, was offset by a corresponding change in our valuation allowance, thus no tax expense or benefit wasrecorded. The ultimate impact may49differ from these provisional amounts, possibly materially, due to, among other things, additional information necessary to complete the computation andanalysis thereof, additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Act. The accounting is expected to becomplete by December 22, 2018.Stock-Based Compensation We recognize stock-based compensation expense in accordance with the provisions of ASC Topic 718, Compensation—Stock Compensation. Thefair value of stock-based payments is estimated, on the date of grant, using a Black-Scholes model. The resulting fair value is recognized on a straight-linebasis over the requisite service period, which is generally the vesting period of the option. The use of a Black-Scholes model requires us to apply judgmentand make assumptions and estimates that include the following: •Fair Value of Common Stock – Before our entry into the public market on October 10, 2013, our Board of Directors determined the fair value ofthe common stock. The Board of Directors made determinations of fair value based, in part, upon contemporaneous valuations to determine fairvalue. The contemporaneous valuations were performed in accordance with applicable methodologies, approaches and assumptions of thetechnical practice-aid issued by the American Institute of Certified Public Accountants Practice Aid entitled Valuation of Privately-HeldCompany Equity Securities Issued as Compensation.•Expected Volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility)or is expected to fluctuate (expected volatility) during a period. As we do not yet have sufficient history of our own volatility, we have identifiedseveral public entities of similar size, complexity and stage of development and estimate volatility based on the volatility of these companies.•Expected Dividend Yield – We have never declared or paid dividends and have no plans to do so in the foreseeable future.•Risk-Free Interest Rate – This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resemblesthe expected life of the option.•Expected Term – This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term often years and we have estimated the expected life of the option term to be 6.25 years. We use a simplified method to calculate the averageexpected term.•Expected Forfeiture Rate – The forfeiture rate is the estimated percentage of options granted that is expected to be forfeited or canceled on anannual basis before becoming fully vested. We estimate the forfeiture rate based on turnover data with further consideration given to the class ofthe employees to whom the options were granted.Recent Accounting PronouncementsSee Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements for information under the caption "RecentlyIssued Accounting Standards."Results of Operations for the Years Ended December 31, 2017 and 2016 Revenue The following represents a comparison of our research and development revenue for the years ended December 31, 2017 and 2016: Year Ended December 31, Increase/(Decrease) 2017 2016 (dollars in millions)Revenue from collaborative agreements$155.5 $86.6 $68.9 80 %Revenue from government agreements2.2 5.3 (3.1) (58)%Total revenue$157.7 $91.9 $65.8 72 %Revenue from collaborative agreements for the year ended December 31, 2017 includes the $150.0 million upfront payment recognized under theIncyte agreement. Revenue from collaborative agreements for the year ended December 31, 2016 includes the $75.0 million upfront payment recognizedunder our MGD015 agreement with Janssen Biotech, Inc.50(Janssen). The remaining change in revenue from collaborative agreements is primarily due to a $2.0 million milestone payment from Pfizer, Inc. in 2016 anda decrease in revenue recognized under the our MGD010 agreement with Takeda Pharmaceutical Company, Limited (Takeda) of $2.1 million for the yearended December 31, 2017 compared to 2016.Revenue from government agreements decreased for the year ended December 31, 2017 compared to 2016 primarily due to lower costs incurredunder our cost plus fixed fee contract with the National Institute of Allergy and Infectious Diseases.Research and Development Expense The following represents a comparison of our research and development expense for the years ended December 31, 2017 and 2016: Year Ended December 31, Increase/(Decrease) 2017 2016 (dollars in millions)Margetuximab$48.2 $35.4 $12.8 36 %Enoblituzumab21.8 18.0 3.8 21 %Flotetuzumab (a)6.3 3.8 2.5 66 %MGD0076.2 3.6 2.6 72 %MGD0093.9 3.3 0.6 18 %MGD0103.6 7.8 (4.2) (54)%MGA01213.8 9.3 4.5 48 %MGD0135.7 8.7 (3.0) (34)%MGC01810.1 3.5 6.6 189 %MGD0196.6 4.8 1.8 38 %Other immune modulator programs6.3 1.5 4.8 320 %Discovery and other pipeline programs, collectively14.7 22.4 (7.7) (34)%Total research and development expense$147.2 $122.1 $25.1 21 %(a) - Expenses are shown net of reimbursements from collaborator.During the year ended December 31, 2017 our research and development expense increased by $25.1 million compared to 2016. This increase wasprimarily due to the continued enrollment in our various clinical trials, including two margetuximab studies, multiple enoblituzumab studies, and theflotetuzumab and MGD007 Phase 1 studies. Also contributing to the increase was the initiation of the Phase 1 clinical trial of MGA012 in late 2016, as wellas IND-enabling activities for both MGC018 and MGD019. These increases were partially offset by decreased spending on MGD010 due to the completionof a Phase 1 study and decreased spending on MGD013, as IND-enabling activities ended and the dose escalation study began in 2017.General and Administrative Expense The following represents a comparison of our general and administrative expense for the years ended December 31, 2017 and 2016: Year Ended December 31, Increase/(Decrease) 2017 2016 (dollars in millions)General and administrative expense$32.7 $29.8 $2.9 10%General and administrative expense increased for the year ended December 31, 2017 by $2.9 million compared to 2016 primarily due to an increasein labor-related costs, including stock-based compensation expense, and information technology-related expenses, partially offset by lower patent expenses.Other Income51The increase in other income for the years ended December 31, 2017 and 2016 is primarily due to an increase in interest income earned onmarketable securities.Results of Operations for the Years Ended December 31, 2016 and 2015Revenue The following represents a comparison of our research and development revenue for the years ended December 31, 2016 and 2015: Year Ended December 31, Increase/(Decrease) 2016 2015 (dollars in millions)Revenue from collaborative agreements$86.6 $99.4 $(12.8) (13)%Revenue from government agreements5.3 1.5 3.8 253 %Total revenue$91.9 $100.9 $(9.0) (9)%The decrease in collaboration revenue of $12.8 million for the year ended December 31, 2016 compared to 2015 is primarily due to the decrease inrevenue recognition related to the Boehringer Ingelheim GmbH (Boehringer) and Takeda agreements. Revenue under the Boehringer agreement decreasedbecause the development period, and therefore the related revenue recognition period, was completed in September 2015. Revenue under the TakedaMGD010 agreement decreased primarily due to a $3.0 million milestone being recognized during the year ended December 31, 2015. These decreases werepartially offset by the $75.0 million in revenue recognized during the year ended December 31, 2016 under the Janssen MGD015 agreement compared to$72.3 million recognized during the year ended December 31, 2015 under the Janssen duvortuxizumab agreement.Revenue from government agreements increased for the year ended December 31, 2016 compared to 2015 due to revenue from the NIAID contractwhich began in September 2015.Research and Development Expense The following represents a comparison of our research and development expense for the years ended December 31, 2016 and 2015: Year Ended December 31, Increase/(Decrease) 2016 2015 (dollars in millions)Margetuximab$35.4 $41.2 $(5.8) (14)%Enoblituzumab18.0 11.9 6.1 51 %Flotetuzumab (a)3.8 3.0 0.8 27 %MGD0073.6 3.9 (0.3) (8)%MGD0093.3 4.0 (0.7) (18)%MGD0107.8 7.6 0.2 3 %MGA0129.3 3.6 5.7 158 %MGD0138.7 5.4 3.3 61 %Immune checkpoint programs6.3 — 6.3 NAOther preclinical and clinical programs, collectively25.9 17.7 8.2 46 %Total research and development expense$122.1 $98.3 $23.8 24 %(a) - Expenses are shown net of reimbursements from collaborator.During the year ended December 31, 2016 our research and development expense increased by $23.8 million compared to 2015. This increase wasprimarily due to increased activity in our preclinical immune checkpoint programs,52including MGD013, the initiation of two Phase 1 clinical trials combining enoblituzumab with other compounds, the initiation of a Phase 1 clinical trial ofMGA012 and the addition of the NIAID MGD014 contract (which is included in Other preclinical and clinical studies, collectively above). These increaseswere partially offset by decreased manufacturing costs for margetuximab. General and Administrative Expense The following represents a comparison of our general and administrative expense for the years ended December 31, 2016 and 2015: Year Ended December 31, Increase/(Decrease) 2016 2015 (dollars in millions)General and administrative expense$29.8 $22.8 $7.0 31%General and administrative expense increased for the year ended December 31, 2016 by $7.0 million compared to 2015 primarily due to increasedstaff, recruiting costs, stock-based compensation expense and patent expense.Other IncomeThe increase in other income for the year ended December 31, 2016 compared to 2015 is primarily due to an increase in interest income earned onmarketable securities.Liquidity and Capital ResourcesWe have historically financed our operations primarily through public and private offerings of equity, upfront fees, milestone payments and licenseoption fees from collaborators and reimbursement through government grants and contracts. As of December 31, 2017, we had $305.1 million in cash, cashequivalents and marketable securities. In addition to our existing cash, cash equivalents and marketable securities, we are eligible to receive additionalreimbursement from our collaborators, including under various government grants or contracts, for certain research and development services rendered,additional milestone and opt-in payments and grant revenue. However, our ability to receive these milestone payments is dependent upon our ability tosuccessfully complete specified research and development activities and is therefore uncertain at this time.Funding RequirementsWe have not generated any revenue from product sales to date and do not expect to do so until such time as we obtain regulatory approval for andcommercialize one or more of our product candidates. As we are currently in the clinical trial stage of development, it will be some time before we expect togenerate revenue from product sales and it is uncertain that we ever will. We expect that we will continue to increase our operating expenses in connectionwith ongoing as well as additional clinical trials and preclinical development of product candidates in our pipeline. We expect to continue our collaborationarrangements and will look for additional collaboration opportunities. We also expect to continue our efforts to pursue additional grants and contracts fromthe U.S. government in order to further our research and development. Although it is difficult to predict our funding requirements, based upon our currentoperating plan, we anticipate that our existing cash, cash equivalents and marketable securities as of December 31, 2017, as well as other collaborationpayments we anticipate receiving, will enable us to fund our operations for approximately two years, assuming all of our programs and collaborationsadvance as currently contemplated.Cash FlowsThe following table represents a summary of our cash flows for the years ended December 31, 2017, 2016 and 2015:53 Year Ended December 31, 2017 2016 2015 (dollars in millions)Net cash provided by (used in): Operating activities$14.4 $(43.7) $(13.7)Investing activities77.9 (70.2) (152.1)Financing activities35.3 1.9 204.3Net increase (decrease) in cash and cash equivalents$127.6 $(112.0) $38.5Operating Activities Net cash provided by or used in operating activities reflects, among other things, the amounts used to run our clinical trials and preclinical activities.Net cash provided by operating activities during the year ended December 31, 2017 is primarily due to cash received under the Incyte agreement partiallyoffset by an increase in the number of ongoing clinical trials and the expenses associated with increased enrollment in clinical trials. The increase in net cashused in operating activities for the year ended December 31, 2016 compared to 2015 is primarily due to an increase in the number of ongoing clinical trials,the expenses associated with increased enrollment in clinical trials and an increase in the number of employees. Investing ActivitiesNet cash provided by investing activities during the year ended December 31, 2017 is primarily due to maturities of marketable securities, partiallyoffset by purchases of marketable securities and making leasehold improvements to our facilities, including the build out of a manufacturing suite at ourheadquarters building in Rockville, Maryland. Net cash used in investing activities during the years ended December 31, 2016 and 2015 is primarily due toinvesting our cash in marketable securities and making leasehold improvements to our facilities. Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2017 reflects net cash proceeds from our securities offerings ofapproximately $34.3 million, cash from stock option exercises and proceeds from the purchase of shares under our employee stock purchase plan. Net cashprovided by financing activities for the year ended December 31, 2016 includes cash from stock option exercises. Net cash provided by financing activitiesfor the year ended December 31, 2015 includes net proceeds from the Johnson & Johnson Innovation – JJDC, Inc. investment (described more fully in Note 9to the financial statements), the follow-on equity offering, and cash from stock option exercises. Contractual Obligations and Contingent LiabilitiesThe following table represents future minimum operating lease payments under non-cancelable operating leases as of December 31, 2017: Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years (in millions)Operating Leases$45.8 $6.6 $11.1 $9.6 $18.5Our current obligations and contingent liabilities are limited to the operating leases at our facilities in Rockville, Maryland and Brisbane,California. In July 2008, we acquired Raven Biotechnologies (Raven). The Raven purchase agreement provides for certain contingent payments that are basedon the achievement of development and commercialization activities for product candidates derived from the acquired Raven technology. We are required tomake a one-time payment of $5.0 million to the former Raven stockholders upon the initiation of patient dosing in the first Phase 2 clinical trial of anyproduct derived from the Raven cancer stem cell program. No payment shall be made if the Phase 2 trial start date has not occurred on or before July 15, 2018.Other consideration includes a percentage of revenue (excluding consideration for research and development, equity and certain cost reimbursements) wemay recognize for each license of a product candidate derived from the Raven cancer stem cell program. The revenue percentage in each case is based uponthe execution date of the subject license. No consideration is owed for licenses executed after July 16, 2018. There is additional contingent consideration ofone-time payments of $8.0 million and $12.0 million, which depend upon the achievement of a specified level of sales of a product derived from the Ravencancer54stem cell program. At our sole discretion, each payment can be made in cash, common stock or a combination thereof. No additional amounts related to theRaven purchase agreement were recorded during the three years ended December 31, 2017.The contractual obligations table does not include any potential future payments we may be required to make under the purchase agreement withRaven. Due to the uncertainty of the achievement and timing of the events requiring payment under that agreement, the amounts to be paid by us are notfixed or determinable at this time. Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements, as defined under the rules and regulations of the Securities and Exchange Commission.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur primary objective when considering our investment activities is to preserve capital in order to fund our operations. We also seek to maximizeincome from our investments without assuming significant risk. Our current investment policy is to invest principally in deposits and securities issued by theU.S. government and its agencies, Government Sponsored Enterprise agency debt obligations, corporate debt obligations and money market instruments. Asof December 31, 2017, we had cash, cash equivalents and marketable securities of $305.1 million. Our primary exposure to market risk is related to changesin interest rates. Due to the short-term maturities of our cash equivalents and marketable securities and the low risk profile of our marketable securities, animmediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and marketable securities.We have the ability to hold our marketable securities until maturity, and we therefore do not expect a change in market interest rates to affect our operatingresults or cash flows to any significant degree.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe information required by this item is set forth on pages F-1 - F-29.ITEM 9.CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESDisclosure Controls and ProceduresOur management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls andprocedures as of December 31, 2017. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to bedisclosed in this annual report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including ourprincipal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principalexecutive and principal financial officers have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.Changes in Internal ControlOur management, including our principal executive and principal financial officers, has evaluated any changes in our internal control over financialreporting that occurred during the quarterly period ended December 31, 2017, and has concluded that there was no change that occurred during the quarterlyperiod ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Management's Report on Internal Control over Financial ReportingThe management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal controlover financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designedby, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors,management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:55•pertain to the management of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of theCompany;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assetsthat could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore,even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2017. Inmaking this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission(2013 framework) (COSO) in Internal Control-Integrated Framework. Based on our assessment, management believes that, as of December 31, 2017, theCompany's internal control over financial reporting is effective based on those criteria.The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young, LLP, an independentregistered public accounting firm, as stated in their report which is included herein.ITEM 9B.OTHER INFORMATIONNone.56Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of MacroGenics, Inc.Opinion on Internal Control over Financial ReportingWe have audited MacroGenics, Inc.’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In ouropinion, MacroGenics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive loss, stockholders’equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated February 27, 2018,expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Ernst & Young LLPBaltimore, MarylandFebruary 27, 201857PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEWe incorporate herein by reference the relevant information concerning directors, executive officers and corporate governance to be included in ourdefinitive proxy statement for the 2018 annual meeting of stockholders (the "2018 Proxy Statement").ITEM 11.EXECUTIVE COMPENSATIONWe incorporate herein by reference the relevant information concerning executive compensation to be included in the 2018 Proxy Statement.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSWe incorporate herein by reference the relevant information concerning security ownership of certain beneficial owners and management to beincluded in the 2018 Proxy Statement.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEWe incorporate herein by reference the relevant information concerning certain other relationships and related transactions to be included in the2018 Proxy Statement.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESWe incorporate herein by reference the relevant information concerning principal accountant fees and services to be included in the 2018 ProxyStatement.58PART IVITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) The following documents are filed as part of this Annual Report on Form 10-K:(1)Consolidated Financial Statements:Report of Ernst & Young LLP, Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of Operations and Comprehensive LossF-4Consolidated Statements of Stockholders' EquityF-5Consolidated Statements of Cash FlowsF-6Notes to Consolidated Financial StatementsF-7(2)Financial Statement Schedules:All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in thefinancial statements or the notes thereto. (3)ExhibitsThe exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately following our consolidated financialstatements. The Exhibit Index is incorporated herein by reference.ITEM 16. FORM 10-K SUMMARYNot applicable.59SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized: MacroGenics, Inc. By:/s/ Scott Koenig Scott Koenig, M.D., Ph.D. President and CEO and DirectorPursuant to the requirements of the Securities Act of 1934, as amended, this Report has been signed by the following persons on behalf of theregistrant and in the capacities and on the dates indicated:Signature Title Date /s/ Scott Koenig President and CEO and Director February 27, 2018Scott Koenig, M.D., Ph.D. (Principal Executive Officer) /s/ James Karrels Senior Vice President, Chief Financial February 27, 2018James Karrels Officer and Secretary (Principal Financial Officer) /s/ Lynn Cilinski Vice President, Controller and Treasurer February 27, 2018Lynn Cilinski (Principal Accounting Officer) /s/ Paulo Costa Director February 27, 2018Paulo Costa /s/ Karen Ferrante, M.D. Director February 27, 2018Karen Ferrante, M.D. /s/ Matthew Fust Director February 27, 2018Matthew Fust /s/ Kenneth Galbraith Director February 27, 2018Kenneth Galbraith /s/ Edward Hurwitz Director February 27, 2018Edward Hurwitz /s/ Scott Jackson Director February 27, 2018Scott Jackson /s/ Jay Siegel, M.D. Director February 27, 2018Jay Siegel, M.D. /s/ David Stump, M.D. Director February 27, 2018David Stump, M.D. 60INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageNumber Report of Ernst & Young LLP, Independent Registered Public Accounting FirmF - 2 Consolidated Balance Sheets at December 31, 2017 and December 31, 2016F - 3 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2017, 2016 and 2015F - 4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2016 and 2015F - 5 Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015F - 6 Notes to Consolidated Financial StatementsF - 7F - 1Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of MacroGenics, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of MacroGenics, Inc. (the Company) as of December 31, 2017 and 2016, the relatedconsolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the consolidated financial position of the Company at December 31, 2017 and 2016, and the consolidated results of its operations and itscash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2018, expressed an unqualifiedopinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLP We have served as the Company's auditor since 2006. Baltimore, Maryland February 27, 2018 F - 2MACROGENICS, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data) December 31, 2017 2016Assets Current assets: Cash and cash equivalents$211,727 $84,098Marketable securities93,394 192,898Accounts receivable13,643 2,764Prepaid expenses3,151 3,483Other current assets383 704Total current assets322,298 283,947 Property, equipment and software, net49,983 17,961Marketable securities, non-current— 7,986Other assets1,602 1,369Total assets$373,883 $311,263 Liabilities and stockholders' equity Current liabilities: Accounts payable$2,451 $3,995Accrued expenses38,581 16,134Deferred revenue7,202 4,261Deferred rent1,048 1,319Lease exit liability298 1,593Other current liabilities175 —Total current liabilities49,755 27,302 Deferred revenue, net of current portion13,637 10,045Deferred rent, net of current portion11,253 4,867Lease exit liability, net of current portion— 298Total liabilities74,645 42,512 Stockholders' equity: Common stock, $0.01 par value – 125,000,000 shares authorized, 36,859,077 and 34,870,607 shares outstandingat December 31, 2017 and 2016, respectively369 349Additional paid-in capital611,270 561,198Accumulated other comprehensive loss(61) (82)Accumulated deficit(312,340) (292,714)Total stockholders' equity299,238 268,751Total liabilities and stockholders' equity$373,883 $311,263See accompanying notes.F - 3MACROGENICS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(In thousands, except share and per share data) Year Ended December 31, 2017 2016 2015Revenues: Revenue from collaborative agreements$155,516 $86,582 $99,368Revenue from government agreements2,226 5,298 1,486Total revenues157,742 91,880 100,854 Costs and expenses: Research and development147,232 122,091 98,271General and administrative32,653 29,831 22,765Total costs and expenses179,885 151,922 121,036 Loss from operations(22,143) (60,042) (20,182) Other income2,517 1,514 42Net loss(19,626) (58,528) (20,140) Other comprehensive loss: Unrealized loss on investments(21) (77) (5)Comprehensive loss$(19,647) $(58,605) $(20,145) Basic and diluted net loss per common share$(0.54) $(1.69) $(0.63)Basic and diluted weighted average number of common shares36,095,080 34,685,274 31,801,645See accompanying notes.F - 4MACROGENICS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(In thousands, except share amounts) Common Stock Treasury Stock AdditionalPaid-InCapital AccumulatedDeficit AccumulatedOtherComprehensive Loss TotalStockholders'Equity Shares Amount Shares Amount Balance, December 31, 201427,995,638 $280 865 $(19) $335,071 $(214,046) $— $121,286Share-based compensation— — — — 7,847 — — 7,847Issuance of common stock, net of offeringcosts5,976,827 60 — — 203,407 — — 203,467Stock plan related activity373,289 3 925 (29) 908 — — 882Retirement of treasury stock— — (1,790) 48 (48) — — —Unrealized loss on investments— — — — — — (5) (5)Net loss— — — — — (20,140) — (20,140)Balance, December 31, 201534,345,754 343 — — 547,185 (234,186) (5) 313,337Share-based compensation— — — — 12,165 — — 12,165Stock plan related activity524,853 6 1,862 (39) 1,887 — — 1,854Retirement of treasury stock— — (1,862) 39 (39) — — —Unrealized loss on investments— — — — — — (77) (77)Net loss— — — — — (58,528) — (58,528)Balance, December 31, 201634,870,607 349 — — 561,198 (292,714) (82) 268,751Share-based compensation— — — — 14,744 — — 14,744Issuance of common stock, net of offeringcosts1,699,284 17 — — 34,227 — — 34,244Stock plan related activity289,186 3 1,862 (40) 1,141 — — 1,104Retirement of treasury stock— — (1,862) 40 (40) — — —Unrealized gain on investments— — — — — — 21 21Net loss— — — — — (19,626) — (19,626)Balance, December 31, 201736,859,077 $369 — $— $611,270 $(312,340) $(61) $299,238See accompanying notes.F - 5MACROGENICS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2017 2016 2015Operating activities Net loss$(19,626) $(58,528) $(20,140)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization expense7,228 7,608 2,863Share-based compensation14,744 12,165 7,847Changes in operating assets and liabilities: Accounts receivable(10,878) (1,540) 1,711Prepaid expenses332 (1,677) 2,405Restricted cash— — 300Other assets262 276 (285)Accounts payable(1,544) 2,232 (163)Accrued expenses12,832 4,659 3,545Lease exit liability(1,593) (2,822) (3,293)Deferred revenue6,533 (4,191) (12,223)Deferred rent6,115 (1,134) 4,650Other liabilities— (727) (878)Net cash provided by (used in) operating activities14,405 (43,679) (13,661) Cash flows from investing activities Purchases of marketable securities(135,122) (347,762) (142,910)Proceeds from sales and maturities of marketable securities242,401 288,894 —Purchases of property, equipment and software(29,403) (11,381) (9,197)Net cash provided by (used in) investing activities77,876 (70,249) (152,107) Cash flows from financing activities Proceeds from issuance of common stock, net of offering costs34,244 — 203,467Proceeds from stock option exercises and ESPP purchases1,144 1,893 911Purchase of treasury stock(40) (39) (29)Net cash provided by financing activities35,348 1,854 204,349Net change in cash and cash equivalents127,629 (112,074) 38,581Cash and cash equivalents at beginning of period84,098 196,172 157,591Cash and cash equivalents at end of period$211,727 $84,098 $196,172 See accompanying notes.F - 6MACROGENICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization and Nature of OperationsMacroGenics, Inc. (the Company) was incorporated in Delaware on August 14, 2000. The Company is a biopharmaceutical company focused ondiscovering and developing innovative antibody-based therapeutics designed to modulate the human immune response for the treatment of cancer. TheCompany currently has a pipeline of product candidates in human clinical testing that have been created primarily using its proprietary technologyplatforms, which have broad applicability across other therapeutic domains, including autoimmune disorders and infectious disease. The Company believesits programs have the potential to have a meaningful effect on treating patients' unmet medical needs as monotherapy or, in some cases, in combination withother therapeutic agents.2. Summary of Significant Accounting PoliciesBasis of Presentation and Principles of ConsolidationThe consolidated financial statements include the accounts of MacroGenics, Inc. and its wholly owned subsidiary, MacroGenics UK Limited. Allintercompany accounts and transactions have been eliminated in consolidation. The Company currently operates in one operating segment. Operatingsegments are defined as components of an enterprise about which separate discrete information is available for the chief operating decision maker, or decisionmaking group, in deciding how to allocate resources and assessing performance. The Company views its operations and manages its business in one segment,which is developing monoclonal antibody-based therapeutics for cancer, autoimmune and infectious diseases.Use of EstimatesThe preparation of the financial statements in accordance with generally accepted accounting principles (GAAP) requires the Company to makeestimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities. In preparing these consolidated financial statements, management has made its best estimates and judgments of certainamounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, the Company evaluates its estimates, includingthose related to revenue recognition, fair values of assets, stock-based compensation, income taxes, preclinical study and clinical trial accruals and othercontingencies. Management bases its estimates on historical experience or on various other assumptions that it believes to be reasonable under thecircumstances. Actual results could differ from these estimates.Cash, Cash Equivalents and Marketable SecuritiesThe Company considers all investments in highly liquid financial instruments with a maturity of 90 days or less at the date of purchase to be cashequivalents. Cash and cash equivalents includes investments in money market funds with commercial banks and financial institutions, securities issued bythe U.S. government and its agencies, Government Sponsored Enterprise agency debt obligations and corporate debt obligations. Cash equivalents are statedat amortized cost, plus accrued interest, which approximates fair value.The Company carries marketable securities classified as available-for-sale at fair value as determined by prices for identical or similar securities at thebalance sheet date. Marketable securities consist of Level 2 financial instruments in the fair-value hierarchy. The Company records unrealized gains andlosses as a component of other comprehensive loss within the statements of operations and comprehensive loss and as a separate component of stockholders'equity. Realized gains or losses on available-for-sale securities are determined using the specific identification method and the Company includes netrealized gains and losses in other income (expense).At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized lossis other-than-temporary. The Company considers factors including: the significance of the decline in value compared to the cost basis, underlying factorscontributing to a decline in the prices of securities in a single asset class, the length of time the market value of the security has been less than its cost basis,the security's relative performance versus its peers, sector or asset class, expected market volatility and the market and economy in general. The Companyalso evaluates whether it is more likely than not that it will be required to sell a security prior to recovery of its fair value. An impairment loss is recognizedat the time the Company determines that a decline in the fair value below its cost basis is other-than-temporary. There were no unrealized losses atDecember 31, 2017 or 2016 that the Company determined to be other-than-temporary.F - 7Accounts ReceivableAccounts receivable that management has the intent and ability to collect are reported in the consolidated balance sheets at outstanding amounts,less an allowance for doubtful accounts. The Company writes off uncollectible receivables when the likelihood of collection is remote.The Company evaluates the collectability of accounts receivable on a regular basis. The allowance, if any, is based upon various factors includingthe financial condition and payment history of customers, an overall review of collections experience on other accounts and economic factors or eventsexpected to affect future collections experience. No allowance was recorded as of December 31, 2017 or 2016, as the Company has a history of collecting onall outstanding accounts.Fair Value of Financial InstrumentsThe Company's financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accruedexpenses. The carrying amount of accounts receivable, accounts payable and accrued expenses are generally considered to be representative of theirrespective fair values because of their short-term nature. The Company accounts for recurring and non-recurring fair value measurements in accordance withthe Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820).ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosures about fairvalue measurements. The ASC 820 hierarchy ranks the quality of reliability of inputs, or assumptions, used in the determination of fair value and requiresassets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:•Level 1 – Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.•Level 2 – Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can includequoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Relatedinputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated byobservable market data.•Level 3 – Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significantand subjective judgments to be made by a reporting entity – e.g., determining an appropriate adjustment to a discount factor for illiquidityassociated with a given security.The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level atwhich to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used indetermining fair value and where such inputs lie within the ASC 820 hierarchy.Financial assets measured at fair value on a recurring basis were as follows (in thousands): Fair Value Measurement at December 31, 2017 Quoted Prices inActive Markets forIdentical Assets Significant OtherObservable Inputs SignificantUnobservableInputs Total Level 1 Level 2 Level 3Assets: Money market funds$61,512 $61,512 $— $—U.S Treasury securities3,990 — 3,990 —Government-sponsored enterprises11,990 — 11,990 —Corporate debt securities78,418 — 78,418 —Total assets measured at fair value (a)$155,910 $61,512 $94,398 $—(a) Total assets measured at fair value at December 31, 2017 includes approximately $62.5 million reported in cash and cash equivalents on the balancesheet.F - 8 Fair Value Measurement at December 31, 2016 Quoted Prices inActive Markets forIdentical Assets Significant OtherObservable Inputs SignificantUnobservableInputs Total Level 1 Level 2 Level 3Assets: Money market funds$46,781 $46,781 $— $—U.S Treasury securities8,826 — 8,826 —Government-sponsored enterprises29,759 — 29,759 —Corporate debt securities166,300 — 166,300 —Total assets measured at fair value (a)$251,666 $46,781 $204,885 $—(a) Total assets measured at fair value at December 31, 2016 includes approximately $50.8 million reported in cash and cash equivalents on the balancesheet.The fair value of Level 2 securities is determined from market pricing and other observable market inputs for similar securities obtained from variousthird-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data.There were no transfers between Level 1 and Level 2 investments during the periods presented.Concentration of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketablesecurities and accounts receivable. We maintain our cash and money market funds with financial institutions that are federally insured. While balancesdeposited in these institutions often exceed Federal Deposit Insurance Corporation limits, we have not experienced any losses on related accounts to date. Our investment policy limits investments to certain types of debt securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The counterparties are various corporations, financialinstitutions and government agencies of high credit standing.The Company's revenue relates to agreements with various collaborators and contracts and research grants received from U.S. governmentagencies. The following table includes those collaborators that represent more than 10% of total revenue earned in the periods indicated: Year Ended December 31, 2017 2016 2015Incyte Corporation (Incyte)96% * *Janssen Biotech, Inc. (Janssen)* 85% 72%Boehringer Ingelheim GmbH (Boehringer)* * 12%The following table includes those counterparties that represent more than 10% of accounts receivable at the date indicated: December 31, 2017 2016F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (Roche)73% *Les Laboratoires Servier and Institut de Recherches Servier (Servier)12% 31%Janssen* 40%U.S. Government* 19%* Balance is less than 10%F - 9Property, Equipment and SoftwareProperty, equipment and software are stated at cost. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciationor amortization are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs areexpensed as incurred. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:Computer equipment3 yearsSoftware3 yearsFurniture10 yearsLaboratory and office equipment5 yearsLeasehold improvementsShorter of lease term or useful lifeImpairment of Long-Lived Assets The Company assesses the recoverability of its long-lived assets in accordance with the provisions of ASC 360, Property, Plant and Equipment.ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscountednet cash flows expected to be generated by the asset or asset group. If carrying value exceeds the sum of undiscounted cash flows, the Company thendetermines the fair value of the underlying asset group. Any impairment to be recognized is measured by the amount by which the carrying amount of theasset group exceeds the estimated fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, lesscosts to sell. As of December 31, 2017 and 2016, the Company determined that there were no impaired assets and had no assets held-for-sale.Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and aremeasured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assetsand liabilities of a change in tax rates is recognized as income in the period that such tax rate changes are enacted. The measurement of a deferred tax asset isreduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Financialstatement recognition of a tax position taken or expected to be taken in a tax return is determined based on a more-likely-than-not threshold of that positionbeing sustained. If the tax position meets this threshold, the benefit to be recognized is measured as the largest amount that is more likely than not to berealized upon ultimate settlement. The Company's policy is to record interest and penalties related to uncertain tax positions as a component of income taxexpense.Revenues Revenue RecognitionThe Company enters into collaboration and license agreements with collaborators for the development of monoclonal antibody-based therapeuticsto treat cancer and other complex diseases. The terms of these agreements contain multiple deliverables which may include (i) licenses, or options to obtainlicenses, to the Company's technological platforms, such as its Fc Optimization and DART® technologies, (ii) rights to future technological improvements,(iii) research and development activities to be performed on behalf of the collaborator or as part of the collaboration, and (iv) the manufacture of preclinicalor clinical materials for the collaborator. Payments to the Company under these agreements may include nonrefundable license fees, option fees, exercisefees, payments for research and development activities, payments for the manufacture of preclinical or clinical materials, license maintenance payments,payments based upon the achievement of certain milestones and royalties on product sales. Other benefits to the Company of these agreements include theright to sell products resulting from the collaborative efforts of the parties in specific geographic territories. The Company follows the provisions of FASBASC Topic 605-25, Revenue Recognition – Multiple-Element Arrangements, and FASB ASC Topic 605-28, Revenue Recognition–Milestone Method, inaccounting for these agreements. In order to account for these agreements, the Company must identify the deliverables included within the agreement andevaluate which deliverables represent separate units of accounting based on the achievement of certain criteria, including whether the delivered element hasstand-alone value to the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognitioncriteria are applied to each of the separate units.F - 10For the periods presented, the Company had the following two types of agreements: 1) exclusive development and commercialization licenses to usethe Company's technology and/or certain other intellectual property to develop compounds against specified targets (referred to herein as exclusive licenses);and 2) option/research agreements to secure on established terms, development and commercialization licenses to therapeutic product candidates tocollaborator-selected targets developed by the Company during an option period (referred to herein as right-to-develop agreements).There are no performance, cancellation, termination or refund provisions in any of the arrangements that contain material financial consequences tothe Company.Exclusive LicensesThe deliverables under an exclusive license agreement generally include the exclusive license to the Company's DART technology with respect to aspecified antigen target, and may also include deliverables related to rights to future technological improvements, research and preclinical developmentactivities to be performed on behalf of the collaborator. In some cases, the Company may have an option to participate in the co-development of productcandidates that result from such agreements.Generally, exclusive license agreements contain nonrefundable terms for payments and, depending on the terms of the agreement, provide that theCompany will (i) at the collaborator's request, provide research and preclinical development services at negotiated prices which are generally consistent withwhat other third parties would charge, (ii) earn payments upon the achievement of certain milestones, (iii) earn royalty payments, and (iv) in some cases grantthe Company an option to participate in the development and commercialization of products that result from such agreements. Royalty rates may vary overthe royalty term depending on the Company's intellectual property rights and whether the Company exercises any co-development and co-commercializationrights. The Company does not directly control when any collaborator will achieve milestones or become liable for royalty payments.When entering into a new collaboration arrangement or materially modifying an existing arrangement, the Company must identify the deliverablesincluded within the agreement and evaluate which deliverables represent separate units of accounting based on the achievement of certain criteria, includingwhether the delivered element has stand-alone value to the collaborator. The selling prices of deliverables under an arrangement may be derived using third-party evidence (TPE), or a best estimate of selling price (BESP), if vendor specific objective evidence (VSOE) is not available. The objective of BESP is todetermine the price at which the Company would transact a sale if the element within the license agreement was sold on a standalone basis. EstablishingBESP involves management's judgment and considers multiple factors, including market conditions, company-specific factors, and factors contemplated innegotiating the agreements, as well as internally developed models that include assumptions related to market opportunity, discounted cash flows, estimateddevelopment costs, probability of success and the time needed to commercialize a product candidate pursuant to the license. In validating the BESP,management considers whether changes in key assumptions used to determine the BESP will have a significant effect on the allocation of the arrangementconsideration between the multiple deliverables. Deliverables under the arrangement are separate units of accounting if (i) the delivered item has value to thecustomer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of theundelivered item is considered probable and substantially within the Company's control. The arrangement consideration that is fixed or determinable at theinception of the arrangement is allocated to the separate units of accounting based on their relative selling prices. The appropriate revenue recognition modelis applied to each element and revenue is accordingly recognized as each element is delivered. Management exercises significant judgment in determiningwhether a deliverable is a separate unit of accounting.In determining the separate units of accounting, the Company evaluates whether the exclusive license has standalone value to the collaboratorbased on consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research anddevelopment capabilities of the collaborator and the availability of relevant research expertise in the marketplace. In addition, the Company considerswhether or not (i) the collaborator could use the license for its intended purpose without the receipt of the remaining deliverables, (ii) the value of the licensewas dependent on the undelivered items and (iii) the collaborator or other vendors could provide the undelivered items. If the Company concludes that thelicense has stand-alone value and therefore will be accounted for as a separate unit of accounting, the Company then determines the estimated selling pricesof the license and all other units of accounting based on market conditions, similar arrangements entered into by third parties, and entity-specific factors suchas the terms of the Company's previous collaboration agreements, recent preclinical and clinical testing results of therapeutic product candidates that use theCompany's technology platforms, the Company's pricing practices and pricing objectives, the likelihood that technological improvements will be made, thelikelihood that technological improvements made will be used by the Company's collaborators and the nature of the research services to be performed onbehalf of its collaborators and market rates for similar services. Total arrangement consideration is then allocated to each of the units of accounting using therelative-selling-price method. If facts and circumstances dictate that the exclusive license does not have stand-alone value, then the related payments aredeferred and revenue is recognized throughout the period of performance.F - 11Management reassesses the period of performance over which the Company recognizes deferred upfront license fees and makes adjustments asappropriate in the period in which a change in the estimated period of performance is identified. In the event a collaborator elects to discontinuedevelopment of a specific product candidate under a single target license, but retains its right to use the Company's technology to develop an alternativeproduct candidate to the same target or a target substitute, the Company would cease amortization of any remaining portion of the upfront fee until there issubstantial preclinical activity on another product candidate and its remaining period of substantial involvement can be estimated. In the event that a singletarget license was to be terminated, the Company would recognize as revenue any portion of the upfront fee that had not previously been recorded asrevenue, but was classified as deferred revenue, at the date of such termination or through the remaining substantial involvement in the wind down of theagreement.Upfront payments on exclusive licenses may be recognized upon delivery of the license if facts and circumstances dictate that the license has stand-alone value from the undelivered elements, which generally include rights to future technological improvements, research services and the manufacture ofpreclinical and clinical materials.The Company recognizes revenue related to research and preclinical development services that represent separate units of accounting as they areperformed, as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable, and collection is reasonably assured. The Companyrecognizes revenue related to the rights to future technological improvements over the estimated term of the applicable license.The Company typically performs research activities and preclinical development services, including generating and engineering productcandidates, on behalf of its licensees during the early evaluation and preclinical testing stages of drug development under its exclusive licenses. TheCompany records amounts received for research materials produced or services performed as revenue from collaborative agreements.The Company's license agreements have milestone payments which for reporting purposes are aggregated into three categories: (i) developmentmilestones, (ii) regulatory milestones, and (iii) sales milestones. Development milestones are typically payable when a product candidate initiates oradvances into different clinical trial phases. Regulatory milestones are typically payable upon submission for marketing approval with the U.S. Food andDrug Administration (FDA) or other countries' regulatory authorities or on receipt of actual marketing approvals for the compound or for additionalindications. Sales milestones are typically payable when annual sales reach certain levels.At the inception of each agreement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk toboth parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (i) the consideration is commensuratewith either (a) the entity's performance to achieve the milestone, or (b) the enhancement of the value of the delivered item(s) as a result of a specific outcomeresulting from the entity's performance to achieve the milestone, (ii) the consideration relates solely to past performance and (iii) the consideration isreasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, regulatory,commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respectivemilestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment.Non-refundable development and regulatory milestones that are expected to be achieved as a result of the Company's efforts during the period ofsubstantial involvement are considered substantive and are recognized as revenue upon the achievement of the milestone, assuming all other revenuerecognition criteria are met. Milestones that are not considered substantive because the Company does not contribute effort to their achievement aregenerally recognized as revenue upon achievement of the milestone, as there are no undelivered elements remaining and no continuing performanceobligations, assuming all other revenue recognition criteria are met. Right-to-Develop Agreements The Company's right-to-develop agreements provide collaborators with an exclusive option to obtain licenses to develop and commercialize inspecified geographic territories product candidates developed by the Company under agreed upon research and preclinical development product programs.The product candidates resulting from each program are all directed to a specific target selected by the collaborator. Under these agreements, fees may be dueto the Company (i) at the inception of the arrangement (referred to as "upfront" fees or payments), (ii) the selection of a target for a program, (iii) upon theexercise of an option to acquire a development and commercialization license (referred to as exercise fees or payments earned) for a program, or (iv) somecombination of all of these fees.The accounting for right-to-develop agreements is dependent on the nature of the options granted to the collaborator. Options are consideredsubstantive if, at the inception of a right-to-develop agreement, the Company is at risk as to whether the collaborator will choose to exercise the options tosecure development and commercialization licenses. Factors that areF - 12considered in evaluating whether options are substantive include the overall objective of the arrangement, the benefit the collaborator might obtain from theagreement without exercising the options, the cost to exercise the options relative to the total upfront consideration, and the additional financialcommitments imposed on the collaborator as a result of exercising the options.For right-to-develop agreements where the options to secure development and commercialization licenses to a product program are consideredsubstantive, the Company does not consider the development and commercialization licenses to be a deliverable at the inception of the agreement, andtherefore defers any upfront payments received and recognizes this revenue over the period during which the collaborator could elect to exercise options fordevelopment and commercialization licenses. These periods are specific to each collaboration agreement. If a collaborator selects a target for a productprogram, any substantive option fee is deferred and recognized over the life of the option. For right-to-develop agreements that include multiple deliverables,the Company determines the selling prices of deliverables under the arrangement using TPE or a BESP, if VSOE is not available. The objective of BESP is todetermine the price at which the Company would transact a sale if the element within the right-to-develop agreement was sold on a standalone basis.Establishing BESP involves management's judgment and considers multiple factors, including market conditions and company-specific factors, includingthose factors contemplated in negotiating the agreements, as well as internally developed models that include assumptions related to market opportunity,discounted cash flows, estimated development costs, probability of success and the time needed to commercialize a product candidate pursuant to the right-to-develop agreement. In validating the BESP, management considers whether changes in key assumptions used to determine the BESP will have asignificant effect on the allocation of the arrangement consideration between the multiple deliverables. Deliverables under the arrangement are separate unitsof accounting if (i) the delivered item has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative tothe delivered item, delivery or performance of the undelivered item is considered probable and substantially within the Company's control. The arrangementconsideration that is fixed or determinable at the inception of the arrangement is allocated to the separate units of accounting based on their relative sellingprices. The appropriate revenue recognition model is applied to each element and revenue is accordingly recognized as each element is delivered.Management exercises significant judgment in determining whether a deliverable is a separate unit of accounting.If a collaborator exercises an option and acquires a development and commercialization license to a product program, the Company attributes theexercise fee to the development and commercialization license. The Company determines the selling price of the option license, upon exercise, throughmanagement's best estimate using the process for an exclusive license as described above.Upon exercise of an option to acquire a development and commercialization license, the Company would also attribute any remaining deferredoption fee, in addition to the consideration received for the license upon exercise of the option, to the development and commercialization license. TheCompany then applies the multiple-element revenue recognition criteria to the development and commercialization license and other deliverables, if any, todetermine the appropriate revenue recognition method. This model is consistent with the Company's accounting policy for upfront payments on exclusivelicenses (discussed above). In the event a right-to-develop agreement were to be terminated, the Company would recognize as revenue any portion of theupfront fee that had not previously been recorded as revenue, but was classified as deferred revenue, at the date of such termination. The Company's right-to-develop agreements have been determined to contain substantive options.For right-to-develop agreements where the options to secure development and commercialization licenses to product programs are not consideredsubstantive, the Company considers the development and commercialization licenses to be a deliverable at the inception of the agreement and applies themultiple-element revenue recognition criteria to determine the appropriate revenue recognition. The Company does not directly control when anycollaborator will exercise its options for development and commercialization licenses.Research and Development CostsResearch and development expenditures are expensed as incurred. Research and development costs primarily consist of employee related expenses,including salaries and benefits, expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct theCompany's clinical trials, the cost of acquiring and manufacturing clinical trial materials and other allocated expenses, license fees for and milestonepayments related to in-licensed products and technologies, stock-based compensation expense, and costs associated with non-clinical activities andregulatory approvals.Right-to-develop agreements may contain cost-sharing provisions whereby the Company and the collaborator share the cost of research anddevelopment activities. Reimbursement of research and development expenses received in connection with these agreements is recorded as a reduction ofsuch expenses.Comprehensive LossF - 13Comprehensive loss represents net loss adjusted for the change during the periods attributed to unrealized gains and losses on available-for-salesecurities.Stock-based CompensationStock-based payments are accounted for in accordance with the provisions of ASC 718, Compensation – Stock Compensation. The fair value ofstock-based payments is estimated, on the date of grant, using the Black-Scholes model. The resulting fair value is recognized ratably over the requisiteservice period, which is generally the vesting period of the option.For all time-vesting awards granted, expense is amortized using the straight-line attribution method. For awards that contain a performancecondition, expense is amortized using the accelerated attribution method. Recognition of stock-based compensation expense is based on the value of theportion of stock-based awards that is ultimately expected to vest during the period.The Company utilizes the Black-Scholes model for estimating fair value of its stock options granted. Option valuation models, including the Black-Scholes model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of anaward. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.Net Loss Per ShareBasic loss per common share is determined by dividing loss attributable to common stockholders by the weighted-average number of commonshares outstanding during the period, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the lossattributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period. The treasury stock method isused to determine the dilutive effect of the Company's stock option grants.Basic and diluted loss per common share is computed as follows (in thousands except share and per share data): Year Ended December 31, 2017 2016 2015Numerator: Net loss used for calculation of basic and diluted EPS$(19,626) $(58,528) $(20,140) Denominator: Weighted average shares outstanding, basic36,095,080 34,685,274 31,801,645Effect of dilutive securities: Stock options and restricted stock units— — — Weighted average shares outstanding, diluted36,095,080 34,685,274 31,801,645Net loss per share, basic and diluted$(0.54) $(1.69) $(0.63)The following common stock equivalents were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive: Year Ended December 31, 2017 2016 2015Stock options4,504,642 3,838,060 4,146,064Recently Issued Accounting StandardsIn May 2014, the (FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-basedapproach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods orservices as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cashflows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain orfulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after DecemberF - 1415, 2017 and interim periods therein, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016. ASU 2014-09 may be adopted either retrospectively or on a modified retrospective basis whereby ASU 2014-09 would be applied to new contracts and existingcontracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings atthe effective date for existing contracts with remaining performance obligations. In 2016, the FASB issued ASU 2016-08, Revenue from Contracts withCustomers: Principal versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations andLicensing, and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients to provide supplementaladoption guidance and clarification to ASU 2014-09. The effective date for these new standards is the same as the effective date and transition requirementsfor ASU 2014-09. The Company will adopt the new standard in the first quarter of 2018 using the modified retrospective method.The Company has substantially completed extensive contract specific reviews to determine the impact of the new standard on its historical andprospective revenue recognition. Due to the unique contract terms of certain agreements, the Company is still in the process of finalizing its analysis of thoseagreements. Upon completion of the Company’s analysis, it will determine the cumulative effect of initially applying the new standard (if any). TheCompany is also finalizing its accounting policy and designing and implementing the necessary changes to processes and controls to account for revenueunder the new standard. Based on the Company's timeline and planned resources, the Company anticipates completing its implementation in connectionwith its first quarter 2018 interim financial statements.In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02) that provides principles for the recognition, measurement, presentationand disclosure of leases for both lessees and lessors. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for operatingleases and changes many key definitions, including the definition of a lease. ASU 2016-02 includes a short-term lease exception for leases with a term of 12months or less, in which a lessee can make an accounting policy election not to recognize lease assets and lease liabilities. Lessees will continue todifferentiate between finance leases (previously referred to as capital leases) and operating leases, using classification criteria that are substantially similar tothe previous guidance. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with earlierapplication permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliestcomparative period in the financial statements. The Company is currently evaluating the effect of the standard on its consolidated financial statements andrelated disclosures.In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). This amendmentaddresses several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as eitherequity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, includinginterim periods within that year. The Company adopted ASU 2016-09 effective January 1, 2017 and has elected to continue to estimate the number of stock-based awards expected to vest, as permitted by ASU 2016-09, rather than electing to account for forfeitures as they occur. The adoption of this standard didnot have a material impact on the Company's financial statements or related disclosures.The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that the adoption of thesewill not have a material impact on the Company's consolidated financial statements.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law making significant changes to the Internal RevenueCode, which included how the U.S. imposes income tax on multinational corporations. Key changes in the Tax Act which are relevant to us, and generallyeffective January 1, 2018, include a flat corporate income tax rate of 21% to replace the marginal rates that range from 15% to 35% and the elimination of thecorporate alternative minimum tax. The Tax Act also imposes limits on executive compensations and interest expense deductions, while permitting theimmediate expensing for the cost of new investments in certain property acquired after September 27, 2017.On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when aregistrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accountingfor certain income tax effects of the Tax Act. SAB 118 allows registrants to include a provisional amount to account for the implications of the Tax Act wherea reasonable estimate can be made and requires the completion of the accounting no later than one year from the date of the enactment of the Tax Act, orDecember 22, 2018.ASC 740 requires changes in tax rates and tax laws to be accounted for in the period of enactment in continuing operations. Accordingly, ofsignificance, we recorded a provisional estimate for the re-measurement of our U.S. deferred tax assets and liabilities to 21%. This change in value of thesedeferred tax assets and liabilities, which is provisional, was offsetF - 15by a corresponding change in our valuation allowance, thus no tax expense or benefit was recorded. The ultimate impact may differ from these provisionalamounts, possibly materially, due to, among other things, additional information necessary to complete the computation and analysis thereof, additionalregulatory guidance that may be issued, and actions we may take as a result of the Tax Act. The accounting is expected to be complete by December 22,2018.3. Marketable SecuritiesAvailable-for-sale marketable securities as of December 31, 2017 and 2016 were as follows (in thousands): December 31, 2017 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValueU.S. Treasury securities$3,995 $— $(6) $3,989Government-sponsored enterprises11,998 — (7) 11,991Corporate debt securities77,462 2 (50) 77,414Total$93,455 $2 $(63) $93,394 December 31, 2016 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValueU.S. Treasury securities$4,826 $— $(1) $4,825Government-sponsored enterprises29,764 5 (10) 29,759Corporate debt securities166,376 51 (127) 166,300Total$200,966 $56 $(138) $200,884All of the Company's available-for-sale securities held at December 31, 2017 had maturity dates of less than one year. The contractual maturities of theavailable-for-sale marketable securities as of December 31, 2016 were as follows (in thousands): Amortized Cost Fair ValueMature in one year or less$192,985 $192,898Mature between one and five years7,981 7,986Total$200,966 $200,884All available-for-sale securities in an unrealized loss position as of December 31, 2017 and 2016 were in a loss position for less than twelve months. There were no unrealized losses at December 31, 2017 or 2016 that the Company determined to be other-than-temporary. The Company recorded interestincome of $2.4 million, $2.3 million and $0.2 million during the years ended December 31, 2017, 2016 and 2015, respectively, which is included in otherincome. 4. Property, Equipment and SoftwareProperty, equipment and software consists of the following (in thousands):F - 16 December 31, 2017 2016Computer equipment$2,261 $2,520Software5,111 2,352Furniture and office equipment656 897Lab equipment20,549 20,208Leasehold improvements17,525 17,807Construction in progress32,800 —Property, equipment and software78,902 43,784Less accumulated depreciation and amortization(28,919) (25,823)Property, equipment and software, net$49,983 $17,961Construction in progress at December 31, 2017 consists of the costs incurred for the build-out of a manufacturing suite at our headquarters buildingin Rockville, Maryland, which is expected to be completed in mid-2018.We had $9.6 million in property, equipment and software at December 31, 2017 that was purchased in 2017 but was not paid for by year end. Property, equipment and software balance at December 31, 2016 includes approximately $0.3 million in assets that were purchased in 2016 but were not paidfor by year end. Depreciation and amortization expense related to property, equipment and software for the years ended December 31, 2017, 2016 and 2015was $7.0 million, $6.8 million and $3.2 million, respectively.5. Stockholders' Equity The Company's amended and restated certificate of incorporation authorizes 125,000,000 shares of common stock, and 5,000,000 shares ofundesignated preferred stock, both with a par value of $0.01 per share. There were no shares of undesignated preferred stock issued or outstanding as ofDecember 31, 2017 or 2016.In February 2014, the Company completed an equity offering, in which the Company sold 1,800,000 shares of its common stock at a price of $36.50per share. Additionally, the underwriters of the offering exercised the full amount of their over-allotment option resulting in the sale of an additional 450,000shares of the Company's common stock at a price of $36.50 per share. The Company received proceeds of $76.7 million from this offering, net ofunderwriting discounts and commissions and other offering expenses.In January 2015, the Company's stock purchase agreement and investor agreement, each with Johnson & Johnson Innovation – JJDC, Inc. (JJDC)became effective (see Note 9 for additional information). Under these agreements, JJDC purchased 1,923,077 new shares of the Company's common stock ata price of $39.00 per share, representing proceeds of $75.0 million.In July 2015, the Company completed an equity offering, in which the Company sold 3,525,000 shares of its common stock at a price of $37.00 pershare. Additionally, the underwriters of the offering exercised the full amount of their over-allotment option resulting in the sale of an additional 528,750shares of the Company's common stock at a price of $37.00 per share. The Company received net proceeds of $141.0 million from this offering, net ofunderwriting discounts and commissions and other estimated offering expenses.On April 26, 2017, the Company entered into a definitive agreement with an institutional healthcare investor to purchase 1,100,000 shares of itscommon stock at a purchase price of $21.50 per share in a registered direct offering. Proceeds to the Company, before deducting estimated offering expenses,were $23.7 million. The shares were offered pursuant to the Company’s effective shelf registration on Form S-3 that was filed with the SEC on November 2,2016.On May 3, 2017, the Company entered into a sales agreement with an agent to sell, from time to time, shares of its common stock having anaggregate sales price of up to $75.0 million through an “at the market offering” (ATM Offering) as defined in Rule 415 under the Securities Act of 1933, asamended. The shares that may be sold under the sales agreement would be issued and sold pursuant to the Company's shelf registration statement on Form S-3that was filed with the SEC on November 2, 2016. During the year ended December 31, 2017, the Company sold 599,284 shares of common stock resulting innet proceeds of $10.8 million related to the ATM Offering.6. Stock-based CompensationF - 17Employee Stock Purchase PlanIn May 2017, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the 2016 ESPP). The 2016 ESPP is structured as aqualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended, and is not subject to the provisions of theEmployee Retirement Income Security Act of 1974. The Company reserved 800,000 shares of common stock for issuance under the 2016 ESPP. The 2016ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 10% of their eligiblecompensation, subject to any plan limitations. The 2016 ESPP provides for six-month offering periods ending on May 31 and November 30 of each year. Atthe end of each offering period, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of theoffering period. During the year ended December 31, 2017, employees purchased 38,012 shares of common stock under the 2016 ESPP for net proceeds to theCompany of approximately $0.6 million.Employee Stock Option PlansEffective February 2003, the Company implemented the 2003 Equity Incentive Plan (2003 Plan), and it was amended and approved by theCompany's stockholders in 2005. The 2003 Plan originally allowed for the grant of awards in respect of an aggregate of 2,051,644 shares of the Company'scommon stock. Between 2006 and 2012, the maximum number of shares of common stock authorized to be issued by the Company under the 2003 Plan wasincreased to 4,336,730. Stock options granted under the 2003 Plan may be either incentive stock options as defined by the Internal Revenue Code (IRC), ornon-qualified stock options. In 2013, the 2003 Plan was terminated, and no further awards may be issued under the plan. Any shares of common stock subjectto awards under the 2003 Plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised, orresulting in any common stock being issued, will become available for issuance under the 2013 Stock Incentive Plan (2013 Plan), up to a specified number ofshares. As of December 31, 2017, under the 2003 Plan, there were options to purchase an aggregate of 955,296 shares of common stock outstanding at aweighted average exercise price of $1.85 per share.In October 2013, the Company implemented the 2013 Plan. The 2013 Plan provides for the grant of stock options and other stock-based awards, aswell as cash-based performance awards. The aggregate number of shares of common stock initially available for issuance pursuant to awards under the 2013Plan was 1,960,168 shares. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each year from January1, 2014 through and including January 1, 2023, by the lesser of (a) 1,960,168 shares, (b) 4.0% of the total number of shares of common stock outstanding onDecember 31 of the preceding calendar year, or (c) the number of shares of common stock determined by the Board of Directors. During the year endedDecember 31, 2017, the maximum number of shares of common stock authorized to be issued by the Company under the 2013 Plan was increased to6,769,888. If an option expires or terminates for any reason without having been fully exercised, if any shares of restricted stock are forfeited, or if any awardterminates, expires or is settled without all or a portion of the shares of common stock covered by the award being issued, such shares are available for thegrant of additional awards. However, any shares that are withheld (or delivered) to pay withholding taxes or to pay the exercise price of an option are notavailable for the grant of additional awards. As of December 31, 2017, under the 2013 Plan, there were options to purchase an aggregate of 3,549,346 sharesof common stock outstanding at a weighted average exercise price of $24.62 per share.The following stock-based compensation amounts were recognized for the periods indicated (in thousands): Year Ended December 31, 2017 2016 2015 Research and development$7,388 $5,778 $3,623General and administrative7,356 6,387 4,224Total stock-based compensation expense$14,744 $12,165 $7,847Employee Stock OptionsThe fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in thefollowing table:F - 18 Year Ended December 31, 2017 2016 2015Expected dividend yield0% 0% 0%Expected volatility67% - 68% 64% - 69% 73% - 75%Risk-free interest rate1.9% - 2.3% 1.2% - 2.4% 1.6% - 2.1%Expected term6.25 years 6.25 years 6.25 yearsExpected Dividend Yield – The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.Expected Volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) oris expected to fluctuate (expected volatility) during a period. As the Company does not yet have sufficient history of its own volatility, the Company hasidentified several public entities of similar size, complexity and stage of development and estimates volatility based on the volatility of these companies.Risk-Free Interest Rate – This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resemblesthe expected life of the option.Expected Term – This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term often years. The Company uses a simplified method to calculate the average expected term.In addition to the assumptions above, the Company estimates the forfeiture rate based on turnover data with further consideration given to the classof the employees to whom the options were granted. The forfeiture rate is the estimated percentage of options granted that is expected to be forfeited orcanceled on an annual basis before becoming fully vested.The following table summarizes stock option and restricted stock unit (RSU) activity for 2017: Shares Weighted-AverageExercise Price Weighted-AverageRemainingContractualTerm(Years) AggregateIntrinsic Value(in thousands)Outstanding, December 31, 20163,838,060 $18.93 7.0 Granted1,246,225 20.05 Options exercised or RSUs vested(253,036) 2.16 Forfeited or expired(326,607) 24.26 Outstanding, December 31, 20174,504,642 19.79 7.0 $18,343 December 31, 2017: Exercisable2,910,171 17.65 6.1 17,495Vested and expected to vest4,337,015 19.60 6.9 18,275During 2017, 2016 and 2015 the Company issued 253,036, 526,715 and 374,214 net shares of common stock, respectively, in conjunction withstock option exercises and RSU lapses. The Company received cash proceeds from the exercise of stock options of approximately $0.5 million, $1.9 millionand $0.9 million during 2017, 2016 and 2015, respectively.The weighted-average grant-date fair value of options granted during 2017, 2016 and 2015 was $12.53, $15.17 and $20.90 per share, respectively.The total intrinsic value of options exercised during 2017, 2016 and 2015 was approximately $4.2 million, $10.8 million and $10.9 million,respectively. The total fair value of stock options which vested during 2017, 2016 and 2015 was $14.6 million, $11.6 million and $7.3 million,respectively. As of December 31, 2017, the total unrecognized compensation expense related to non-vested stock options and RSUs, net of related forfeitureestimates, was $20.3 million, which the Company expects to recognize over a weighted-average period of approximately 2.3 years.7. Income TaxesF - 19For the years ended December 31, 2017, 2016 and 2015 there was no provision for income taxes due to taxable losses generated, fully offset by avaluation allowance.The significant components of the Company's deferred income tax assets (liabilities) were as follows (in thousands): December 31, 2017 2016Deferred income tax assets: Federal U.S. net operating loss carryforward$50,346 $75,377State net operating loss carryforward7,551 6,583Research and development credit, net21,284 12,829Orphan drug credit, net21,708 19,855Deferred rent3,385 2,497Deferred revenue2,982 5,098Depreciation155 2,926Other5,847 5,085Gross deferred income tax assets113,258 130,250Valuation allowance(112,453) (128,844)Net deferred income tax assets805 1,406 Deferred income tax liabilities: Prepaid expenditures(805) (1,406)Gross deferred income tax liabilities(805) (1,406)Net deferred income tax asset/(liability)$— $—The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessingthe likelihood of realization, management considers (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive ofreversing temporary difference and carryforwards; (iii) taxable income in prior carryback years if carryback is permitted under applicable tax law; and (iv) taxplanning strategies. The Company's net deferred income tax asset is not more likely than not to be utilized due to the lack of sufficient sources of futuretaxable income and cumulative book losses which have resulted over the years. The net decrease in the valuation allowance in 2017 is primarily as a result ofthe legislation enacted in 2017, which lowers the statutory corporate tax rate from 35% to 21%,, which decreased the net deferred tax asset.As of December 31, 2017, the Company has U.S. federal and state NOL carryforwards of approximately $239.7 million that will expire in variousyears beginning in 2025 through 2037. In addition, the Company has U.S. federal tax credits of $42.8 million which will expire in various years beginning in2025 through 2037.The use of the Company's U.S. federal NOL and tax credit carryforwards in future years are restricted due to changes in the Company's ownership andtax attributes acquired through the Company's acquisitions. As of December 31, 2017, $13.5 million of the Company's U.S. Federal NOLs are limited for useover the years 2018 – 2028 in which a range of such amounts could be utilized on an annual basis of $0.2 million to $1.4 million. The remaining $226.2million of NOLs is not limited and can be offset against future taxable income, subject to certain limitations for newly enacted tax legislation. The Companyadopted ASU 2016-09 as of January 1, 2017. Accordingly, the Company recognized the previously unrecognized excess tax benefits of approximately $18.6million ($6.5 million tax effected) recorded as deferred tax assets with a corresponding offsetting full valuation allowance at the beginning of 2017 withoutany tax impact. Further, despite the NOL and tax credit carryforwards, the Company may have a future tax liability due to recent changes in tax legislation orstate tax requirements in which net operating losses do not exist. The Company is still quantifying the impact of these changes.F - 20The reconciliation of the reported estimated income tax benefit to the amount that would result by applying the U.S. federal statutory tax rate to thenet income is as follows (in thousands): Year Ended December 31, 2017 2016 2015 United States federal tax at statutory rate$(6,869) $(20,489) $(7,049)State taxes (net of federal benefit)(735) (3,116) (897)Deferred income tax adjustments607 173 661Deferred state blended rate adjustments(485) (32) (493)Deferred federal rate change reduction in corporate rate39,447 — —Research credit, net(8,455) (2,551) (3,296)Orphan drug credit, net(1,853) (571) (106)Other permanent items276 145 (25)Equity-based compensation2,067 1,997 1,102Change in valuation allowance(24,000) 24,444 10,103Income tax expense/(benefit)$— $— $—A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands): Year Ended December 31, 2017 2016 2015Beginning balance$2,465 $2,425 $2,047Increases for current year tax positions569 308 357Increases/(decreases) for prior year tax positions361 (268) 21Ending balance$3,395 $2,465 $2,425As of December 31, 2017 and 2016, of the total gross unrecognized tax benefits, approximately $3.4 million and $2.4 million would favorablyimpact the Company's effective income tax rate, respectively. Although, due to the Company's determination that the deferred income tax asset would notmore likely than not be realized, a valuation allowance would be recorded, therefore, zero net impact would result within the Company's effective income taxrate. The Company's uncertain income tax position liability has been recorded to deferred income taxes to offset the tax attribute carryforward amounts.For the years ended December 31, 2017, 2016 and 2015, the Company has not recognized any interest or penalties related to the uncertain incometax positions due to the fact such position is related to tax attribute carryforwards which have not yet been utilized. The Company does not expect itsunrecognized income tax position to significantly decrease within the next twelve months.The Company's U.S. Federal and state income tax returns from 2001 forward remain open to examination due to the carryover of unused netoperating losses and tax credits.As more fully described in Note 2 to the consolidated financial statements, the Tax Act was signed into law making significant changes to theInternal Revenue Code on December 22, 2017. Under ASC 740-10-25-47, the effects of the new legislation are to be recognized in the period of enactment.As such, recognition of the tax impact of the Tax Act is required in the interim and annual periods that include December 22, 2017. As a result, the Companyhas revalued the deferred tax asset as of December 31, 2017, fully offset by a valuation allowance without impact to the financial statements. The Companydoes not anticipate that other provisions of the Act would have a material impact on its financial statements. 8. Lease Exit LiabilityIn 2008, the Company acquired Raven Biotechnologies, Inc. (Raven), a private South San Francisco-based company focused on the development ofmonoclonal antibody therapeutics for treating cancer. The Company undertook restructuring activities related to the acquisition of Raven. In connectionwith these restructuring activities, as part of the cost of acquisition, the Company established a restructuring liability attributed to an existing operatinglease. During the year ended December 31,F - 212016, the Company entered into an agreement to sublease a portion of the space subject to this operating lease. The Company will receive approximately$1.3 million in sublease payments over its term, which ends at the same time as the original lease in February 2018. No sublease income was contemplatedwhen the restructuring liability was recorded in 2008; therefore, the Company adjusted the liability to reflect the future sublease income during the yearended December 31, 2016 and recorded an offset to research and development expense of approximately $1.3 million in the same period.Changes in the lease exit liability are as follows (in thousands):Accrual balance at December 31, 2015$4,713Principal payments and other adjustments(2,822)Accrual balance at December 31, 20161,891Principal payments and other adjustments (net of sublease receipts)(1,593)Accrual balance at December 31, 2017$298During 2015, the Company corrected an immaterial error attributed to the estimated lease term that resulted in a reduction of research anddevelopment expense of $1.9 million.9. Collaboration and Other AgreementsIncyteIn October 2017, the Company entered into an exclusive global collaboration and license agreement with Incyte Corporation (Incyte) for MGA012,an investigational monoclonal antibody that inhibits programmed cell death protein 1 (PD-1). Incyte has obtained exclusive worldwide rights for thedevelopment and commercialization of MGA012 in all indications, while the Company retains the right to develop its pipeline assets in combination withMGA012. The Company received a $150.0 million upfront payment from Incyte when the transaction closed in the fourth quarter of 2017.Under the terms of the collaboration and license agreement, Incyte will lead global development of MGA012. Assuming successful developmentand commercialization by Incyte, the Company could receive up to approximately $420.0 million in development and regulatory milestones, and up to$330.0 million in commercial milestones. The Company determined that each potential future clinical and regulatory milestone is substantive. Although thesales milestones are not considered substantive, they will be recognized upon achievement of the milestone (assuming all other revenue recognition criteriahave been met) because there are no undelivered elements that would preclude revenue recognition at that time. If commercialized, the Company would beeligible to receive tiered royalties of 15% to 24% on any global net sales. The Company retains the right to develop its pipeline assets in combination withMGA012, with Incyte commercializing MGA012 and the Company commercializing its asset(s), if any such potential combinations are approved. Inaddition, the Company retains the right to manufacture a portion of both companies' global clinical and commercial supply needs of MGA012. The Companyand Incyte have agreed to initiate negotiations for a separate clinical supply agreement that will set forth terms and conditions. Finally, Incyte will fund theCompany's activities related to the ongoing monotherapy clinical study until such time as the Company can transfer the Investigational New Drugapplication (IND) to Incyte.The Company evaluated the collaboration and license agreement with Incyte and determined that it is a revenue arrangement with multipledeliverables, or performance obligations. The Company’s substantive performance obligations under the collaboration and license agreement include thedelivery of the license and clinical activities through a brief technology transfer period. The Company evaluated the collaboration and license agreementwith Incyte and determined that the license and clinical trial activities each represented separate deliverables and were accounted for as separate units ofaccounting. The Company concluded that the license had standalone value to Incyte and was separable from the clinical trial activities because the licensewas sublicensable and Incyte has significant capabilities in performing clinical trials. Thus, the total arrangement consideration for these two deliverableswas allocated using the relative best estimate of selling price (BESP) to each deliverable. The BESP for the exclusive license was determined usinginformation from other similar collaboration and license agreements. The BESP for the clinical trial activities was determined using similar arrangements andis estimated at approximately $4.0 million, which will be recognized over the technology transfer period as work is performed and the expenses arereimbursed by Incyte.The Company recognized revenue of $151.1 million under the Incyte collaboration and license agreement during the year ended December 31,2017, including the $150.0 million upfront payment and $1.1 million related to clinical trial activities performed.F - 22RocheIn December 2017, the Company entered into a research collaboration and license agreement with Roche to jointly discover and develop novelbispecific molecules to undisclosed targets. During the research term, both companies will leverage their respective platforms, including the Company'sDART platform and Roche's CrossMAb and DutaFab technologies to select a bispecific format and lead product candidate. Roche would then further developand commercialize any such product candidate.Under the terms of this agreement, Roche received rights to use certain of the Company’s intellectual property rights to exploit collaborationcompounds and products, and paid the Company an upfront payment of $10.0 million which was received in January 2018. The Company will also beeligible to receive up to $370.0 million in potential milestone payments and royalties on future sales.The Company evaluated the research collaboration and license agreement with Roche and determined that it is a revenue arrangement with multipledeliverables, or performance obligations. The Company’s substantive performance obligations under the research collaboration and license agreementinclude the delivery of the license and activities during the research period. The Company evaluated the collaboration and license agreement with Roche anddetermined that the license and research activities do not have value on a standalone basis and therefore represented one unit of accounting. The $10.0million will be recognized over the expected research period, which is 30 months. Each company will be responsible for their own expenses during theresearch period.In addition, the Company determined that each potential future development and regulatory milestone is substantive. Although sales milestonesare not considered substantive, they are still recognized upon achievement of the milestone (assuming all other revenue recognition criteria have been met)because there are no undelivered elements that would preclude revenue recognition at that time.At December 31, 2017, $10.0 million of revenue was deferred under this agreement, $4.0 million of which was current and $6.0 million of whichwas non-current. JanssenIn December 2014, the Company entered into a collaboration and license agreement with Janssen for the development and commercialization ofMGD011 (also known as JNJ-64052781 or duvortuxizumab), a product candidate that incorporates the Company's proprietary DART technology tosimultaneously target CD19 and CD3 for the potential treatment of B-cell hematological malignancies (MGD011 Agreement). The Companycontemporaneously entered into an agreement with JJDC under which JJDC agreed to purchase 1,923,077 new shares of the Company's common stock forproceeds of $75.0 million. Upon closing the transaction in January 2015, the Company received a $50.0 million upfront payment from Janssen as well as the$75.0 million investment in the Company's common stock. In August 2017, Janssen notified the Company that they were terminating the MGD011Agreement.Under the MGD011 Agreement, the Company granted an exclusive license to Janssen to develop and commercialize duvortuxizumab. Followingthe Company's submission of the Investigational New Drug (IND) application, Janssen became fully responsible for the development and commercializationof duvortuxizumab. At the inception of the MGD011 Agreement, the Company evaluated it and determined that it was a revenue arrangement with multiple deliverables,or performance obligations. The Company's substantive performance obligations under the collaboration and license agreement included the delivery of anexclusive license and research and development services during the preclinical research period (through the filing of the IND for duvortuxizumab). TheCompany evaluated the MGD011 Agreement and determined that the license and preclinical research and development activities each represented separatedeliverables and were accounted for as separate units of accounting. The Company concluded that the license had standalone value to Janssen and wasseparable from the research and development services because the license was sublicensable, there were no restrictions as to Janssen's use of the license andJanssen or other third parties have significant research capabilities in this field. Thus, the total arrangement consideration for these two deliverables wasallocated using the relative BESP method to each deliverable. The BESP for the exclusive license was determined using a discounted cash flow model thatincludes Level 3 fair value measurements. The BESP for the research and development services was determined using third party evidence of other similarresearch and development arrangements, which are Level 2 fair value measurements.The Company evaluated the stock purchase agreement and the collaboration and license agreement as one arrangement and determined that thestock purchase price of $39.00 per share exceeded the fair value of the common stock by $12.3 million. This excess was recognized in the same manner as theupfront payment allocated to the license and preclinicalF - 23research and development activities. Of the total arrangement consideration of $125.0 million, the Company allocated $62.7 million to equity (representingthe fair value of common stock purchased), $62.3 million to the license and preclinical research and development activities, and a de minimis amount to theongoing research and development activities. The Company submitted the IND application and therefore met its performance obligation during the yearended December 31, 2015.In July 2015, Janssen dosed the first patient in an open-label Phase 1 study of duvortuxizumab which triggered a $10.0 million milestone to theCompany. No revenue was recognized under the MGD011 Agreement during the year ended December 31, 2017. During the years ended December 31, 2016and 2015, the Company recognized revenue of approximately $2.0 million and $72.3 million, respectively, under the MGD011 agreement.In May 2016, the Company entered into a separate collaboration and license agreement with Janssen, a related party through ownership of theCompany's common stock, for the development and commercialization of MGD015, a product candidate that incorporates the Company's proprietary DARTtechnology to simultaneously target CD3 and an undisclosed tumor target for the potential treatment of various hematological malignancies and solid tumors(MGD015 Agreement). Under the MGD015 Agreement, the Company granted an exclusive license to Janssen to develop and commercialize MGD015. TheCompany received a $75.0 million upfront payment from Janssen upon closing the transaction. In January 2018, Janssen notified the Company that theywere terminating the MGD015 Agreement.At the inception of the MGD015 Agreement, the Company evaluated it and determined that it was a revenue arrangement with multiple deliverables,or performance obligations. The Company's substantive performance obligations under the MGD015 Agreement included the delivery of an exclusivelicense and research and development services during the preclinical research period. The Company evaluated the MGD015 Agreement with Janssen anddetermined that the license and preclinical research and development activities each represented separate deliverables and were accounted for as two separateunits of accounting. The Company concluded that the license had standalone value to Janssen and was separable from the research and development servicesbecause the license was sublicensable, there were no restrictions as to Janssen's use of the license and Janssen or other third parties have significant researchcapabilities in this field. Thus, the total arrangement consideration for these two deliverables was allocated using the BESP method to each deliverable. TheBESP for the exclusive license was determined using information from the previous collaboration and license agreement with Janssen as well as other thirdparty collaboration and license agreements, which are Level 2 fair value measurements. The BESP for the research and development services was determinedusing other similar research and development arrangements, which are also Level 2 fair value measurements.During the years ended December 31, 2017 and 2016, the Company recognized revenue of $0.6 million and $75.8 million, respectively, under theMGD015 Agreement. Revenue recognized in 2016 included the $75.0 million upfront fee for the exclusive license.TakedaIn May 2014, the Company entered into a license and option agreement with Takeda for the development and commercialization of MGD010, aproduct candidate that incorporates the Company's proprietary DART technology to simultaneously engage CD32B and CD79B, which are two B-cellsurface proteins. MGD010 is being developed for the treatment of autoimmune disorders. Upon execution of the agreement, Takeda made a non-refundablepayment of $15.0 million to the Company. Takeda had an option to obtain an exclusive worldwide license for MGD010 following the completion of a pre-defined Phase 1a study. Following the announcement of its therapeutic area re-prioritization, Takeda gave formal notification in September 2016 that it didnot intend to exercise this option. As a result of Takeda not exercising the option, the Company regained worldwide development and commercializationrights to MGD010.At the inception of the license and option agreement with Takeda, the Company evaluated it and determined that it was a revenue arrangement withmultiple deliverables, or performance obligations. The Company's substantive performance obligations under the license and option agreement includedexclusivity, research and development services through the Phase 1a study and delivery of a future license for an initial research compound. The Companyconcluded that the MGD010 option was substantive and that the license fee payable upon exercise of the option was not a deliverable at the inception of thearrangement as there was considerable uncertainty that the option would be exercised. The Company determined that each potential future clinical andregulatory milestone was substantive. Although sales milestones are not considered substantive, they are still recognized upon achievement of the milestone(assuming all other revenue recognition criteria have been met) because there are no undelivered elements that would preclude revenue recognition at thattime. The Company determined that these performance obligations represent a single unit of accounting, because the exclusivity clause does not havestand-alone value to Takeda without the Company's technical expertise and development through the pre-defined Phase 1a study.F - 24After identifying the deliverables included within the arrangement, the Company determined its best estimate of selling price. The Companyallocated $10.0 million to the exclusivity clause to its technology and the research and development services and $5.0 million to the exclusive license forthe initial research compound. The Company's determination of best estimate of selling price for the research and development services relied upon othersimilar transactions. The Company relied upon the income approach (e.g., discounted future cash flows) to determine the value of the license of the to-be-delivered compound along with other similar license transactions with differing indications but similar stage of development. The portion of the up-front feeallocated to the MGD010 option was being recognized over an initial 24-month period, which represented the expected period of development through thecompletion of a pre-defined Phase 1a study. During the first quarter of 2016, the Company determined that the development period would be extended byeight months, and prospectively adjusted the MGD010 option fee recognition period. The portion of the up-front fee allocated to the license for the initialresearch compound was deferred until the research collaboration and license option agreement was executed and the license delivered in September 2014. Upon the notification that Takeda would not exercise the option to obtain an exclusive worldwide license for MGD010 during the three months endedSeptember 30, 2016, the Company's performance obligation to Takeda ceased, and the remaining deferred revenue under the MGD010 agreement wasrecognized in full.No revenue under was recognized under this agreement during the year ended December 31, 2017. The Company recognized revenue ofapproximately $2.1 million and $8.0 million under the MGD010 agreement during the years ended December 31, 2016 and 2015, respectively. Revenuerecognized during the year ended December 31, 2015 included a $3.0 million milestone payment received upon initiation of a Phase 1a trial ofMGD010. No revenue was deferred under this agreement at December 31, 2017 or 2016. ServierIn September 2012, the Company entered into a right-to-develop collaboration agreement with Servier and granted it options to obtain threeseparate exclusive licenses to develop and commercialize DART molecules, consisting of those designated by the Company as MGD006 (or flotetuzumab)(also known as S80880) and MGD007, as well as a third DART molecule, in all countries other than the United States, Canada, Mexico, Japan, South Koreaand India. During 2014, Servier exercised its exclusive option to develop and commercialize flotetuzumab, and during 2016 Servier notified the Companythat it did not intend to exercise the option for the third DART molecule. Servier retains the option to obtain a license for MGD007.Upon execution of the agreement, Servier made a nonrefundable payment of $20.0 million to the Company. In addition, the Company will beeligible to receive up to $40.0 million in license fees, $63.0 million in clinical milestone payments, $188.0 million in regulatory milestone payments and$420.0 million in sales milestone payments if Servier exercises the remaining available options and successfully develops, obtains regulatory approval for,and commercializes a product under each license. In addition to these milestones, the Company and Servier will share Phase 2 and Phase 3 developmentcosts. The Company has determined that each potential future clinical and regulatory milestone is substantive. Although sales milestones are not consideredsubstantive, they are still recognized upon achievement of the milestone (assuming all other revenue recognition criteria have been met) because there are noundelivered elements that would preclude revenue recognition at that time. Under this agreement, Servier would be obligated to pay the Company from lowdouble-digit to mid-teen royalties on net product sales in its territories.The Company evaluated the research collaboration agreement with Servier and determined that it is a revenue arrangement with multipledeliverables, or performance obligations. The Company concluded that each option is substantive and that the license fees for each option are notdeliverables at the inception of the arrangement and were not issued with a substantial discount. The Company's substantive performance obligations underthis research collaboration include an exclusivity clause to its technology, technical, scientific and intellectual property support to the research plan andparticipation on an executive committee and a research and development committee. The Company determined that the performance obligations with respectto the preclinical development represent a single unit of accounting, since the license does not have stand-alone value to Servier without the Company'stechnical expertise and committee participation. As such, the initial upfront license payment was deferred and initially recognized ratably over a 29-monthperiod, which represented the expected development period. During 2014, the Company and Servier further refined the research plan related to the threeDART molecules and as such, the development period was extended. Based on this revised development period, the Company prospectively adjusted itsperiod of recognition of the upfront payment to a 75-month period. The impact of this change in accounting estimate reduced revenue that would have beenrecognized in 2014 by $3.7 million.As a result of Servier exercising its option in 2014, the Company received a $15.0 million payment from Servier for its license to develop andcommercialize flotetuzumab in its territories. Upon exercise of the option, the Company evaluated itsF - 25performance obligations with respect to the license for flotetuzumab. The Company's substantive performance obligations under this research collaborationinclude an exclusive license to its technology, technical, scientific and intellectual property support to the research plan and participation on an executivecommittee and a research and development committee. The Company determined that the performance obligations with respect to the clinical developmentrepresent a single unit of accounting, since the license does not have stand-alone value to Servier without the Company's technical expertise and committeeparticipation. As such, the $15.0 million license fee was deferred and was being recognized ratably over a period of 82 months, which represented theexpected development period for flotetuzumab. During the year ended December 31, 2017, the Company and Servier determined that the expecteddevelopment period should be extended to 124 months. The impact of this change in accounting estimate reduced revenue that would have been recognizedin 2017 by $0.8 million. In accordance with the agreement, the Company and Servier will share costs incurred to develop flotetuzumab. Reimbursement ofresearch and development expenses received in connection with this collaborative cost-sharing agreement is recorded as a reduction to research anddevelopment expense. During the years ended December 31, 2017, 2016 and 2015 the Company recorded approximately $3.2 million, $2.6 million and $0.5million as an offset to research and development costs under this collaboration arrangement, respectively. During the years ended December 31, 2017, 2016 and 2015 the Company recognized revenue of $2.5 million, $3.3 million, and $3.5 million,respectively, under this agreement. At December 31, 2017, $8.5 million of revenue was deferred under this agreement, $2.3 million of which was current and$6.2 million of which was non-current. At December 31, 2016, $11.1 million of revenue was deferred under this agreement, $3.3 million of which was currentand $7.8 million of which was non-current. BoehringerIn October 2010 the Company entered into a collaboration and license agreement with Boehringer to discover, develop and commercialize multipleDART molecules that were to be evaluated during a five-year period that ended in October 2015. Under the terms of the agreement, the Company grantedBoehringer an exclusive, worldwide, royalty-bearing, license under its intellectual property to research, develop, and market DART molecules generatedunder the agreement.Upon execution of the agreement, the Company received an upfront payment of $15.0 million. The Company subsequently received three annualmaintenance payments. These maintenance payments were being recognized over the estimated period of development. The Company has the potential toearn additional milestone payments of approximately $34.0 million related to preclinical and clinical development, $88.5 million related to regulatorymilestones and $82.5 million related to sales milestones for each of the two ongoing programs under this agreement. The Company determined that eachpotential future preclinical, clinical and regulatory milestone is substantive. Although sales milestones are not considered substantive, they are stillrecognized upon achievement of the milestone (assuming all other revenue recognition criteria have been met) because there are no undelivered elementsthat would preclude revenue recognition at that time. Boehringer would be required to pay the Company mid-single digit royalties on product sales.The Company determined that the deliverables under the Boehringer agreement include the license, the research and development services to beperformed by the Company, and the co-promotion/manufacturing services. The Company concluded that the co-promotional activities were optional andwere subject to further negotiation upon reaching regulatory approval. As such, the co-promotional period is not included in the expected obligation periodto perform services.The Company concluded that the undelivered element of research and development services had fair value. The Company concluded that thelicense did not have value on a standalone basis (e.g. absent the provision of the research and development services) and therefore did not represent aseparate unit of accounting. The Company concluded that because the drug candidate had not yet been developed, the license was of no value to Boehringerwithout the ensuing research and development activities using the DART technology, which is proprietary to the Company. Likewise, Boehringer could notsell the license to another party (without the Company agreeing to provide the research and development activities for the other party). Therefore, the upfrontlicense fee and research and development services were treated as a combined unit of accounting and recognized over the expected obligation periodassociated with the research and development services through October 2015, which represented the estimated period of development.The Company and Boehringer also agreed to establish a joint research committee to facilitate the governance and oversight of the parties' activitiesunder the agreements. Management considered whether participation on the joint committee may be a deliverable and determined that it was not adeliverable. However, had management considered participation on the joint committee as a deliverable, it would not have had a material impact on theaccounting for the arrangement as the period of participation in this committee matched the obligation period for the research and development services.The Company recognized no revenue under this agreement during the years ended December 31, 2017 and December 31, 2016. The Companyrecognized revenue of approximately $12.5 million during the year ended December 31,F - 262015 under this agreement, including a payment of $5.0 million for the achievement of preclinical milestones. No revenue was deferred under this agreementat December 31, 2017 or 2016.Green CrossIn June 2010, the Company entered into a collaboration agreement with Green Cross Corp. (Green Cross) for the development of the Company's anti-HER2 antibody margetuximab. This arrangement grants Green Cross an exclusive license to conduct specified Phase 1 and Phase 2 clinical trials andcommercialize margetuximab in South Korea. In March 2014, the Company and Green Cross entered into an amendment to the original agreement, causingthe terms of the original agreement to be materially modified.Upon execution of the amendment, the Company became eligible to receive reimbursement for costs incurred for Phase 2 and Phase 3 clinical trialsup to $5.5 million as well as clinical development and commercial milestone payments of up to $2.5 million. The Company determined that each potentialclinical development and commercial milestone is substantive. The Company is also entitled to receive royalties on net sales of margetuximab in SouthKorea. The Company and Green Cross have formed a joint steering committee to coordinate and oversee activities on which the companies collaborate underthe agreement.The Company evaluated the collaboration agreement with Green Cross and determined that it is a revenue arrangement with multiple deliverables orperformance obligations. As a result of the material modification to the arrangement in March 2014, the Company reassessed the entire arrangement inaccordance with the guidance provided by ASC 605-25, Multiple Element Arrangements (Revenue Recognition) as the original agreement was accounted forprior to adopting ASU 2009-13. The Company's substantive performance obligations under this agreement include an exclusive license to its technologies,research and development services, and participation in a joint steering committee. The Company concluded that the license and the reimbursements forresearch and development services do not have value on a standalone basis and therefore do not represent separate units of accounting.The initial $1.0 million upfront payment received by the Company upon execution of the original agreement is non-refundable; as such, there is noright of return for the license. Therefore, the upfront license fee and participation on the joint steering committee were treated as a combined unit ofaccounting and will be recognized over the term of the agreement through June 2020. Further, due to the fact the research and development services are notdeemed to have stand-alone value, revenue for those services will be recognized over the entire term of the agreement (through June 2020). As a result ofreassessing the arrangement in accordance with ASC 605-25, the Company was required to record an adjustment on the date of the material modification toreflect the revenue that would have resulted had the entity applied the requirements of ASC 605-25 from the inception of the agreement. As a result, theCompany recorded an additional $1.3 million of revenue during 2014. The Company has received a total of $5.5 million through December 31, 2017 forreimbursement of research and development services, which is also being recognized over the remaining term of the agreement.The Company recognized revenues of approximately $0.9 million, $0.8 million and $0.5 million under this agreement during the years endedDecember 31, 2017, 2016 and 2015, respectively. No milestones were achieved under this agreement during the years ended December 31, 2017, 2016 and2015.At December 31, 2017, $2.3 million of revenue was deferred under this agreement, $0.9 million of which was current and $1.4 million of which wasnon-current. At December 31, 2016, $3.2 million of revenue was deferred under this agreement, $0.9 million of which was current and $2.3 million of whichwas non-current.NIAID ContractThe Company entered into a contract with the National Institute of Allergy and Infectious Diseases (NIAID), effective as of September 15, 2015, toperform product development and to advance up to two DART molecules, including MGD014. Under this contract, the Company will develop these productcandidates for Phase 1/2 clinical trials as therapeutic agents, in combination with latency reversing treatments, to deplete cells infected with humanimmunodeficiency virus (HIV) infection. This contract includes a base period of $7.5 million to support development of MGD014 through IND applicationsubmission with the FDA, as well as up to $17.0 million in additional development funding via NIAID options. Should NIAID fully exercise such options, theCompany could receive total payments of up to $24.5 million. The total potential period of performance under the award is from September 15, 2015 throughSeptember 14, 2022. During the year ended December 31, 2017, NIAID exercised the first option in the amount of $10.8 million. The Company recognizedrevenue of $1.7 million, $5.1 million and $0.2 million in revenue under this contract during the years ended December 31, 2017, 2016 and 2015,respectively.10. Commitments and Contingencies F - 27Operating Leases The Company leases manufacturing, office and laboratory space in Rockville, Maryland under five leases that have terms that expire between 2019and 2027 unless renewed. During the year ended December 31, 2017, the Company entered into an agreement to sublease a portion of the space it leases.Under the terms of the sublease, the Company will receive a total of $2.4 million over the 30 month term.The Rockville leases include a lease executed in July 2015 for space that the Company uses as its headquarters with office and laboratory space andmanufacturing space currently under construction. Under the terms of the lease, which commenced on January 1, 2016, the Company received anassignment fee from the former tenant and a tenant improvement allowance from the landlord totaling $5.1 million. In July 2017, the Company executed alease amendment for its headquarters building which extends the term of the lease to August 2027, restructures the rent due under the lease, and provides foran additional tenant improvement allowance from the landlord of $7.5 million, which was received during the third quarter. The assignment fee and tenantimprovement allowances have been recorded as deferred rent and are being recognized over the new lease term.The Company also leases office and laboratory space in South San Francisco under a lease that expires on February 28, 2018. During the year endedDecember 31, 2016, the Company entered into a sublease agreement for a portion of the South San Francisco space (see Note 8). As of December 31, 2017,future payments to be received by the Company under this sublease total approximately $0.1 million. In April 2017, the Company entered into a 72-monthlease commencing in December 2017 for office and laboratory space which will replace our current South San Francisco location. All of the leases contain rent escalation clauses and certain leases contain rent abatements. For financial reporting purposes, rent expense is chargedto operations on a straight-line basis over the term of the lease. As of December 31, 2017 and 2016, the Company had recorded a deferred rent liability of$12.3 million and $6.2 million, respectively. Rent expense for the years ended December 31, 2017, 2016 and 2015 was $3.1 million, $3.0 million and $0.9million, respectively.Future minimum lease payments under noncancelable operating leases as of December 31, 2017 are as follows (in thousands):2018$6,57420196,34220204,77520214,74320224,885Thereafter18,484 $45,803ContingenciesFrom time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business. The Companydoes not believe it is currently subject to any material matters where there is at least a reasonable possibility that a material loss may be incurred.11. Employee Benefit PlanIn 2002, the Company established the MacroGenics 401(k) Plan (the Plan) for its employees under Section 401(k) of the IRC. Under this Plan, allemployees at least 21 years of age are eligible to participate in the Plan, starting on the first day of each month. Employees may contribute up to 100% oftheir salary, subject to government maximums.Employees are 100% vested in their contributions to the Plan. The Company's contribution to the Plan, as determined by the Board of Directors, isdiscretionary. The Company's contributions to the Plan totaled $1.1 million, $1.0 million and $0.4 million for the years ended December 31, 2017, 2016 and2015, respectively.F - 2812. Quarterly Financial Information (unaudited) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter (in thousands, except per share data)2017 Revenue$2,055 $1,666 $1,663 $152,359Net income (loss)(37,655) (40,654) (47,043) 105,727Net income (loss) per share, basic$(1.08) $(1.14) $(1.28) $2.87Net income (loss) per share, diluted$(1.08) $(1.14) $(1.28) $2.80 2016 Revenue$2,846 $80,673 $3,255 $5,106Net income (loss)(30,363) 40,464 (33,846) (34,783)Net income (loss) per share, basic$(0.88) $1.17 $(0.97) $(1.00)Net income (loss) per share, diluted$(0.88) $1.12 $(0.97) $(1.00)F - 29EXHIBIT INDEXExhibitNo. Description 3.1 Restated Certificate of Incorporation of the Company and Certificate of Correction to the Restated Certificate of Incorporation of theCompany (incorporated by reference to Exhibits 3.1 and 3.3, respectively, to the Company's Current Report on Form 8-K filed onOctober 18, 2013) 3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1(File No. 333-190994) filed by the Company on October 1, 2013) 4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 (File No. 333-190994)filed by the Company on October 9, 2013) 4.2† Investor Agreement by and between Johnson and Johnson Innovation-JJDC, Inc. and the Company, dated December 19, 2014(incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K filed on March 3, 2015) 10.1 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 (File No.333-190994) filed by the Company on October 1, 2013) 10.2† Option for a License Agreement by and between the Company and Les Laboratoires Servier and Institut de Recherches Servier, datedSeptember 19, 2012 (incorporated by reference to Exhibit 10.20 to the Registration Statement on Form S-1 (File No. 333-190994) filedby the Company on October 4, 2013) 10.3† Global Collaboration and License Agreement by and between the Company and Incyte Corporation, dated October 24, 2017 10.4+ Company 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1 (File No.333-190994) filed by the Company on September 4, 2013) 10.5+ Form of Incentive Stock Option Agreement under 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to theRegistration Statement on Form S-1 (File No. 333-190994) filed by the Company on September 4, 2013) 10.6+ Company 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 (File No.333-190994) filed by the Company on October 1, 2013) 10.7+ Form of Incentive Stock Option Agreement under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to theRegistration Statement on Form S-1 (File No. 333-190994) filed by the Company on October 1, 2013) 10.8+ Form of Nonstatutory Stock Option Agreement under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to theRegistration Statement on Form S-1 (File No. 333-190994) filed by the Company on October 1, 2013) 10.9+ Form of Restricted Stock Units Grant Notice under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to theCompany's Quarterly Report on Form 10-Q filed on May 6, 2015) 10.10+ 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (File No. 333-214386) filed by the Company on November 2, 2016) 10.11+ Employment Agreement between the Company and Scott Koenig, M.D., Ph.D. (incorporated by reference to Exhibit 10.14 to theCompany's Annual Report on Form 10-K filed by the Company on February 29, 2016) 10.12+ Employment Agreement between the Company and James Karrels (incorporated by reference to Exhibit 10.15 to the Company's AnnualReport on Form 10-K filed by the Company on February 29, 2016) 10.13+ Employment Agreement between the Company and Jon Wigginton, M.D. (incorporated by reference to Exhibit 10.1 to the Company'sQuarterly Report on Form 10-Q filed on May 4, 2016) 10.14+ Restricted Stock Units Grant Notice and Agreement between the Company and Jon Wigginton, M.D. (incorporated by reference toExhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on May 4, 2016) 10.15+ Employment Agreement between the Company and Ezio Bonvini, M.D. (incorporated by reference to Exhibit 10.3 to the Company'sQuarterly Report on Form 10-Q filed on May 4, 2016) 10.16+ Employment Agreement between the Company and Eric Risser (incorporated by reference to Exhibit 10.16 to the Company's AnnualReport on Form 10-K filed on February 28, 2017) 23.1 Consent of Ernst & Young, LLP, Independent Registered Public Accounting Firm 31.1 Rule 13a-14(a) Certification of Principal Executive Officer 31.2 Rule 13a-14(a) Certification of Principal Financial Officer 32.1 Section 1350 Certification of Principal Executive Officer 32.2 Section 1350 Certification of Principal Financial Officer 101.INS XBRL Instance Document 101.SCH XBRL Schema Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Labels Linkbase Document 101.PRE XBRL Presentation Linkbase Document†Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment granted by the SEC.+Indicates management contract or compensatory plan.CONFIDENTIAL TREATMENT MATERIALCONFIDENTIAL TREATMENT REQUESTED: Information for which confidential treatment has been requested is omittedand is noted with asterisks. An unredacted version of this document has been filed separately with the Securities and ExchangeCommission (the “Commission”).GLOBAL COLLABORATION AND LICENSE AGREEMENTBY AND BETWEENMACROGENICS, INC.ANDINCYTE CORPORATIONNG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTED TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS1 ARTICLE 2 GOVERNANCE25 2.1Joint Steering Committee252.2Joint Development Committee262.3Joint Manufacturing Committee272.4Joint Intellectual Property Committee282.5Commercialization Coordination Committee292.6Joint Committee Membership and Operations302.7Additional Subcommittees and Working Groups322.8Authority322.9Alliance Managers322.1Decision-Making Limitations32 ARTICLE 3 LICENSES33 3.1License to Incyte333.2Sublicensing343.3Retained Rights363.4Freedom to Operate Licenses383.5No Implied Licenses40 ARTICLE 4 DEVELOPMENT40 4.1Transition of Ongoing Clinical Study404.2Incyte Development Responsibilities414.3MacroGenics Development Responsibilities444.4Global Development Plans494.5Delegation of Development Activities504.6Compliance with Law; Other Requirements50 ARTICLE 5 REGULATORY RESPONSIBILITIES51 5.1Data Sharing: Licensed Compound515.2Data Sharing: Combination Regimens535.3Data Sharing Limitations555.4Right of Reference565.5Regulatory Documentation; Regulatory Communications575.6Adverse Event Reporting and Safety Data Exchange595.7Recalls and Voluntary Withdrawals615.8Labeling615.9Other Studies62 i[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.NG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTEDARTICLE 6 COMMERCIALIZATION63 6.1Commercialization Activities636.2Pricing of Licensed Product646.3Pricing of Pipeline Assets666.4Transparency Reporting66 ARTICLE 7 MANUFACTURING67 7.1Manufacturing Technology Transfer677.2General Clinical Supply Terms687.3General Commercial Supply Terms727.4Records; Audit Rights757.5Operation of MacroGenics Manufacturing Facilities757.6Quality Assurance757.7Compliance with Law76 ARTICLE 8 CONSIDERATION76 8.1Upfront Payment768.2Milestone Payments778.3Royalty Obligations798.4Royalty Term808.5Royalty Rate Adjustments; Licensed Product Pricing808.6Manner of Royalty Payment818.7Monotherapy Development Sublicense Fees818.8Collaborator Sublicense Fees828.9Currency828.1Third Party Financial Obligations828.11Taxes848.12Audit848.13Manner of Payment85 ARTICLE 9 INTELLECTUAL PROPERTY MATTERS85 9.1Inventorship; Ownership and Disclosure of Inventions859.2Prosecution of Patents69.3Infringement of Patents by Third Parties919.4Patent Term Extensions949.5Infringement of Third Party Rights in the Territory.959.6Patent Oppositions and Other Proceedings.95 ARTICLE 10 REPRESENTATIONS, WARRANTIES AND COVENANTS96 10.1Mutual Representations, Warranties and Covenants9610.2Additional Representations and Warranties of MacroGenics9710.3Additional Representations and Warranties of Incyte100ii[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.NG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTED10.4No Other Representations or Warranties101 ARTICLE 11 CONFIDENTIALITY101 11.1Nondisclosure10111.2Exceptions10111.3Authorized Disclosure10211.4Terms of this Agreement10311.5Publicity10311.6Securities Filings10411.7Relationship to Confidentiality Agreement10411.8Equitable Relief10411.9Publications10511.1Additional Obligations Relating to Competing Antibodies106 ARTICLE 12 TERM AND TERMINATION107 12.1Term10712.2Unilateral Termination by Incyte10712.3Termination for Material Breach10712.4Termination by Incyte for Safety Reasons10712.5Termination for Patent Challenge10712.6Termination for Bankruptcy.10812.7HSR Filing; Termination Upon HSR Denial11012.8Effects of Termination11012.9Effect of Termination for MacroGenics Breach or Bankruptcy11512.1Remedies11712.11Survival117 ARTICLE 13 DISPUTE RESOLUTION118 13.1Dispute Resolution Mechanism11813.2Resolution by Executive Officers11813.3Provisional Remedies118 ARTICLE 14 INDEMNIFICATION118 14.1Indemnification by Incyte11814.2Indemnification by MacroGenics11914.3Indemnification Procedures.11914.4Insurance12014.5Limitation of Liability121 ARTICLE 15 MISCELLANEOUS121 15.1Notices12115.2Governing Law122iii[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.NG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTED15.3Change of Control.12215.4Assignment12515.5Designation of Affiliates12515.6Relationship of the Parties12515.7Force Majeure12515.8Entire Agreement; Amendments12615.9Severability12615.1English Language12615.11Waiver and Non-Exclusion of Remedies12615.12Further Assurance12615.13Headings12715.14Standstill12715.15Construction12915.16Third Party Beneficiaries12915.17Counterparts129iv[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.NG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTEDLIST OF EXHIBITSExhibit A‒Licensed PatentsExhibit B-1‒Incyte Global Development PlanExhibit B-2‒MacroGenics Global Development PlanExhibit C‒Existing Third Party LicensesExhibit D‒Form of Press ReleaseExhibit E‒Ongoing Clinical Study ActivitiesExhibit F‒Shared Prosecution Expense CountriesExhibit G‒[**]Exhibit H‒[**]v[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.NG-6PHJ0AHM 4812-2013-0909v.1CONFIDENTIAL TREATMENT REQUESTEDGLOBAL COLLABORATION AND LICENSE AGREEMENTThis GLOBAL COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is entered into as of October 24, 2017 (the“Execution Date”), by and between INCYTE CORPORATION, a Delaware corporation, having its principal place of business at1801 Augustine Cut-Off, Wilmington, DE 19803 (hereinafter “Incyte”), and MACROGENICS, INC., a Delaware corporation,having its principal place of business at 9704 Medical Center Drive, Rockville, MD 20850 (“MacroGenics”). Incyte andMacroGenics are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.WHEREAS, MacroGenics has discovered and is developing the Licensed Compound (as defined below), coded by MacroGenics as“MGA012”, for various human therapeutic uses;WHEREAS, Incyte desires to obtain certain rights to Develop, Manufacture, and Commercialize the Licensed Compound andproducts and treatment regimens incorporating the Licensed Compound, all in accordance with the terms and conditions of thisAgreement; andWHEREAS, MacroGenics is willing to grant such rights, retaining certain rights for itself, all in accordance with the terms andconditions of this Agreement.NOW, THEREFORE, in consideration of the foregoing and the premises and conditions set forth herein, the Parties agree as follows:ARTICLE 1DEFINITIONS1.1 “Acquirer” means any Third Party that is a party to any Change of Control transaction and any of such Third Party’s Affiliates.1.2 “Affiliate” means, with respect to a particular Person, a person, corporation, partnership, or other entity that controls, is controlledby, or is under common control with such first Person. For the purposes of this definition, (a) the word “control” (including, withcorrelative meaning, the term “controlled by”) means the actual power, either directly or indirectly through one or more intermediaries,to direct or cause the direction of the management and policies of a Person, whether by the ownership of fifty percent (50%) or more ofthe voting stock of such entity, or by contract or otherwise; and (b) the term “common control” includes ownership, directly, orindirectly, beneficially or legally, of outstanding voting securities or capital stock by the same Person or Persons.1.3 “Agreement” has the meaning set forth in the Preamble, and means this Agreement as in effect from time-to-time, including allSchedules, Exhibits, and other attachments hereto.1.4 “Alliance Manager” means the person appointed by each Party from within their respective organization to coordinate andfacilitate the communication, interaction and cooperation of the Parties pursuant to this Agreement.1.5 “Ancillary Therapy” means an approved (including a standard of care) therapy. For clarity, Ancillary Therapy excludes alltherapies that have not received Regulatory Approval.1[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.6 “Applicable Law” means all applicable statutes, ordinances, regulations, directives, rules, or orders of any kind whatsoever ofany Governmental Authority applicable to any activity hereunder, including the EU Data Protection Directive and the regulationsissued under the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the U.S. Federal Food, Drug, andCosmetic Act (21 U.S.C. §301 et seq.) (“FFDCA”), the Prescription Drug Marketing Act of 1987 (21 U.S.C. §§331, 333, 353, 381),the Generic Drug Enforcement Act of 1992 (21 U.S.C. §335(a) et seq.), U.S. Patent Act (35 U.S.C. §1 et seq.), the Federal FalseClaims Act (31 U.S.C. §3729 et seq.), and the Anti-Kickback Statute (42 U.S.C. §1320a-7b et seq.), and the Foreign Corrupt PracticesAct of 1977 (15 U.S.C. §§ 78dd-1, et seq.), all as amended from time to time, together with any rules, regulations, and guidancedocuments, and regulatory standards (including GCP, GLP, and GMP) promulgated relating to any of the foregoing, all as amendedfrom time to time.1.7 “Approved PD-1 Antibodies” means, collectively, all PD-1 Monoclonal Antibodies that have received Regulatory Approval (itbeing understood that this shall reflect on an ongoing basis any Regulatory Approvals that are received during the Term) in a giventerritory. As of the Execution Date, the Approved PD-1 Antibodies are pembrolizumab and nivolumab.1.8 “Biosimilar Product” means, with respect to a Licensed Product that has received Marketing Approval in a country in theTerritory, (a) a biologic therapeutic containing the same amino acid polymer as any Licensed Product; (b) a biologic therapeuticcontaining an amino acid polymer that is highly similar, or similar enough to one contained in a reference Licensed Product,notwithstanding minor differences in clinically inactive components, to permit an applicant for Regulatory Approval for such biologictherapeutic to refer to and rely on clinical and other scientific Information regarding the safety, purity, potency and/or efficacy of thereference Licensed Product in order to allow such biologic therapeutic to receive Regulatory Approval in any jurisdiction within theTerritory through an abbreviated regulatory pathway; or (c) a biologic therapeutic containing an amino acid polymer that is highlysimilar, or similar enough to one contained in a reference Product, notwithstanding minor differences in clinically inactive components,to permit such biologic therapeutic to be marketed in any jurisdiction within the Territory as generic-equivalent, functionallyequivalent, biosimilar, biogeneric, biobetter, interchangeable, or by using any other description referring to the reference Product(and/or such Product’s clinical and other scientific Information) for support for safety, purity, potency and/or efficacy claims for suchbiologic therapeutic.1.9 “Breakthrough Designation” means, with respect to a Product, that such Product satisfies the requirements for a “breakthroughtherapy”, as set forth in 21 U.S.C. § 356, as amended by § 902 of the Food and Drug Administration Safety and Innovation Act.1.10 “Business Day” means any day other than Saturday, Sunday or any other day on which banking institutions located in NewYork, New York are permitted or required by Applicable Law, executive order or governmental decree to remain closed.1.11 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30,September 30 and December 31; provided, however, that the first Calendar Quarter and the last Calendar Quarter may be partialquarters as applicable under the relevant Calendar Year.2[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.12 “Calendar Year” means the twelve (12) month period ending on December 31; provided, however, that the first Calendar Yearand the last Calendar Year of the applicable period (such as the Royalty Term) may be a partial year, as the case may be.1.13 “[**]” means, with respect to the Licensed Compound, the [**] of (a) [**] or (b) the [**] of the [**] in [**].1.14 “Cancer Treatment Use” means any of the following uses or methods of cancer treatment or therapy: (a) dosing regimens,schedules, sequencing or amounts; (b) incorporation of specific supportive care regimens; (c) treatment of patients according to aspecific biomarker, genetic disposition, or genetic profile; (d) stratification of patients who are likely or unlikely to benefit from suchclaimed combination; or (e) data or uses of data to undertake or conduct any of foregoing (a) – (d).1.15 “Centralised Approval Procedure” means, to the extent compulsory or permitted for Regulatory Approval of the LicensedCompound or a Licensed Product in Iceland, Liechtenstein, Norway or any country in the European Union, the procedureadministrated by the EMA which results in a single marketing authorization that is valid in Iceland, Liechtenstein, Norway and allcountries in the European Union.1.16 “Change of Control” shall occur if: (a) any Third Party acquires directly or indirectly the beneficial ownership of any votingsecurity of a Party, or if the percentage ownership of such person or entity in the voting securities of a Party is increased through stockredemption, cancellation or other recapitalization, and immediately after such acquisition or increase such Third Party is, directly orindirectly, the beneficial owner of voting securities representing more than fifty percent (50%) of the total voting power of all of thethen outstanding voting securities of a Party; (b) a merger, consolidation, recapitalization, or reorganization of a Party is consummated,other than any such transaction that would result in stockholders or equity holders of such Party immediately prior to such transaction,owning at least fifty percent (50%) of the outstanding securities of the surviving entity (or its parent entity) immediately following suchtransaction; (c) the stockholders or equity holders of a Party approve a plan of complete liquidation of such Party, or an agreement forthe sale or disposition by such Party of all or substantially all of such Party’s assets, other than to an Affiliate; (d) individuals who, as ofthe Effective Date, constitute the Board of Directors of a Party (the “Incumbent Board”) cease for any reason to constitute at least amajority of the Board of Directors of such Party (provided, however, that any individual becoming a director subsequent to theEffective Date whose election, or nomination for election by such Party’s shareholders, was recommended or approved by a vote of atleast a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member ofthe Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of anactual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation ofproxies or consents by or on behalf of any person other than the Board of Directors of such Party); or (e) the sale or transfer to a ThirdParty of (i) all or substantially all of such Party’s assets taken as a whole or (ii) a majority of such Party’s assets which relate to thisAgreement, is effected.3[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.17 “Clinical Study” means a Phase I Study, Phase II Study, Phase III Study, Phase IV Study or Pivotal Study, as applicable.1.18 “Clinical Supply Shortage” means a failure by MacroGenics to Manufacture Committed Supply which has occurred or isreasonably likely to occur, and which results or is reasonably likely to result in the unavailability of Licensed Compound Bulk DrugSubstance and/or Licensed Compound Drug Product when needed for use across: (a) Monotherapy Studies; (b) Incyte CombinationStudies; (c) MacroGenics Combination Studies; or (d) Collaborator Combination Studies (in the case of (d), solely to the extent therequest for such Licensed Compound Bulk Drug Substance or Licensed Compound Drug Product is made at least [**] aftercommencement of Manufacture at the MacroGenics Large-Scale Supply Plant).1.19 “Collaborator” means a Third Party collaborator who conducts Collaborator Combination Study(ies) pursuant to an applicableCollaborator Contract.1.20 “Collaborator Combination Regimen” means a Combination comprising the Licensed Compound and at least oneCollaborator Pipeline Asset (which Combination may also include any other compound that constitutes an Ancillary Therapy that isnot a Collaborator Pipeline Asset (e.g., a triplet combination)).1.21 “Collaborator Combination Study” means a Clinical Study of a Collaborator Combination Regimen that is performed with,by, or on behalf of a Collaborator, pursuant to the terms of this Agreement and the applicable Collaborator Contract, but excluding any(a) Incyte investigator-sponsored Clinical Studies, (b) Clinical Studies conducted by Incyte with academic centers, or (c) ClinicalStudies that include an Incyte Pipeline Asset. For clarity, any Clinical Study in which both an Incyte Pipeline Asset and a CollaboratorPipeline Asset are evaluated shall be considered an Incyte Combination Study.1.22 “Combination” means a combination of the Licensed Compound and a Pipeline Asset in concurrent or sequentialadministration (which combination, for clarity, may include any other compound that constitutes an Ancillary Therapy and is not aPipeline Asset (e.g., a triplet combination)).1.23 “Combination Product” means a combination of the Licensed Compound and a Pipeline Asset sold in a single finished dosageform. For clarity, the term “Combination Product” shall not include any Combination Regimen(s), except that a single finished dosageCombination that is a component of such Combination Regimen may constitute a Combination Product.1.24 “Combination Regimen(s)” means, individually or collectively, as the context requires, any MacroGenics CombinationRegimen, Incyte Combination Regimen, or Collaborator Combination Regimen.1.25 “Combination Sponsor” means (a) with respect to any MacroGenics Combination Study, MacroGenics; (b) with respect to anyIncyte Combination Study, Incyte; and (c) with respect to any Collaborator Combination Study, the applicable Collaborator or Incyte,as the case may be.4[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.26 “Combination Study(ies)” means, individually or collectively, as the context requires, any MacroGenics Combination Study,Incyte Combination Study or Collaborator Combination Study.1.27 “Commercialization” means any and all processes and activities directed to marketing, promoting, educating, pricing, payorcontracting, market access, distributing, detailing, importing, exporting, offering for sale, having sold, or selling with respect to aCompound or Product, including the conduct of any Phase IV Studies with respect thereto, and Medical Affairs Activities, but shallnot include any activities included within the Manufacture of such Compound or Product. When used as a verb, “Commercialize”means to engage in Commercialization activities.1.28 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended, or considerations to be undertaken, bya Party or its Affiliate with respect to any objective, activity or decision to be undertaken hereunder, reasonable, good faith efforts toaccomplish such objective, activity or decision as such Party would normally use to accomplish a similar objective, activity or decisionunder similar circumstances, it being understood and agreed that, with respect to the Development, Manufacture, seeking and obtainingRegulatory Approval, or Commercialization of the Licensed Compound or any Licensed Product, such efforts and resources shall beconsistent with those efforts and resources commonly used by such Party under similar circumstances for similar compounds orproducts to which it has similar rights, which compound or product, as applicable, is at a similar stage in its development or product lifeand is of similar market potential, taking into account: (a) issues of efficacy, safety, and expected and actual approved labeling; (b) theexpected and actual competitiveness of alternative products sold by Third Parties in the marketplace; (c) the expected and actualproduct profile of the Licensed Compound or any Licensed Product; (d) the expected and actual patent and other proprietary positionof the Licensed Compound or any Licensed Product; (e) the likelihood of Regulatory Approval of the Licensed Compound or anyLicensed Product given the regulatory structure involved; and (f) the expected and actual profitability and return on investment of theLicensed Compound or any Licensed Product, taking into consideration expected and actual Third Party costs and expenses andpricing and reimbursement relating to the Licensed Compound or any Licensed Product.1.29 “Commercial Supply Commitment” means, individually or collectively, as the context requires, (a) the MacroGenicsCommercial Supply Commitment or (b) the Incyte Commercial Supply Commitment.1.30 “Compound(s)” means, individually or collectively, as the context requires, (a) the Licensed Compound or (b) any PipelineAsset.1.31 “Confidential Information” means, subject to Article 11, all non-public or proprietary Information disclosed by a Party to theother Party under this Agreement, without regard as to whether any of the foregoing is marked “confidential” or “proprietary,” ordisclosed in oral, written, graphic, or electronic form. Confidential Information shall include: (a) the terms and conditions of thisAgreement; and (b) Confidential Information disclosed by either Party pursuant to the Mutual Confidential Disclosure Agreementdated [**] (the “Prior CDA”).5[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.32 “Control” or “Controlled” means, with respect to any Information, Know-How, Patent or other intellectual property right, (a)ownership by a Person or, subject to Section 15.3(d), any of its Affiliates, of such Information, Know-How, Patent or other intellectualproperty right, or (b) possession by a Person or, subject to Section 15.3(d), any of its Affiliates, of ownership of, or an exclusive licenseto, such Information, Know-How, Patent, or other intellectual property rights, in each case with the right (without taking into accountany rights granted by one Party to the other Party under the terms of this Agreement) to grant access, a license or a sublicense to suchInformation, Patent or other intellectual property right without violating the terms of any agreement or other arrangement with, ornecessitating the consent of, any Third Party, at such time that the Person would be first required under this Agreement to grant theother Person such access, license or sublicense; provided that, a Person or any of its Affiliates shall be deemed not to “Control” anyInformation, Know-How, Patent or other intellectual property right if such Person or its Affiliate is required to pay additionalconsideration to a Third Party licensor for the grant of any sublicense under such Information, Know-How, Patent or other intellectualproperty right (unless the other Person agrees in writing to pay such additional consideration).1.33 “Controlling Party” means (a) with respect to the conduct of any MacroGenics Combination Study or any relatedDevelopment, regulatory (other than Licensed Compound Regulatory Discussions, for which Incyte shall be the Controlling Party), orother obligations, MacroGenics; (b) with respect to the conduct of any Incyte Combination Study or any related Development,regulatory or other obligations, Incyte; and (c) with respect to the conduct of any Collaborator Combination Study or any relatedDevelopment, regulatory or other obligations, Incyte. For clarity, (i) except as set forth in subsection (a), MacroGenics shall be deemedto be the “Controlling Party” under subsection (a), and (ii) Incyte shall be deemed to be the “Controlling Party” under subsection (c),irrespective of which Party actually performs or causes to be performed the study or such other activity or obligation.1.34 “Core Regulatory Authority” means, individually or collectively, as the context requires, the FDA, EMA, MHLW, andHealth Canada.1.35 “Cover” or “Covering” means, with respect to a product, technology, process or method, that, in the absence of ownership ofor a license granted under a Valid Claim, the practice or exploitation of such product, technology, process or method would infringesuch Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue).1.36 “CPI Adjustment” means the percentage increase or decrease in the Consumer Price Index-Urban Wage Earners and ClericalWorkers, U.S. City Average, All Items 1982-84=100, published by the United States Department of Labor, Bureau of Labor Statistics(or its successor equivalent index), in the United States, comparing the levels of such index on the last days of the two most recentlycompleted Calendar Years.1.37 “Development” means any and all research and pre-clinical, non-clinical, and clinical drug development activities andprocesses, including toxicology, pharmacology, project management, regulatory affairs, statistical analysis, ManufacturingDevelopment, formulation development, delivery system development, the performance of Clinical Studies, or other activitiesreasonably6[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDnecessary in order to obtain Regulatory Approval of Compounds or Products in the Field in the Territory. When used as a verb,“Develop” means to engage in Development activities.1.38 “Development Partner” means, with respect to a Party, a Third Party with which such Party has entered into a DevelopmentAgreement pursuant to Section 4.5 to conduct Clinical Studies.1.39 “Effective Date” means the first (1st) Business Day immediately following the date on which the Parties have actual knowledgethat all applicable waiting periods under the HSR Act with respect to the transactions contemplated hereunder have expired or havebeen terminated.1.40 “EMA” means the European Medicines Agency or any successor agency(ies) or authority having substantially the samefunction.1.41 “European Major Markets” means, collectively, France, Germany, Italy, Spain, and the United Kingdom.1.42 “European Union” or “EU” means the European Union member states as then-currently constituted; provided, however, thatthe EU shall always be deemed to include the European Major Markets. As of the Execution Date, the European Union member statesare Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,and United Kingdom.1.43 “[**]” means, with respect to the Licensed Compound, the [**] of (a) [**] or (b) the [**] of [**] across all [**] in which theLicensed Compound has received Regulatory Approval.1.44 “Executive Officers” means, with respect to each Party, the Chief Executive Officer of such Party (or his or her designee).1.45 “Exploit” means to use, have used, Develop, have Developed, Commercialize, have Commercialized, and Manufacture or haveManufactured.1.46 “FDA” means the U.S. Food and Drug Administration and any successor agency(ies) or authority having substantially the samefunction.1.47 “Field” means all uses, including the diagnosis, treatment or prevention of any disease in humans and animals.1.48 “First Commercial Sale” means, with respect to a Licensed Product, on a country-by-country basis, the first sale for monetaryvalue of such Licensed Product under this Agreement by Incyte, its Affiliates or its sublicensees to an end user for use, consumption orresale of such Licensed Product in such country in the Field after all Regulatory Approvals of such Licensed Product (i.e., when allapplicable approvals, licenses, registrations or authorizations described in the definition of Regulatory Approval that are necessary tosell the applicable Licensed Product) have been obtained in such country in the Field, where such sale results in the recognition of NetSales. The sale of a Licensed Product under this Agreement by Incyte to an Affiliate of Incyte or a sublicensee of Incyte shall notconstitute a First Commercial Sale unless such Affiliate or such sublicensee is7[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDthe end user of such Licensed Product. For the avoidance of doubt, the transfer or disposition by Incyte, its Affiliates or its sublicenseesof reasonable and customary quantities of samples of the Licensed Product below cost for promotional or educational purposes, or thesale of Licensed Product for clinical study purposes, early access programs (such as to provide patients with a Licensed Product priorto Regulatory Approval pursuant to treatment INDs or protocols, named patient programs or compassionate use programs), or anysimilar uses, shall not constitute a First Commercial Sale.1.49 “Force Majeure” means any event beyond the reasonable control of the affected Party, which may include embargoes; war oracts of war, including terrorism; insurrections, riots, or civil unrest; labor strikes or lockouts; epidemics, fire, floods, earthquakes orother severe acts of nature; widespread unavailability of raw materials or reagents affecting manufacturers generally, actions by aRegulatory Authority affecting the manufacture of Monoclonal Antibodies generally and the Licensed Compound specifically, andomissions or delays in acting by any Governmental Authority (other than delays incident to the ordinary course of drug development).1.50 “FTE” means [**] hours of work devoted to or in direct support of specified Development, Manufacturing or other specifiedactivities under this Agreement, conducted by one or more qualified employees, contractors, consultants or other personnel of a Partyor its Affiliates. For clarity, any individual contributing less than [**] hours per Calendar Year (or equivalent pro-rata portion thereoffor the period beginning on the Effective Date and ending on the last day of the first Calendar Year) shall be deemed a fraction of anFTE on a pro-rata basis.1.51 “FTE Cost” means, with respect to any period and a Party or its Affiliate, the FTE Rate multiplied by the number of FTEsexpended by such Party or its Affiliate during such period; provided that a Party shall not be charged twice for any FTE Cost if suchFTE Cost is already included as a component of Manufacturing Expenses payable under this Agreement.1.52 “FTE Rate” means a rate of [**] per FTE per Calendar Year (pro-rated for the period beginning on the Effective Date andending on the last day of the first Calendar Year); provided, however, that such rate shall be increased or decreased annually beginningon [**] by the applicable CPI Adjustment. The FTE Rate is “fully burdened” and covers employee salaries, benefits, travel and othersuch costs.1.53 “GAAP” means generally accepted accounting principles in the U.S., consistently applied.1.54 “Global Safety Database” means the global safety database for the Licensed Compound.1.55 “Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures promulgated or endorsed bythe FDA as set forth in the guideline adopted by the International Conference on Harmonization (“ICH”), titled “Guidance forIndustry E6 Good Clinical Practice: Consolidated Guidance” (or any successor document), including related regulatory requirementsimposed by the FDA and comparable regulatory standards, practices and procedures promulgated by the EMA, PMDA or otherRegulatory Authority applicable to the Territory, as they may be updated from time to time.8[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.56 “Good Laboratory Practices” or “GLP” means the then-current standards, practices and procedures promulgated or endorsedby the FDA as set forth in 21 C.F.R. Part 58 (or any successor statute or regulation), including related regulatory requirements imposedby the FDA and comparable regulatory standards, practices and procedures promulgated by the EMA, PMDA or other RegulatoryAuthority applicable to the Territory, as they may be updated from time to time, including applicable guidelines promulgated under theICH.1.57 “Good Manufacturing Practices” or “GMP” means the then-current good manufacturing practices required by the FDA, as setforth in the FFDCA, as amended, and the regulations promulgated thereunder, for the manufacture and testing of pharmaceuticalmaterials, and comparable Applicable Law related to the manufacture and testing of pharmaceutical materials in jurisdictions outsidethe U.S., including the quality guideline promulgated by the ICH designated ICH Q7A, titled “Q7A Good Manufacturing PracticeGuidance for Active Pharmaceutical Ingredients” and the regulations promulgated thereunder, as they may be updated from time totime.1.58 “Governmental Authority” means any multi-national, federal, state, local, municipal or other government authority of anynature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, court orother tribunal).1.59 “Health Canada” means Health Canada, the department of the government of Canada with responsibility for national publichealth, and any successor agency(ies) or authority having substantially the same function.1.60 “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time, and anycomparable Applicable Law in jurisdictions outside the U.S. related to the approval of transactions similar to those contemplated underthis Agreement.1.61 “HSR Clearance Date” means the expiration or termination of all applicable waiting periods and requests for information (andany extensions thereof) under the HSR Act.1.62 “HSR Filing” means (a) filings by Incyte and MacroGenics with the U.S. Federal Trade Commission and the Antitrust Divisionof the U.S. Department of Justice of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined inthe HSR Act) with respect to the matters set forth in this Agreement, together with all required documentary attachments thereto, or (b)equivalent filings with relevant foreign authorities.1.63 “Incyte Combination Regimen” means (a) a Combination comprising a Licensed Compound and at least one Incyte PipelineAsset (which Combination may also include: (x) any other compound that constitutes an Ancillary Therapy that is not a MacroGenicsPipeline Asset (e.g., a triplet combination) or (y) a Collaborator Pipeline Asset (e.g., a triplet combination)); or (b) a Non-ProprietaryCombination Regimen (which Combination may also include Ancillary Therapy(ies), provided that, such inclusion shall not precludeany inclusion of Ancillary Therapy(ies) in MacroGenics Combination Regimens).1.64 “Incyte Combination Study” means any (a) Clinical Study of an Incyte Combination Regimen or (b) other Clinical Study thatis performed by or on behalf of Incyte that includes the9[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDLicensed Compound and any other specific molecule or molecules (as monotherapies or combinations) other than a MonotherapyStudy, Collaborator Combination Study, or a Clinical Study that includes a MacroGenics Pipeline Asset. For clarity, an IncyteCombination Study shall only be performed by Incyte, its Affiliates or its sublicensees.1.65 “Incyte Global Development Plan” means the high-level, non-binding, written plan attached hereto as Exhibit B-1 coveringIncyte’s (a) planned development of the Licensed Compound and any Licensed Products and (b) planned conduct of any IncyteCombination Studies, as updated by Incyte from time to time in accordance with Sections 2.2 and 4.4. For clarity, a PowerPointpresentation summarizing such planned studies would be sufficient as a written plan.1.66 “Incyte Pipeline Asset Criteria” means, with respect to a molecule, that Incyte: (a) has previously conducted, or is conducting,a Clinical Study evaluating a combination of such molecule and the Licensed Compound and has entered into, or shall enter into, abona fide license agreement with a Third Party with respect thereto (provided that, such Third Party licensee shall be contractuallyobligated to at least the same development obligations as Incyte, pursuant to Section 4.2 or otherwise in Article 4); or (b) haspreviously entered into, or enters into, a bona fide collaboration with a Third Party that governs the research, development and/orcommercialization of such molecule, where Incyte retains development rights to sponsor and fund a Clinical Study and to provide inputon the development of such molecule.1.67 “IND” means (a) an Investigational New Drug application as defined in the FFDCA and applicable regulations promulgatedthereunder by the FDA; (b) a clinical trial authorization application for a product filed with a Regulatory Authority in any otherregulatory jurisdiction outside the U.S., the filing of which (in the case of (a) or (b)) is necessary to commence or conduct clinicaltesting of a pharmaceutical product in humans in such jurisdiction; or (c) documentation issued by a Regulatory Authority that permitsthe conduct of clinical testing of a product in humans in such jurisdiction.1.68 “Indication” means (a) with respect to [**], any cancer with [**], even if they are, [**] or [**] or [**] (e.g., [**], [**], and[**]) or (b) with respect to [**], [**], [**] and [**] (e.g., [**], and [**]), but [**]. For the sake of clarity, treatment of [**] within [**]shall not be treated as [**] (e.g., [**] and [**] shall not be considered [**] shall not be considered different [**]).1.69 “Information” means information, inventions, discoveries, ideas, developments, compounds, compositions, formulations,formulas, practices, procedures, processes, methods, knowledge, know-how, trade secrets, technology, inventories, machines,techniques, designs, drawings, correspondence, computer programs, skill, experience, documents, apparatus, results, strategies,Regulatory Documentation, information and submissions pertaining to, or made in association with, filings with any GovernmentalAuthority or patent office, data, including pharmacological, toxicological, non-clinical and clinical data, analytical and quality controldata, manufacturing data and descriptions, market data, patent and legal data, financial data or descriptions, devices, assays, chemicalformulations, specifications, material, product samples and other samples, physical, chemical and biological materials and compounds,and the like, in written, electronic, oral or other tangible or intangible form, now known or hereafter developed, whether or notpatentable.10[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.70 “Initiation” means, with respect to a Clinical Study, the first dosing of the first subject enrolled in such Clinical Study.1.71 “Invention” means any Information, whether or not patentable, generated, made, conceived, or reduced to practice in the courseof performance of this Agreement, whether made, conceived or reduced to practice solely by, or on behalf of, MacroGenics, Incyte,the Parties jointly, or any Affiliate, subcontractor, or sublicensee of the same (including Collaborators or any development orcommercialization partner or collaborator of either Party).1.72 “[**]” means, with respect to the Licensed Compound, the [**] of (a) [**] or (b) the [**] of the [**] in [**].1.73 “Know-How” means any Information; provided that, with respect to any Party, Know-How excludes any intangibleInformation contained within such Party’s published Patents.1.74 “Knowledge” means, as applied to a Party, that such Party has actual knowledge of a particular fact or other matter, or that areasonably prudent person with primary responsibility for the applicable subject matter (whether an officer or employee of such Party)knew or should have known of such fact or other matter.1.75 “Label Combination Patents” means Patents Controlled by MacroGenics or, subject to Section 15.3(d), any of its Affiliates(including, subject to Section 15.3(d), MacroGenics’ or its Affiliate’s interest in the Joint Patents) to the extent (a) such Patents Cover aMacroGenics Combination Regimen that has received Regulatory Approval; and (b) Incyte has exercised its right under Section 5.8(c)to expand the label of the Licensed Compound to include such Regulatory Approval.1.76 “Licensed Compound” or “MGA012” means: (a) the anti-PD-1 Monoclonal Antibody coded as “MGA012”, as furtherdescribed in IND # 130952, or (b) any other anti-PD-1 Monoclonal Antibody (or any antigen-binding Fab fragment thereof) with at[**] sequence identity to each of the [**] in comparison to the anti-PD-1 Monoclonal Antibody coded as “MGA012”.1.77 “Licensed Compound API” means Licensed Compound active pharmaceutical ingredient of a Licensed Product.1.78 “Licensed Compound Approval” means the first instance on which Regulatory Approval is received with respect to theLicensed Compound as either (a) the Monotherapy Regimen or (b) part of a Combination Regimen.1.79 “Licensed Compound Bulk Drug Substance” means the Licensed Compound API as produced in bulk, in accordance withthe Clinical Supply Agreement or Commercial Supply Agreement (as applicable), as well as the applicable quality agreements andQuality Assurance processes.1.80 “Licensed Compound Drug Product” means the Licensed Compound Bulk Drug Substance in its final finished form, whichhas been separated into unlabeled vials in accordance11[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwith the Clinical Supply Agreement or Commercial Supply Agreement (as applicable), as well as the Clinical Quality Agreement andapplicable Quality Assurance processes.1.81 “Licensed Compound Regulatory Discussion” means a material discussion with a Core Regulatory Authority related to theLicensed Compound in the context of any MacroGenics Combination Study.1.82 “Licensed Know-How” means all Know-How Controlled by MacroGenics or, subject to Section 15.3(d), any of its Affiliatesas of the Execution Date or during the Term that is necessary or useful to (a) Develop (including seeking Regulatory Approval of) orCommercialize Licensed Products, as Monotherapy Regimens or as a component of Incyte Combination Regimens or CollaboratorCombination Regimens, (b) seek Regulatory Approval of the Licensed Products as a component of MacroGenics CombinationRegimens, or (c) Commercialize Licensed Products in accordance with any such Regulatory Approvals in (b) above in the Field in theTerritory (for clarity, to Commercialize the Licensed Products to the extent it has an Indication in combination with any MacroGenicsPipeline Asset, but not to Develop or promote any MacroGenics Pipeline Asset), in each case (of (a)-(c)), excluding any such Know-How Controlled by MacroGenics to the extent such Know-How is solely related to any MacroGenics Pipeline Asset.1.83 “Licensed Patents” means all Patents, other than Label Combination Patents, that (a) are Controlled by MacroGenics or, subjectto Section 15.3(d), any of its Affiliates (including, subject to Section 15.3(d), MacroGenics’ or its Affiliate’s interest in the JointPatents), as of the Execution Date or during the Term; and (b) are necessary or useful to Develop, manufacture, use or Commercializethe Licensed Compound or Licensed Product, provided that Licensed Patents shall not include any Patents to the extent that the claimsof such Patents Cover a MacroGenics Pipeline Asset. Notwithstanding the foregoing limitation, the Licensed Patents as of theExecution Date include (i) those set forth in Exhibit A and (ii) those licensed under Existing Third Party Licenses.1.84 “Licensed Product” means any pharmaceutical product, including all forms, presentations, strengths, doses and formulations(including any method of delivery), comprising the Licensed Compound. For clarity, in the case of a Combination Regimen, theLicensed Compound that is a component of such Combination Regimen shall constitute a Licensed Product, but neither theCombination Regimen as a whole, nor the applicable Pipeline Asset that is a component of such Combination Regimen, shallconstitute a Licensed Product.1.85 “Licensed Technology” means, collectively, the Licensed Patents and the Licensed Know-How.1.86 “MacroGenics 1,000L Supply Plant” means MacroGenics’ existing two by five hundred (2x500) liter GMP Manufacturingplant, located at 15235 Shady Grove Road, Rockville, Maryland.1.87 “MacroGenics Combination Regimen” means a Combination comprising a Licensed Compound and at least oneMacroGenics Pipeline Asset (which Combination may also include any other compound that constitutes an Ancillary Therapy that isnot an Incyte Pipeline Asset (e.g., a triplet combination)).12[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.88 “MacroGenics Combination Regimen Detailing” means an interactive face-to-face meeting between a sales representativeacting on behalf of Incyte and a health care professional having prescribing authority within the target audience that occurs afterRegulatory Approval of a Licensed Product, which shall be conducted in a manner consistent with Applicable Law and industrystandards and with the quality of similar presentations made by Incyte’s sales representatives for Incyte’s other products, if applicable.During such meeting, the Incyte sales representative shall only discuss the MacroGenics Pipeline Asset as it relates to a component ofMacroGenics Combination Regimen as it relates to the following provisions incorporated in the “highlights of prescribing information”section of the Licensed Compound label: (a) recent major changes, (b) indications and usage, (c) warnings and precautions, (d) adversereactions and (e) dosage and administration. Unless otherwise mutually agreed by the Parties or required by a Regulatory Authority,the Incyte sales representative shall not discuss any other data that relates to the MacroGenics Pipeline Asset, including informationcontained in the “clinical studies” section of the Licensed Compound label such as clinical results from any MacroGenics CombinationStudy or information in the “pharmacology” section of the Licensed Compound label related to the MacroGenics Pipeline Asset. TheIncyte sales representative shall refer the health care professional to a sales representative acting on behalf of MacroGenics for thepurpose of such discussion, unless and until such time as the Parties execute a definitive Co-Promotion Agreement that includesrequisite terms with respect to promotion of the MacroGenics Combination Regimen by the Incyte sales representative. For clarity,MacroGenics Combination Regimen Detailing shall not include (i) sample drops made by sales representatives, (ii) medical affairsactivities or related activities conducted by medical support staff (such as medical science liaisons), (iii) activities conducted atconventions, (iv) electronic details or (v) activities performed by market development specialists, managed care account directors orother personnel not performing face-to-face sales calls or not specifically trained with respect to a Product.1.89 “MacroGenics Combination Study” means a Clinical Study of a MacroGenics Combination Regimen (which study (i) mayinclude a MacroGenics PD-1 Control Arm solely subject to the terms and conditions of this Agreement, including Section 4.3(c), (ii)may evaluate the Licensed Compound as a monotherapy arm, and (iii) may include an Ancillary Therapy control arm, provided thatsuch Ancillary Therapy is not an Incyte Pipeline Asset) that is performed by or on behalf of MacroGenics or its Affiliates orsublicensees in accordance with Section 1.94, but excluding any Required Monotherapy Study and excluding a Clinical Study thatincludes an Incyte Pipeline Asset.1.90 “MacroGenics Global Development Plan” means the high-level, non-binding, written plan attached hereto as Exhibit B-2covering MacroGenics’ planned conduct of any MacroGenics Combination Studies, as updated by MacroGenics from time to time inaccordance with Sections 2.2 and 4.4. For clarity, a PowerPoint presentation summarizing such planned studies would be sufficient asa written plan.1.91 “MacroGenics Large-Scale Supply Plant” means MacroGenics’ proposed five by two thousand (5x2000) liter GMPManufacturing plant, to be located at 9704 Medical Center Drive, Rockville, Maryland.13[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.92 “MacroGenics Manufacturing Facilities” means, individually or collectively, as the context requires, the MacroGenics 1,000LSupply Plant and the MacroGenics Large-Scale Supply Plant.1.93 “MacroGenics PD-1 Control Arm” means, in connection with a MacroGenics Combination Study, either: (a) both (i) amonotherapy arm of the Licensed Product and (ii) a separate monotherapy arm of a different PD-1/-L1 Monoclonal Antibody that is anAncillary Therapy only (e.g., pembrolizumab), or (b) both (i) an arm that evaluates the Licensed Compound in combination with agiven MacroGenics Pipeline Asset and (ii) a separate arm that evaluates a different PD-1/-L1 Monoclonal Antibody that is an AncillaryTherapy (e.g., pembrolizumab) in combination with the same MacroGenics Pipeline Asset.1.94 “MacroGenics Pipeline Asset Criteria” means, with respect to a molecule, that MacroGenics:(a) (i) owned or Controlled such molecule for any period after the Effective Date, (ii) previously conducted, or is conducting,a Clinical Study with such molecule that evaluates a combination of such molecule and the Licensed Compound, and (iii) hasentered into, or shall enter into, a bona fide collaboration with a Third Party that governs the research, development andcommercialization of such molecule with respect thereto; or(b) has previously entered into, or enters into, a bona fide collaboration with a Third Party that governs the research,development and/or commercialization of such molecule, where MacroGenics retains development rights to sponsor and fund aClinical Study and to provide input on the development of such molecule;provided that in each case (of (a) and (b)), such Third Party collaborator shall be contractually obligated to the samedevelopment obligations as MacroGenics, pursuant to Section 4.3 or otherwise in Article 4, except that in the case of (a), Incyteshall have the final decision-making authority pursuant to Section 4.3(b)(i)(3) and Section 4.3(b)(ii).1.95 “MacroGenics Pipeline Asset Information” means any commercially sensitive confidential information related to aMacroGenics Pipeline Asset, as reasonably determined by MacroGenics in its sole discretion.1.96 “Manufacture” means any and all activities and processes related to the manufacturing of Licensed Compound or LicensedProduct, or any ingredient thereof, including manufacturing of Licensed Compound Bulk Drug Substance, or Licensed CompoundDrug Product for Development or Commercialization, labeling, packaging, in-process and testing of finished Licensed Compound orLicensed Product, release of the Licensed Compound or Licensed Product or any component or ingredient thereof, quality assuranceactivities related to manufacturing and release of Licensed Compound or Licensed Product, and ongoing stability tests and regulatoryactivities related to any of the foregoing. “Manufacture” shall exclude Manufacturing Development.14[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.97 “Manufacturing Development” means any of the following with respect to Licensed Compound or Licensed Product:manufacturing process development and validation, process improvements, formulation development, associated analyticaldevelopment and validation and the manufacture and testing of stability or consistency lots (including process development,qualification, QA, and test batches).1.98 “Manufacturing Expenses” means, with respect to the Licensed Compound or any Licensed Product, the aggregate of fullyburdened (excluding accounting expenses) internal costs (including actual direct labor based on internal FTE Costs) and Third PartyExpenses (without mark-up) incurred by a Party and its Affiliates to Manufacture such Licensed Compound or Licensed Product,calculated as follows, in each case determined in accordance with GAAP, as consistently applied by such Party and its Affiliates: (a) tothe extent that such Party or its Affiliates performs all or any part of the Manufacturing of the Licensed Compound or LicensedProduct, (i) the direct material costs (including media and purification reagents) and direct FTE Costs for such Manufacturing of theLicensed Compound or Licensed Product, which may include, to the extent actually incurred in such Manufacture, cleaning costs ofproductions, Manufacturing administrative (including overhead costs allocable to the Manufacturing, but excluding all corporategeneral and administrative overhead costs), the costs of audits, and all directly incurred Manufacturing variances; (ii) a [**] of the costsof [**] of Licensed Compound (calculated by [**]) (e.g., [**]); and (iii) Manufacturing facilities costs (including depreciation, repairsand maintenance costs), scale-up directly allocable to the Manufacture of the Licensed Compound or Licensed Product (including APIand drug product production), quality assurance and quality control and technical support, provided that, for commercial supply, eachof (i) and (iii) may be included in Manufacturing Expenses only to the extent such costs and expenses are inventoriable under GAAPas consistently applied by such Party or its Affiliates; provided that, all costs of direct labor shall be calculated based on the FTE Rate;and (b) to the extent that a Third Party performs all or any part of the Manufacturing of the Licensed Compound or Licensed Product,the reasonable out-of-pocket costs paid to such Third Party for such activities determined in accordance with GAAP. All invoices forManufacturing Expenses submitted under this Agreement will include a detailed calculation and description of the relevant overheadallocations. For clarity, Manufacturing Expenses shall not include: (A) any [**]; (B) any costs, expenses or overhead associated [**](e.g., if Manufacturing activities [**] Licensed Compound Bulk Drug Substance produced [**] ([**]) of the [**] of the plant if theplant were [**]); (C) any amounts [**]; and (D) any costs or expenses [**].1.99 “Manufacturing Process” means the manufacturing process for (including any associated Know-How owned or Controlled byMacroGenics relating to the then-current process, and necessary or useful for) the Manufacture of the Licensed Compound Bulk DrugSubstance or the Licensed Compound Drug Product at the time of the Manufacturing Technology Transfer as more fully described inSection 7.1 and as further Developed under this Agreement.1.100 “Marketing Approval” means approval of a Regulatory Approval Application by the applicable Regulatory Authority.1.101 “Medical Affairs Activities” means medical and scientific information and responses to external inquiries or complaints,medical education, Health Economics and Outcomes Research15[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(HECOR, HEMAR), advisory boards, educational grants and fellowships, opinion leader development activities, drug safety, localcountry government affairs, field-based medical science liaisons, medical doctors in field (separate from medical science liaisons),publications, medical communications and field medical education.1.102 “MHLW” means the Japanese Ministry of Health, Labour and Welfare and any successor agency(ies) or authority havingsubstantially the same function.1.103 “Monoclonal Antibodies” means any monospecific antibodies, but shall exclude any bi- or multi-specific antibody forms (e.g.,Biclonics®, DART® and TRIDENT™ constructs).1.104 “Monotherapy Regimen” means the Licensed Compound administered as a single agent therapy.1.105 “Monotherapy Study” means a non-clinical study (including Manufacturing Development), preclinical study, or ClinicalStudy of (a) solely the Monotherapy Regimen or (b) the Monotherapy Regimen that compares the Monotherapy Regimen to anAncillary Therapy, in each case of (a) and (b), that is performed by or on behalf of Incyte (or by MacroGenics pursuant to Section5.9(c)). For clarity, a monotherapy arm that is included as part of a Combination Study shall not be considered a Monotherapy Study.1.106 “Net Price” means, with respect to any Licensed Product, the [**] (or its Affiliates or sublicensees) with payers.1.107 “Net Sales” means, with respect to any Licensed Product, the gross amounts invoiced by Incyte or any of its Affiliates orsublicensees for sales of such Licensed Product to unaffiliated Third Party purchasers in arms-length transactions, less the followingdeductions calculated in accordance with GAAP, to the extent actually taken, paid, accrued and allowed:(a) cash, trade or quantity discounts, retroactive price reductions, coupons, charge-back payments, and rebates granted (ineach case, whether in cash or in kind) to trade customers, hospitals, managed health care organizations, pharmaceutical benefitmanagers, group purchasing organizations, and national, state, or local governments;(b) credits, rebates or allowances allowed upon prompt payment or on account of claims, damaged goods, rejections or returnsof such Licensed Product, including in connection with recalls and withdrawals, and the amount of any write-offs for bad debt(provided, that an amount written off as bad debt but subsequently recovered will be treated as Net Sales);(c) outbound freight, shipment and insurance costs, to the extent included in the price and separately itemized on the invoiceprice;(d) taxes (other than income taxes), duties, tariffs, mandated contribution or other governmental charges levied on the sale ofsuch Licensed Product, including Value-Added Taxes (“VAT”), customs duties, healthcare taxes, excise taxes, use taxes, andsales taxes;16[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(e) compulsory payments and cash rebates related to sales of such Licensed Product payable to a Governmental Authority (oragent thereof) pursuant to Applicable Law by reason of any national or local health insurance program or similar program,including that portion of the annual fee on prescription drug manufacturers imposed by the Patient Protection and AffordableCare Act, Pub. L. No. 111-148 (as amended) that Incyte, its Affiliate or its or their sublicensee, as applicable, allocates to salesof the Licensed Products in accordance with Incyte’s, its Affiliate’s or its or their sublicensee’s standard policies and proceduresconsistently applied across its products, as applicable; and(f) any other similar and customary deductions (e.g., currently, co-pay cards) that are consistent with GAAP and Incyte’sactual practice (or its Affiliates’ or licensees’) at the time in calculating and reporting its actual product net sales throughout itsbusinesses (in the particular country, if applicable), provided that no item shall be deducted pursuant to this clause (f) ifincluded in any another deduction provided for under this definition (for example, Incyte shall not deduct an allowance for baddebts pursuant to this clause (f), as actual bad debts are subject to deduction pursuant to clause (b)),All of the aforementioned deductions shall be determined, on a country-by-country basis, as incurred in the ordinary course of businessin type and amount consistent with Incyte’s or its applicable Affiliate’s or sublicensee’s (as the case may be) business practicesconsistently applied across its product lines and accounting standards, as applicable. All such deductions shall be fairly and equitablyallocated to such Licensed Product and other products of Incyte and its Affiliates and sublicensees.In the event a Licensed Product is sold as part of a Combination Product, the Net Sales from the Combination Product shall bedetermined by multiplying the Net Sales of the Combination Product, as calculated above without regard for this paragraph, by thefraction A/(A+B), where A is the average sale price of the Licensed Product when sold separately in finished form, and B is theaverage sale price of the other therapeutic ingredient(s) included in the Combination Product when sold separately in finished form, ineach case in the applicable country of sale or and during the applicable royalty reporting period, if sales of both the Licensed Productand the other therapeutic ingredient(s) did not occur in such period, then in the most recent royalty reporting period in which sales ofboth occurred. In the event that such average sale price cannot be determined for both the Licensed Product and all other therapeuticingredient(s) included in the Combination Product, Net Sales shall be calculated by multiplying the Net Sales of the CombinationProduct, as calculated above without regard for this paragraph, by the fraction of C/(C+D) where C is the fair market value of theLicensed Product and D is the fair market value of all other therapeutic ingredient(s) included in the Combination Product. The Partiesshall seek to determine such fair market values by mutual agreement and, in the absence of such mutual agreement, the Parties shallengage an independent valuation firm (and equally bear the costs of engaging such firm) to determine such fair market values.Notwithstanding the foregoing, amounts invoiced by Incyte, its Affiliates, or its sublicensees for the sale of a Licensed Product amongIncyte, its Affiliates or its sublicensees for resale shall not be included in the computation of Net Sales hereunder unless such Affiliateor such sublicensee is the17[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDend user of such Licensed Product and as long as such Licensed Product is subsequently resold by Incyte, its Affiliates or itssublicensee and considered Net Sales. Net Sales shall exclude reasonable and customary quantities (e.g., samples) of the LicensedProduct transferred, disposed of or sold at no cost or at or below cost for (i) promotional or educational purposes, (ii) Clinical Studypurposes, (iii) early access programs (such as to provide patients with a Licensed Product prior to Regulatory Approval pursuant totreatment INDs or protocols, named patient programs or compassionate use programs) or (iv) any similar uses.1.108 “Non-Proprietary Combination Regimen” means a Combination that is evaluated in a Clinical Study comprising a LicensedCompound and at least one Ancillary Therapy that is not an Incyte Pipeline Asset, Collaborator Pipeline Asset, or MacroGenicsPipeline Asset (which Combination may also include any other compound that constitutes an Ancillary Therapy and is not an IncytePipeline Asset, Collaborator Pipeline Asset, or MacroGenics Pipeline Asset).1.109 “Non-Registrational Study” means a Combination Study conducted by either Party that is not a Phase I Study, Phase IIStudy, Phase III Study, non-interventional Phase IV Study, Phase IV Study required by a Regulatory Authority for purposes ofmaintaining or changing the existing product label for the applicable Combination Regimen or Pivotal Study or otherwise in support ofobtaining or maintaining Regulatory Approval (e.g., an early access, compassionate use, or special use program, or a Phase IV Studynot required by a Regulatory Authority for purposes of maintaining or changing the existing product label for the applicableCombination Regimen).1.110 “Patents” means all: (a) patents, including any utility or design patent; (b) patent applications, including provisionals,substitutions, divisionals, continuations, continuations in-part or renewals; (c) patents of addition, restorations, extensions,supplementary protection certificates, registration or confirmation patents, patents resulting from post-grant proceedings, re-issues andre-examinations; (d) other patents or patent applications claiming priority directly or indirectly to (i) any such specified patent or patentapplication specified in (a) through (c), or (ii) any patent or patent application from which a patent or patent application specified in (a)through (c) claim direct or indirect priority; (e) inventor’s certificates; and (f) other rights issued from a Governmental Authority similarto any of the foregoing; in each case of (a) through (f), irrespective of whether such patent, patent application or other right arises in theU.S. or any other jurisdiction in the Territory.1.111 “PD-1” means programmed cell death receptor 1.1.112 “PD-L1” means programmed cell death ligand 1.1.113 “PD-1 IP” means any intellectual property that relates to anti-PD-1 Monoclonal Antibodies.1.114 “Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation,limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity ororganization, including a government or political subdivision, department or agency of a government.18[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.115 “Phase I Study” means a human clinical trial of a Product in any country that would satisfy the requirements of 21 C.F.R. §312.21(a) (FFDCA), as amended from time to time, or any foreign equivalent thereof.1.116 “Phase II Study” means a human clinical trial of a Product, or relevant portion of such trial (including expansion cohorts froma Phase I Study for which patients are treated at a defined dose or a set of defined doses), for which the primary endpoints include apreliminary determination of efficacy in patients being studied, as described in 21 C.F.R. § 312.21(b) (FFDCA), as amended from timeto time, or any foreign equivalent thereof.1.117 “Phase III Study” means a pivotal human clinical trial with a defined dose or a set of defined doses of a Product that isdesigned to ascertain efficacy and safety of such Product, as described in 21 C.F.R. § 312.21(c) (FFDCA), as amended from time totime, or any foreign equivalent thereof, for the purpose of supporting the preparation and submission of a BLA or MAA.1.118 “Phase IV Study” means a clinical trial of a Product, possibly including pharmacokinetic studies, which trial (a) is not requiredto be completed prior to obtaining Marketing Approval of such Product; and (b) either (i) is required by the applicable RegulatoryAuthority as mandatory to be conducted on or after the Marketing Approval of such Product, or (ii) is conducted voluntarily toenhance scientific knowledge of the Product (e.g., providing additional drug profile, safety data or marketing support information, orsupporting expansion of Product labeling).1.119 “Pipeline Asset” means any specific molecule (i.e., not a class of molecules), other than the Licensed Compound, that is: (a)Controlled (in accordance with Section 1.32(b)) by MacroGenics, or that otherwise satisfies the MacroGenics Pipeline Asset Criteria(either, a “MacroGenics Pipeline Asset”); (b) Controlled (in accordance with Section 1.32(b)) by Incyte, or that otherwise satisfies theIncyte Pipeline Asset Criteria (either, an “Incyte Pipeline Asset”); (c) Controlled (in accordance with Section 1.32(b)) by aCollaborator (a “Collaborator Pipeline Asset”); or (d) solely for purposes of Sections 4.3(c) and 15.3(b), Controlled (in accordancewith Section 1.32(b)) by an Acquirer in a Change of Control transaction with respect to MacroGenics (“Acquirer Pipeline Asset”), asapplicable.1.120 “Pivotal Study” means (a) a Phase III Study or other human Clinical Study designed to be or that becomes a registration trialsufficient for filing a Regulatory Approval Application for a Licensed Product, as evidenced by (i) an agreement with or statementfrom the FDA or applicable Regulatory Authority, or (ii) other guidance of minutes issued by the FDA or such other RegulatoryAuthority for such registration trial, or (b) a Phase III Study or other human Clinical Study which Incyte intends to submit as the basisfor Regulatory Approval of the Licensed Product.1.121 “PMDA” means the Pharmaceuticals and Medical Devices Agency in Japan and any successor agency(ies) or authority havingsubstantially the same function.1.122 “Product(s)” means, individually or collectively, as the context requires, (a) any Licensed Product or (b) any CombinationRegimen.19[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.123 “Proof of Concept” means, with respect to any [**] (but, for clarity, excluding the other [**]), the establishment of a [**] asestablished by the JDC on an [**], subject to an [**] (e.g., [**] or [**]).1.124 “Qualifying Termination” means a termination of this Agreement in its entirety: (a) by MacroGenics pursuant to Section 12.3(for Incyte’s material uncured breach); (b) by MacroGenics pursuant to Section 12.5 (for a patent challenge); (c) by MacroGenicspursuant to Section 12.6 (for Incyte bankruptcy); (d) by Incyte pursuant to Section 12.2 (for convenience); or (e) by Incyte pursuant toSection 12.4 (for safety reasons).1.125 “Regulatory Agreement” means that certain regulatory agreement to be entered into by the Parties to define the Parties’respective roles and responsibilities related to regulatory strategy, labeling strategy (including a delineation of any product label(s) of aParty that will be expanded to include the other Party’s Regulatory Approvals, in accordance with Section 5.8), dossier preparation,interactions with Regulatory Authorities, coordination of Regulatory Approval Application submission contents, timing and othermatters, to enable each Party to comply with its respective obligations under Applicable Law, with regard to filings and interactionswith any Regulatory Authority related to Incyte seeking Regulatory Approval of the Licensed Compound as a component of aMacroGenics Combination Regimen and MacroGenics seeking Regulatory Approval of the MacroGenics Pipeline Asset as acomponent of a MacroGenics Combination Regimen.1.126 “Regulatory Approval” means any and all approvals (including supplements, amendments, pre- and post-approvals andpricing and reimbursement approvals, but excluding Manufacturing approvals), licenses, registrations or authorizations of any national,regional, state or local Regulatory Authority, department, bureau, commission, council or other governmental entity, that are necessaryto Commercialize any Compounds or Products under this Agreement in any country or jurisdiction in the Territory, for one or moreuses, including any pricing and reimbursement approvals that are necessary to conduct a launch of such Compound or Product in suchcountry or jurisdiction (even if such approvals are not legally required to launch such Compound or Product in such country orjurisdiction).1.127 “Regulatory Approval Application” means (a) a New Drug Approval Application (“NDA”) or Biologics LicenseApplication (“BLA”) (each, as defined in the FFDCA) in the U.S., or (b) any corresponding application for Regulatory Approval inany country or jurisdiction in the Territory outside the U.S., including, with respect to the European Union, a Marketing AuthorizationApplication (“MAA”) filed with the EMA pursuant to the Centralised Approval Procedure or with the applicable RegulatoryAuthority of a country in Europe with respect to the decentralised procedure, mutual recognition or any national approval procedure.1.128 “Regulatory Approval in EU” means receipt of Regulatory Approval in at least three (3) of five (5) European Major Markets.1.129 “Regulatory Authority” means any applicable Governmental Authority involved in granting Regulatory Approval in acountry or jurisdiction in the Territory, including (a) in the U.S., the FDA or any other applicable Governmental Authority havingjurisdiction over any Compound or Product; (b) in the EU, the EMA or any other applicable Governmental Authority having20[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDjurisdiction over any Compound or Product; (c) in Japan, the PMDA or MHLW; and (d) in any country or jurisdiction other than theU.S., EU or Japan, any applicable Governmental Authority having jurisdiction over any Compound or Product.1.130 “Regulatory Documentation” means, with respect to any Compound or Product under this Agreement, all regulatory filings,applications, notifications, registrations, licenses, regulatory drug lists, advertising and promotion documents, adverse event files,complaint files, Manufacturing records, Regulatory Approvals or other regulatory submissions or supporting documents, including anywritten correspondence or meeting minutes, made to, made with, or received from an applicable governmental agency or RegulatoryAuthority relating to such Compound or Product, and all data contained therein. “Regulatory Documentation” includes INDs,Regulatory Approval Applications, and amendments and supplements for any of the foregoing.1.131 “Regulatory Exclusivity” means, with respect to a particular country, either exclusive marketing rights or data protection orother exclusivity rights conferred by any Regulatory Authority with respect to such Licensed Product in such country or jurisdiction inthe Territory, including orphan drug exclusivity, pediatric exclusivity, rights conferred in the U.S. under the Biologics PriceCompetition and Innovation Act of 2009 (the “BPCI Act”) or in the European Union under Directive 2001/83/EC, as amended, andRegulation (EC) No. 1901/2006, as amended, or rights similar thereto in other countries or regulatory jurisdictions in the Territory.Regulatory Exclusivity shall not include exclusivity conferred by a Patent right.1.132 “Right of Reference” means the “right of reference” defined in 21 C.F.R. 314.3(b), or any analogous Applicable Lawrecognized outside of the U.S.1.133 “Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by-country basis, the time periodcommencing on the Effective Date and continuing until the later of: (a) the expiration of the last Valid Claim of a Licensed PatentCovering the composition of matter or method of use of such Licensed Product in such country; (b) [**] from the First CommercialSale of such Licensed Product in such country; or (c) if Regulatory Exclusivity is granted with respect to such Licensed Product insuch country, the expiration or termination of such Regulatory Exclusivity in such country.1.134 “Tax” or “Taxes” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature(including any interest thereon).1.135 “Territory” means any country in the world.1.136 “Third Party” means any Person other than (a) Incyte, (b) MacroGenics or (c) an Affiliate of either of Incyte or MacroGenics.1.137 “Third Party Expenses” means out-of-pocket expenses incurred by a Party or any of its Affiliates for services performed by aThird Party on behalf of Incyte or MacroGenics in the course of such Party’s performance of this Agreement.1.138 “U.S.” means the United States of America, including its territories and possessions.21[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED1.139 “[**]” means, with respect to the Licensed Compound, the [**] of (a) [**] or (b) [**] ([**]%) [**] “[**]” (as such term isdefined under applicable [**] ([**]), or if [**] ceases to be [**] in [**], its equivalent successor) of [**].1.140 “Valid Claim” means (a) a claim of an issued and unexpired Patent, to the extent such claim has not been revoked, held invalidor unenforceable by a patent office, court or other Governmental Authority of competent jurisdiction in a final order, from which nofurther appeal can be taken, and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable throughreissue, re-examination, disclaimer, inter-partes review, post-grant review, other patent office administrative proceedings, or otherwise;or (b) a claim within a patent application that has not been pending for more than [**] from the date of its first priority patentapplication filing anywhere in the Territory and which claim has not been revoked, cancelled, withdrawn, held invalid or abandoned.1.141 Additional Definitions. Each of the following definitions is set forth in the Section of this Agreement indicated below:TermSection13D Group15.14(a)(iii)Acquirer Combination Study15.3(b)Ancillary Agreements14.1Annual Global Commercial Supply Forecast7.3(a)Approval Milestone8.2(d)Approved CMO7.1(a)Bankruptcy Laws12.6(b)Binding Portion7.2(e)(i)[**] Conditions3.2(c)[**]3.2(c)[**]8.10(c)[**]8.10(c)[**]10.2(j)Breaching Party12.3[**]6.2(d)CCC2.5(a)Claim14.1Clinical Quality Agreement7.2(a)Clinical Supply Agreement7.2(a)Collaborator Contract3.2(b)Collaborator Development IP3.2(b)Collaborator Sublicense Fees8.8Commercial Supply Agreement7.3(d)Committed Supply7.2(c)Cooperating Party11.5(b)Co-Promotion Agreement6.1(c)Cure Period12.3Deadlocked Committee Matter2.6(d)22[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDDevelopment Agreement4.5Development Milestone8.2(b)Disclosing Party11.1Dispute(s)13.1[**] Conditions3.2(c)[**]3.2(c)[**]8.10(d)[**]8.10(d)[**]4.6(b)[**]6.2(b)Existing Third Party Licenses8.10(b)Funded Collaborator Combination Studies7.2(b)Incyte CDx IP3.4(b)Incyte Commercial Supply Commitment7.3(a)(ii)Incyte Competing Product15.3(b)(iii)Incyte Development IP9.1(b)Incyte Facility7.1(a)Incyte Indemnitee14.2Incyte Know-How3.4(b)Incyte Method Claim3.4(d)(i)Incyte Objection4.3(c)(i)Incyte Patents3.4(b)Incyte PD-1 IP3.4(b)Incyte [**] Objection4.3(b)(i)(1)Incyte Technology3.4(b)IND Transition4.1(b)IND Transition Date4.1(b)IND Transition Plan4.1(b)Indemnifying Party14.3(a)Indemnitee14.3(a)Indication Population4.6(b)Information Transfer5.1(a)Infringement Recovery9.3(f)Insolvency Event12.6(a)Insolvent Party12.6(b)[**]6.2(c)JDC2.2(a)JIPC2.4(a)JMC2.3(a)Joint Committee2.6(a)Joint Inventions9.1(d)Joint Patents9.2(e)(i)JSC2.1(a)Long Term Forecast7.2(e)(i)MacroGenics CDx IP3.4(a)MacroGenics Commercial Supply Commitment7.3(a)(ii)23[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDMacroGenics Competing Product15.3(c)MacroGenics Development IP9.1(c)MacroGenics Indemnitee14.1MacroGenics Licensed Compound Data5.2(c)(i)MacroGenics Method Claim3.4(d)(ii)MacroGenics PD-1 IP3.4(a)MacroGenics-Responsible Joint Patents9.2(e)(i)Manufacturing Technology Transfer7.1(a)Manufacturing Transition Plan7.1(a)[**]4.3(c)(ii)[**]4.3(b)(i)(1)MGA012 IND4.1(b)Milestone8.2Monotherapy Sublicense Fees8.7Non-Insolvent Party12.6(b)Ongoing Clinical Study4.1(a)Opt Out Notice9.2(b)(i)Order7.2(e)(ii)Patent Extension(s)9.4Pharmacovigilance Agreement5.6(c)POC Development Milestone8.2(a)Prosecuting Party9.2(f)(ii)Quality Assurance Measures7.6(a)Receiving Party11.1Regulatory Filing Milestone8.2(c)Representatives9.1(e)Requested Licensed Patent9.2(b)Requesting Party11.5(b)Required Monotherapy Study5.9Required Regulatory Data5.2(c)(iii)Responsible Party9.2(e)(ii)Rolling Forecast7.2(e)(i)Royalty Floor8.5(a)(iii)Sales Milestone8.2(e)Section 365(n)12.6(b)Standstill Period15.14(a)Study Transition4.1(c)Study Transition Date4.1(c)Study Transition Plan4.1(c)Subject Patents9.2(c)(i)Term12.1Terminating Party12.3Third Party Infringement Claim9.5(a)Third Party License8.10(a)Third Party License Credit8.10(a)Third Party Patent Challenge9.6(a)24[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDUpstream License12.8(d)Transferred Documentation5.1(a)[**]6.2(a)[**]6.2(a)ARTICLE 2GOVERNANCE2.1 Joint Steering Committee.(a)Formation and Purpose. The Parties agree to establish and convene a joint steering committee (the “JSC”) within [**]after the Effective Date. The JSC shall consist of representatives from each Party as further described inSection 2.6(a) and operate in accordance with this Section 2.1 and Section 2.6. The purpose of the JSC shallbe to provide a forum for overall coordination and communication with respect to the Parties’ activities underthis Agreement, including the resolution of Deadlocked Committee Matters properly referred to the JSCunder this Agreement.(b)Responsibilities of the JSC. The JSC’s overall responsibility shall be to:(i)discuss any issues arising with respect to the Development or Commercialization of the Licensed Compound orany Licensed Products or Combination Regimens;(ii)discuss the clinical and/or commercial supply needs of MacroGenics, Incyte and any Collaborators with respectto the Licensed Compound and the Manufacturing plans with respect thereto;(iii)discuss and oversee the Study Transition Plan, IND Transition Plan, and Manufacturing Transition Plan(provided that the selection of any Approved CMO(s) shall require mutual agreement, such agreement not to beunreasonably withheld), including discussing any amendments with respect to either of the foregoing;(iv)coordinate the wind-down of efforts under this Agreement following termination in accordance with Section12.8;(v)decide matters and resolve disputes referred to the JSC which the JSC has authority to decide or resolve underthis Agreement and resolve Deadlocked Committee Matters referred to the JSC in accordance with Section2.6(d); and25[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(vi)perform other obligations specifically delegated to the JSC under this Agreement.(c)JSC Decisions and Actions. Actions to be taken and decisions to be made by the JSC (including the resolution ofDeadlocked Committee Matters referred to the JSC in accordance with Section 2.6(d)) shall be taken or madeonly following unanimous agreement, with each Party having one (1) vote. If the JSC fails to reachunanimous agreement on a matter before it for decision within [**] from the date that the matter is firstpresented to the JSC in writing, such matter shall be referred to the Executive Officers for discussion andresolution pursuant to Article 13 upon the request of either Party. Any resolution of such matter by theExecutive Officers shall be final and binding on the Parties. If the Executive Officers are not able to resolvethe matter within the [**] period specified in Article 13, then Incyte shall have the final decision-makingauthority with respect to such matter, and Incyte’s decision on such matter shall be final and binding on theParties, subject to the limitations set forth in Section 2.10.2.2 Joint Development Committee.(a)Formation and Purpose. The Parties agree to establish and convene a joint development committee (the “JDC”) within[**] after the Effective Date. The JDC shall consist of representatives from each Party as further described inSection 2.6(a) and operate in accordance with this Section 2.2 and Section 2.6. The primary purpose of theJDC shall be to oversee, coordinate and facilitate Development of the Licensed Compound and LicensedProducts under this Agreement. For clarity, notwithstanding the establishment of the JDC, Incyte shall havethe sole and unrestricted right to conduct or have conducted any Clinical Study or other Development withrespect to the Monotherapy Regimen, the Incyte Combination Regimens and the Collaborator CombinationRegimens and to modify the Incyte Global Development Plan without restriction.(b)Responsibilities of the JDC. The JDC shall:(i)oversee the Ongoing Clinical Study performed by or on behalf of MacroGenics with respect to the LicensedCompound;(ii)discuss, coordinate and oversee the transition of Development responsibilities from MacroGenics to Incyte ascontemplated under this Agreement, including discussing the IND Transition Date and Study Transition Date,overseeing the Regulatory Transfer, and seeking approval of the IND Transition Plan and Study TransitionPlan;(iii)discuss Incyte’s plans with respect to the Development of the Licensed Compound and any Licensed Productsin the Field in the Territory in accordance with the Incyte Global Development Plan;26[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(iv)discuss MacroGenics’ plans with respect to the Development of the MacroGenics Combination Regimens in theField in the Territory in accordance with the MacroGenics Global Development Plan;(v)annually review the then-current Incyte Global Development Plan and MacroGenics Global Development Plan;(vi)discuss the protocol synopses for MacroGenics’ proposed MacroGenics Combination Studies in accordancewith Section 4.3;(vii)establish the [**] and [**] required for the achievement of Proof of Concept in a [**] or [**] of a [**];(viii)discuss any issues arising with respect to the Development of any Monotherapy Regimen or any CombinationRegimen;(ix)coordinate, and encourage and facilitate, communication and information sharing regarding the Parties’performance of their respective regulatory responsibilities in accordance with Article 5;(x)decide matters which the JDC has the express authority to decide under this Agreement; and(xi)perform other obligations specifically delegated to the JDC under this Agreement.2.3 Joint Manufacturing Committee.(a)Formation and Purpose. The Parties agree to establish and convene a joint manufacturing committee (the “JMC”) within[**] after the Effective Date. The JMC shall consist of representatives from each Party as further described inSection 2.6(a) and operate in accordance with this Section 2.3 and Section 2.6. The primary purpose of theJMC shall be to oversee, coordinate and facilitate the Manufacture of the Licensed Compound Bulk DrugSubstance and Licensed Compound Drug Product.(b)Responsibilities of the JMC. The JMC shall:(i)discuss manufacturing matters with respect to the Licensed Compound Bulk Drug Substance and LicensedCompound Drug Product, including the Manufacturing Process, and discuss and seek approval of the ApprovedCMO (as more fully set forth in Section 7.1);(ii)facilitate the sharing of the Rolling Forecasts and Long Term Forecasts pursuant to Section 7.2(e)(i), and reviewand seek approval of the Annual Global Supply Commitment pursuant to Section 7.3(a);27[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(iii)discuss, coordinate and oversee the Manufacturing Technology Transfer (as more fully set forth in Section 7.1),including discussing and seeking approval of the Manufacturing Transition Plan; and(iv)perform other obligations specifically delegated to the JMC under this Agreement.2.4 Joint Intellectual Property Committee.(a)Formation and Purpose. The Parties agree to establish and convene a joint intellectual property committee (the “JIPC”)within [**] after the Effective Date. The JIPC shall consist of representatives from each Party as furtherdescribed in Section 2.6(a) and operate in accordance with this Section 2.4 and Section 2.6. The primarypurpose of the JIPC shall be to coordinate, oversee, and provide a venue for discussion of intellectualproperty strategy, prosecution, maintenance, and enforcement matters relating to the Licensed Patents, JointPatents, Incyte Patents and Patents within the Incyte Development IP.(b)Responsibilities of the JIPC. The JIPC shall:(i)discuss, coordinate and oversee the preparation, filing, prosecution and maintenance of the Licensed Patents (asmore fully set forth in Section 9.2);(ii)discuss, coordinate and oversee the litigation strategy with respect to any suits or other actions against any ThirdParty engaged in any existing, alleged or threatened infringement of any Licensed Patent or Joint Patent (asmore fully set forth in Section 9.3);(iii)discuss, coordinate and oversee matters related to obtaining Patent Extensions (as more fully set forth in Section9.4);(iv)discuss, coordinate and oversee the litigation strategy with respect to any Third Party Infringement Claim orThird Party Patent Challenge (as more fully set forth in Sections 9.5 and 9.6); and(v)perform other obligations specifically delegated to the JIPC under this Agreement.2.5 Commercialization Coordination Committee.(a)Formation and Purpose. The Parties agree to establish and convene a commercialization coordination committee (the“CCC”) at least [**] prior to the earlier of the [**] of either [**] or [**]. The CCC shall consist ofrepresentatives from each Party as further described in Section 2.6(a) and operate in accordance with thisSection 2.5 and Section 2.6. The primary purpose of the CCC shall be to oversee, discuss and coordinatecommercial activities with respect to MacroGenics Combination Regimens and Monotherapy Regimensunder this Agreement;28[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDprovided that, except in connection with forecasting global commercial demand for Licensed Compound Drug Productin connection with Commercialization of the Combination Regimens, pursuant to Section 7.3(a), neither Party shall beobligated to share with the CCC any information, materials or strategy, or to coordinate on any strategy orcommercialization content, with respect to its Combination Regimens or the Monotherapy Regimen. Notwithstandinganything to the contrary herein, (a) MacroGenics shall have final decision-making authority with respect to commercialmatters related to MacroGenics Pipeline Assets and, subject to the remainder of this Section 2.5(a), MacroGenicsCombination Regimens, and (b) Incyte shall have final decision-making authority with respect to any matters related tothe Monotherapy Regimen and any commercial matters related to the Licensed Product being sold in accordance withits approved label.(b)Responsibilities of the CCC. The CCC shall be advisory in nature and shall not have any decision-making authority, butshall:(i)oversee, discuss and coordinate commercial matters with respect to MacroGenics Combination Regimens andMonotherapy Regimens, including market landscape, strategic positioning, communications and promotionalstrategy and medical strategy;(ii)oversee and coordinate procedures for sharing Information relating to the labeling of MacroGenics CombinationRegimens; and(iii)perform other obligations specifically delegated to the CCC under this Agreement.(c)CCC Membership and operations. During the JSC’s first meeting, the JSC will use good faith efforts to mutually agreeupon procedures regarding the membership and operations of the CCC, it being understood that the CCCshall be advisory in nature and shall not have any decision-making authority.2.6 Joint Committee Membership and Operations.(a)Membership. Promptly after the Effective Date, each Party shall designate three (3) representatives to the JSC, up to three(3) representatives to each of the JDC and JMC, and up to two (2) representatives to the JIPC (each, a “JointCommittee”). Each Joint Committee may elect to vary the number of representatives from time to time. Eachrepresentative designated by a Party shall be an employee of such Party or one of its Affiliates and shall havethe appropriate level of experience in the subject area of the applicable Joint Committee, and at least one (1)representative shall have sufficient seniority within the applicable Party’s organization to have the necessarydecision-making authority in order for such Joint Committee to fulfill its responsibilities. Either Party maydesignate employees as substitutes for any of its Joint Committee representatives if one (1) or more of suchParty’s designated representatives is unable to be present at a meeting. From time to time, each Party mayreplace any of its Joint Committee representatives by written notice to the other29[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDParty specifying the prior representative(s) and their replacement(s). Each representative on a Joint Committee shall bebound by confidentiality and non-use obligations at least as restrictive as those set forth in this Agreement.(b)Joint Committee Chairperson. Each Joint Committee will have a chairperson, to be designated by MacroGenics initiallywith respect to the JDC and Incyte initially with respect to the JSC, JMC, and JIPC, and to be designated bythe two Parties on an alternating basis annually thereafter. The chairperson shall be responsible for callingand convening meetings of its Joint Committee, but shall have no special authority over the other members ofits Joint Committee, and shall have no additional voting rights. The chairperson of each Joint Committee (orits designate) shall: (i) prepare and circulate an agenda reasonably in advance of each upcoming meeting ofsuch Joint Committee; and (ii) prepare and issue minutes of such Joint Committee meeting within [**]thereafter. Such minutes shall not be finalized until each representative on such Joint Committee reviews andapproves such minutes, provided that any minutes shall be deemed approved unless a Joint Committeerepresentative objects to the accuracy of such minutes within [**] after the circulation of the minutes. Theminutes of each Joint Committee meeting shall be the Confidential Information of each Party.(c)Meetings.(i)Timing and Frequency. Promptly following its formation, each Joint Committee will hold an in-person meetingto establish such Joint Committee’s operating procedures. After its initial meeting, the JSC shall meet at leastonce every Calendar Quarter during the Term (or such other frequency as agreed upon by the Parties), and eachother Joint Committee shall meet as frequently as agreed by each such Joint Committee, but no less frequentlythan annually. Additionally, at least once annually, the Parties will hold an in-person meeting (as set forth inSection 2.6(c)(ii)(A)) with all Joint Committees in attendance. Additional meetings of a Joint Committee may beheld with the consent of each Party (such consent not to be unreasonably withheld, delayed or conditioned), asrequired under this Agreement or to attempt to resolve any matter or Deadlocked Committee Matter inaccordance with this Agreement. In the case of any matter or Deadlocked Committee Matter referred to a JointCommittee, such meeting shall be held within [**] following referral to such Joint Committee, or as soon asreasonably possible thereafter.(ii)Meeting Procedures. Meetings of each Joint Committee shall be effective only if a majority of representativesof each Party are present or participating. Other than the initial meeting, each Joint Committee may meet either(A) in person at either Party’s facilities or at such locations as the Parties may otherwise agree; or (B) by audioor video teleconference, provided that at least once annually, each Joint Committee shall meet in person asdescribed in Section 2.6(c)(i). Each Party shall be responsible for all of its own expenses30[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDincurred in connection with its representatives’ participation in each Joint Committee meeting, including alltravel and lodging. All other Third Party Expenses incurred by a Joint Committee in furtherance of a JointCommittee meeting, such as expenses associated with off-site meetings, shall be shared equally by the Parties.(iii)Non-Member Participation. Additional non-members of a Joint Committee having relevant experience mayfrom time to time be invited to participate in a Joint Committee meeting, provided that such participants shallhave no voting rights or powers. Non-member participants who are not employees of a Party or its Affiliatesshall only be allowed to attend if: (A) the other Party’s representatives have consented to the attendance (suchconsent not to be unreasonably withheld, delayed or conditioned); (B) such non-member participants are subjectto confidentiality and non-use obligations at least as restrictive as those set forth in this Agreement, including theprovisions of Sections 11.10(a) and 11.10(b), and shall be deemed the “Representatives” of the Party invitingsuch participants to the meeting.(d)Joint Committee Decisions and Actions. Actions to be taken and decisions to be made by the JDC, JMC, or JIPC shall betaken or made only following unanimous agreement, with each Party having one (1) vote. If the JDC, JMC,or JIPC reaches unanimous agreement on a matter before it for decision, such decision by such JointCommittee shall be final and binding on the Parties. If the JDC, JMC, or JIPC fails to reach unanimousagreement on a matter before it for decision within [**] from the date that the matter is first presented to suchJoint Committee in writing, such matter (a “Deadlocked Committee Matter”) shall be referred to the JSCfor resolution upon the request of either Party pursuant to Section 2.1(c).2.7 Additional Subcommittees and Working Groups. Each Joint Committee may establish other subcommittees or working groupsas needed to further the purposes of this Agreement, including any responsibilities assigned to such Joint Committee under thisAgreement; provided, however, that the JSC shall not delegate its authority to resolve Deadlocked Committee Matters to asubcommittee or working group. The purpose, scope and procedures of any such subcommittee or working group shall be mutuallyagreed in writing by the Joint Committee that formed such subcommittee or working group. Actions to be taken and decisions to bemade by such subcommittee or working group shall be taken or made only following unanimous agreement, with each Party havingone (1) vote. If a subcommittee or working group reaches unanimous agreement on a matter before it for decision, such decision bysuch subcommittee or working group shall be final and binding on the Parties. If a subcommittee or working group fails to reachunanimous agreement on a matter before it for decision within [**] from the date that the matter is first presented to such asubcommittee or working group in writing, such matter shall be referred to the Joint Committee that established such subcommittee orworking group for resolution pursuant to Section 2.6(d) upon the request of either Party.31[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED2.8 Authority. The Parties agree that it shall be conclusively presumed that, unless otherwise explicitly stated, each voting member ofeach Joint Committee, or each subcommittee or working group established by a Joint Committee, has the authority and approval ofsuch member’s respective senior management in casting his or her vote. Each Joint Committee, and each subcommittee or workinggroup established by such Joint Committee, shall each have only the powers assigned expressly to such Joint Committee in this Article2 and elsewhere in this Agreement, and shall not have any power to amend, modify or waive compliance with this Agreement.2.9 Alliance Managers. Promptly following the Effective Date, each Party shall designate in writing an Alliance Manager to serve asthe primary point of contact for the Parties regarding all collaboration activities contemplated under this Agreement. Each AllianceManager shall facilitate communication and coordination of the Parties’ activities under this Agreement. The Alliance Managers shallnot be a member of the CCC, or the JSC or any other Joint Committee. The Alliance Managers shall be allowed to attend, as a non-voting observer, meetings of the Joint Committees and the CCC, as well as any subcommittee or working group established by a JointCommittee of which the Alliance Manager is not a member.2.10 Decision-Making Limitations. Notwithstanding anything to the contrary in this Agreement, to the extent that a Party has finaldecision-making authority with respect to any matter pursuant to Section 2.1(c), such Party shall not exercise such final decision-making authority to: (a) expand or reduce either Party’s rights or obligations in a manner inconsistent with the terms and conditions ofthis Agreement or any Ancillary Agreement; (b) determine that such Party has fulfilled its obligations, or the other Party has breachedits obligations, under this Agreement or any Ancillary Agreement (including regarding MacroGenics’ performance with respect to theManufacture and supply of the Licensed Compound); (c) make any decision that is expressly stated to require the other Party’sapproval or agreement or the approval or agreement of both Parties under this Agreement or any Ancillary Agreement; (d) make anydecision for which the other Party has expressly been given final decision-making authority under this Agreement; (e) resolve anydispute regarding whether a Milestone has been achieved or the amount of any royalties or other payments owed by one Party to theother Party; (f) hold significantly more Joint Committee meetings at such Party’s facility than the other Party’s facility; (g) cause eitherParty to violate Applicable Law, regulatory requirements or guidance or industry codes; or (h) establish the [**] required for theachievement of Proof of Concept in a [**] or [**] of a [**]. If the Parties fail to mutually agree to the [**] described in (h), then suchmatter will be submitted to an independent Third-Party expert (mutually agreed upon by both Parties) to establish [**] based on ananalysis of available or published data from all of the Approved PD-1 Antibodies, subject to the following parameters: (A) the [**]shall be consistent with the applicable [**] for which Approved PD-1 Antibodies have received Regulatory Approval as aMonotherapy Regimen, as derived from an assessment of monotherapy [**] of Approved PD-1 Antibodies (as of the date on whichthe applicable Clinical Study data is being assessed with respect to Proof of Concept) observed in comparable patient populations andIndications; and (B) the [**] shall be based on the Licensed Product as a single agent based on the treatment of at least [**] in aspecific Indication at a defined dose and schedule that does not exceed the maximum tolerated dose of the applicable Licensed Product.For clarity, the foregoing parameters apply only to the decision of the Third-Party expert, and the JDC may mutually agree to an [**]or [**] that falls outside of such parameters. Provided that the decision of such expert falls within the32[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDforegoing parameters, such decision will be conclusive and binding on the Parties, except in the case of fraud or manifest error. TheParties shall equally share the costs and expenses of such expert.ARTICLE 3LICENSES3.1 License to Incyte. Subject to the terms and conditions of this Agreement, MacroGenics hereby grants to Incyte: (a) an exclusive(subject to Section 3.3(a)), non-transferable (except in accordance with Section 15.4) license, with the right to grant sublicenses asprovided in Section 3.2, under the Licensed Technology, to use, have used, Develop, have Developed, Manufacture or haveManufactured, the Licensed Compound and Licensed Products in the Field in the Territory, including as a Monotherapy Regimen or acomponent of an Incyte Combination Regimen, Collaborator Combination Regimen, or MacroGenics Combination Regimen (but for,clarity, not to use, have used, Develop, have Developed, Manufacture or have Manufactured, any MacroGenics Pipeline Asset, nor toconduct or have conducted any MacroGenics Combination Studies); (b) an exclusive, non-transferable (except in accordance withSection 15.4) license, with the right to grant sublicenses as provided in Section 3.2, under the Licensed Technology, to Commercializeor have Commercialized the Licensed Compound and Licensed Products in the Field in the Territory, including as a MonotherapyRegimen or a component of an Incyte Combination Regimen or Collaborator Combination Regimen (but, for clarity, not as acomponent of any MacroGenics Combination Regimen); (c) an exclusive, non-transferable (except in accordance with Section 15.4)license, with the right to grant sublicenses as provided in Section 3.2, under the (x) Licensed Technology and (y) Label CombinationPatents, to Commercialize or have Commercialized the Licensed Compound and Licensed Products in the Field in the Territory as acomponent of a MacroGenics Combination Regimen in accordance with its approved label, provided that Incyte shall have no right toconduct any Medical Affairs Activities or activities directed to marketing, detailing, promoting, educating or any Phase IV Studies withrespect to the Licensed Compound or Licensed Products as a component of a MacroGenics Combination Regimen other thanMacroGenics Combination Regimen Detailing; (d) a co-exclusive (with MacroGenics), non-transferable (except in accordance withSection 15.4) license, with the right to grant sublicenses as provided in Section 3.2, under the (x) Licensed Technology and (y) LabelCombination Patents, to obtain Regulatory Approval of the Licensed Compound as a component of MacroGenics CombinationRegimens and include such Regulatory Approval in the Licensed Compound label; and (e) a co-exclusive (with MacroGenics), non-transferable (except in accordance with Section 15.4) license, with the right to grant sublicenses as provided in Section 3.2, under theLicensed Technology, to conduct or have conducted (by Third Party contractors, licensees or other research or Development Partners,as applicable) preclinical and nonclinical studies with the Licensed Compound and Licensed Product solely for research anddevelopment purposes.3.2 Sublicensing.(a)Incyte shall have the right to grant sublicenses of the rights granted to Incyte under Sections 3.1 and 3.4 to: (i) its Affiliatesthrough multiple tiers; and (ii) Third Parties through multiple tiers, subject to the conditions in this subsection(a). Incyte may, in its discretion, grant any such sublicense to a Collaborator (pursuant to subsection33[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(b)) and to any bona fide Development Partners, commercial partners and distributors. Each sublicense shall refer to thisAgreement and, except to the extent MacroGenics may otherwise agree in writing, be consistent in all material respectswith the terms and conditions of this Agreement. Incyte shall remain responsible for the performance of its obligationsunder this Agreement and the performance of its sublicensees hereunder. Incyte shall provide to MacroGenics copies ofall such sublicenses to Third Parties (whether granted directly by Incyte or by a Third Party which previously received asublicense directly or indirectly from Incyte) within [**] after the execution date of each sublicense; provided thatIncyte shall have the right to redact commercially sensitive information from such copies, and provided further thatIncyte shall provide financial terms to the extent reasonably necessary for MacroGenics to calculate amounts due toMacroGenics hereunder (including Monotherapy Sublicense Fees and Collaborator Sublicense Fees). Informationregarding the scope of the license grants, territory or term of each such sublicense shall not be considered commerciallysensitive.(b)Incyte shall require that each Collaborator agrees in writing to the all terms applicable to a Collaborator or CombinationSponsor under this Agreement, in addition to the following terms, all of which shall be set forth in a writtenagreement executed by Incyte and such Collaborator (the “Collaborator Contract”): (i) Collaborator orIncyte shall bear all costs and expenses associated with the conduct of any Collaborator Combination Studies(other than any Funded Collaborator Combination Studies); (ii) Collaborator shall not have any input ordecision-making authority with respect to any governance matters related to the Licensed Compound or anyLicensed Products under this Agreement; (iii) Collaborator shall provide to Incyte all data Controlled byCollaborator, derived from the conduct of any Collaborator Combination Studies as set forth in Section5.2(b); (iv) irrespective of inventorship, Collaborator and Incyte shall jointly own any Invention that relatesspecifically to the Licensed Compound or any Licensed Product and results from the conduct of anyCollaborator Combination Studies, together with any intellectual property rights therein (collectively,“Collaborator Development IP”) and, to the extent necessary to effectuate the foregoing, each of Incyteand the Collaborator, on behalf of itself and its Affiliates, shall agree to assign, and shall hereby assign, to theother party an undivided joint ownership interest in and to the Collaborator Development IP. Each party shallhave the right to practice, Exploit and license, and assign or transfer its rights in, any CollaboratorDevelopment IP without a duty of accounting to the other party, and each party, on behalf of itself and itsAffiliates, shall hereby waive any right it or its Affiliates may have under Applicable Laws of anyjurisdiction to require any such approval or accounting; (v) Collaborator shall be subject to oversight andreview and/or approval rights by Incyte with respect to the Development of Collaborator CombinationRegimens, in each case, that are no less stringent than the oversight and, review and/or approval rightsapplicable to the Development of MacroGenics Combination Regimens under this Agreement; and (vi)Incyte shall require that each Collaborator Contract be assignable upon34[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDtermination of this Agreement at least in those instances where assignment is required pursuant to Section 12.8.(c)MacroGenics shall have the right, in its sole discretion, to grant sublicenses of any of the rights granted to MacroGenicsunder Section 3.4 solely in accordance with Section 3.3(b) and subject to the remainder of this subsection (c).Each sublicense shall refer to and be subordinate to this Agreement and, except to the extent the Parties mayotherwise agree in writing, any sublicense must be consistent in all material respects with the terms andconditions of this Agreement. MacroGenics shall remain fully responsible for the performance of itsobligations under this Agreement and the performance of its sublicensees hereunder. MacroGenics shallprovide to Incyte copies of all such sublicenses to Third Parties within [**] after the execution date of eachsublicense; provided that MacroGenics shall have the right to redact commercially sensitive information fromsuch copies. Information regarding the scope of the license grants, territory or term of each such sublicenseshall not be considered commercially sensitive. MacroGenics shall not have the right, and shall not, withoutthe prior written approval of Incyte ([**]) (which approval shall not be unreasonably withheld, conditioned ordelayed), grant any sublicenses or allow any Third Party to exercise on behalf of MacroGenics any of therights to be sublicensed to MacroGenics hereunder with respect to the [**] or [**]. Promptly after theEffective Date, the Parties will meet to discuss and agree upon the conditions under which MacroGenicsmay, without the need to obtain Incyte’s prior written approval, grant sublicenses or otherwise allow ThirdParties to exercise on behalf of MacroGenics any of the rights to be sublicensed to MacroGenics hereunderwith respect to the [**] (the “[**] Conditions”) or [**] (the “[**] Conditions”); provided that, each of the[**] Conditions and the [**] Conditions shall not be [**] required under the [**]. (i) Promptly after executionof the [**] and [**] as described in Section [**], Incyte shall provide a [**] of the [**] which Incyte [**] toMacroGenics, reasonably sufficient to [**] the [**]. Within [**] following MacroGenics’ receipt of such[**], MacroGenics shall notify Incyte whether MacroGenics [**] to [**] under the [**] and/or the right to[**] or [**] under the [**] (the “[**]”). MacroGenics may [**] the [**] on a [**], subject to [**] Conditionsor the prior written agreement of Incyte in each instance. (ii) Promptly after execution of each [**] betweenIncyte and [**] as described in [**], Incyte shall provide a [**] of the [**] under which Incyte [**] toMacroGenics, reasonably sufficient to confirm the [**]. Within [**] following MacroGenics’ receipt of suchredacted [**], MacroGenics shall notify Incyte whether MacroGenics [**] under the [**] and/or the [**] or[**] under the [**] (the “[**]”). MacroGenics may [**] the [**] on a [**], subject to satisfaction of the [**]Conditions or the [**] of Incyte in each instance.3.3 Retained Rights(a)General.35[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(i)Retained Exclusive Rights. Notwithstanding anything to the contrary herein, MacroGenics shall retain theexclusive right: (A) to conduct or have conducted (by Third Party subcontractors or licensees in accordancewith Section 1.94, as applicable) the MacroGenics Combination Studies; and (B) subject to Section 3.1(a), toExploit any MacroGenics Pipeline Asset, including as a component of a MacroGenics Combination Regimen.(ii)Other Retained Rights. MacroGenics shall retain, subject to the terms and conditions of this Agreement: (A)the co-exclusive (with Incyte) right to conduct or have conducted (by Third Party contractors, licensees or otherresearch or Development Partners, as applicable) preclinical and nonclinical studies with the LicensedCompound and Licensed Product solely for research and development purposes; (B) the non-exclusive right toconduct or have conducted (by Third Party contractors, licensees in accordance with Section 1.94 or otherresearch or Development Partners, as applicable) the Ongoing Clinical Study prior to completion of the StudyTransition in accordance with the Study Transition Plan; and (C) the non-exclusive, non-transferable right to (x)Manufacture the Licensed Compound Bulk Drug Substance and (y) Manufacture or have Manufactured theLicensed Compound Drug Product.(b)Sublicensing Rights. MacroGenics shall have the right to grant licenses or sublicenses (as applicable) of the rights retainedby or granted to MacroGenics under Sections 3.3 and 3.4, subject only to the following (and, as applicable,Section 3.2(c)). In the case of Section 3.3(a)(i)(A), such license or sublicense (as applicable) shall be solely tothose Third Parties referenced in 3.3(a)(i)(A), and shall be solely for the purposes of either (i) Developing aMacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen or (ii)Commercializing a MacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen inaccordance with its approved label (but, for clarity, the retained rights and such licenses or sublicenses shallnot include the right to Develop or Commercialize the Licensed Compound or any Monotherapy Regimen,Incyte Pipeline Asset or Collaborator Pipeline Asset). In the case of Section 3.3(a)(ii)(C)(x), individualelements of the Manufacturing Process may be performed by Third Parties on behalf of MacroGenics,provided that MacroGenics shall in any case continue to conduct the majority of Manufacturing-relatedactivities in connection with the Manufacture of the Licensed Compound Bulk Drug Substance, andMacroGenics shall not engage in any Manufacturing Process technology transfer with any such Third Partiesother than with respect to the specific Manufacturing Process to be conducted by such Third Parties and onlyto the extent reasonably required for such Third Parties to perform such Manufacturing Process.(c)Notwithstanding anything to the contrary herein, MacroGenics shall not have any right to, and shall not, (i) Exploit anyCombination Product, or (ii) sell, have sold, or distribute Licensed Compound Bulk Drug Substance orLicensed Compound Drug Product other than (x) for use in those activities described in Section 3.3(a), or (y)36[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDto Incyte for use in the Development activities or the Manufacture of the Licensed Product. Furthermore,notwithstanding anything to the contrary herein, MacroGenics shall not have any right to, and shall not, directly orindirectly, conduct or perform, nor contract with any Third Party to conduct or perform (A) any Clinical Study of anIncyte Combination Regimen or any Collaborator Combination Regimen, nor (B) any other Clinical Study that includesthe Licensed Compound and any other specific molecule or molecules (as monotherapies or combinations) other than aMacroGenics Combination Study (or a Monotherapy Study pursuant to Section 5.9(c)). In the event that MacroGenicsenters into any collaboration or analogous relationship with respect to the Licensed Compound involving a Third Partycollaborator who owns or Controls an Ancillary Therapy that is being studied in connection with a MacroGenicsCombination Regimen, (x) MacroGenics shall provide to Incyte all data Controlled by MacroGenics derived from anyarm of the Clinical Study that solely comprises both the Licensed Compound and the Ancillary Therapy, and (y)MacroGenics shall grant and hereby grants to Incyte a non-exclusive, irrevocable, perpetual, transferable, fully paid-up,royalty-free, sublicenseable license under any Information or any intellectual property Controlled by MacroGenicsarising out of any arm of the Clinical Study that solely comprises both the Licensed Compound and the AncillaryTherapy for any use consistent with the license granted pursuant to Section 3.4(a), in each case (of (x) and (y)) to theextent that MacroGenics has the contractual right to extend such rights, licenses, or sublicenses to Incyte, as applicable(and MacroGenics shall use Commercially Reasonable Efforts to obtain such contractual rights from the applicableThird Party collaborator). Any such Clinical Study shall otherwise be subject to all of the requirements and limitationsset forth herein with respect to MacroGenics Combination Studies (e.g., the obligations and limitations set forth inSection 4.3 and Article 5). MacroGenics shall be responsible for any failure of the Third Party collaborator to complywith the obligations set forth in Section 3.3(b) and in this Section 3.3(c).3.4 Freedom to Operate Licenses.(a)Subject to the terms and conditions of this Agreement and without limiting the license granted pursuant to Section 3.1,MacroGenics hereby grants to Incyte a non-exclusive, worldwide, fully-paid, royalty-free, non-transferable(except in accordance with Section 15.4) license, with the right to grant sublicenses to the extent provided inSection 3.2(a) and 3.2(b), under (i) any Patents Controlled by MacroGenics or, subject to Section 15.3(d), itsAffiliates as of the Effective Date or during the Term, including MacroGenics’ interest in any Joint Patentsthat Cover the Exploitation of PD-1 Monoclonal Antibodies (the “MacroGenics PD-1 IP”) except that suchlicense shall not extend to any claims in any Patents Controlled by MacroGenics that Cover a (x)MacroGenics Pipeline Asset, (y) Incyte Pipeline Asset or (z) MacroGenics Combination Regimen, unlesssuch claims are necessary for Incyte to exercise the license granted pursuant to Section 3.1; and (ii) any otherPatents or Know-How Controlled by MacroGenics or, subject to Section 15.3(d), its Affiliates, as of theEffective Date or during the Term, including MacroGenics’37[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDinterest in any such Joint Patents that Cover or are embodied in any in vitro device or other companion diagnostic usedto detect, identify and/or diagnose the presence of PD-1 or PD-L1 for the Exploitation of the Licensed Compound orLicensed Products (the “MacroGenics CDx IP”), in each case (of (i)-(ii)) to Exploit the Licensed Compound andLicensed Products in the Field in the Territory, including as a Monotherapy Regimen or a component of an IncyteCombination Regimen, Collaborator Combination Regimen or, solely to the extent permitted under Section 3.1,MacroGenics Combination Regimens (but, for clarity, not to Exploit any MacroGenics Pipeline Asset).Notwithstanding anything to the contrary herein, to the extent of any overlap between the license grants under thisSection 3.4(a) and the license grant under Section 3.1, any payment obligations of Incyte in connection with the licensegrant under Section 3.1 shall remain unaffected and shall continue in full force and effect. For clarity, this Section 3.4(a)shall not be construed to limit the rights granted to Incyte under Section 3.1 to Exploit the Licensed Compound as acomponent of an Incyte Combination Regimen.(b)Subject to the terms and conditions of this Agreement, Incyte hereby grants to MacroGenics a non-exclusive, worldwide,fully-paid, royalty-free, non-transferable (except in accordance with Section 15.4) license, with the right togrant sublicenses to the extent provided in Section 3.2(c) and Section 3.3(b), under (i) any Patents Controlledby Incyte or its Affiliates, as of the Effective Date or, subject to Section 15.3(d), during the Term, that Coverthe manufacture of the Licensed Compound, including Incyte’s interest in any such Joint Patents (the “IncytePD-1 IP”) except that such license shall not extend to any claims in any Patents Controlled by Incyte thatclaim an Incyte Pipeline Asset or Incyte Combination Regimen, (ii) Incyte Development IP Controlled byIncyte or its Affiliates that relates specifically to the Licensed Compound (and not, for clarity, to anyCombination Regimen or Pipeline Asset), including Incyte’s interest in any such Joint Patents or JointInventions, (iii) any other Patents or Know-How Controlled by Incyte or its Affiliates, as of the EffectiveDate or, subject to Section 15.3(d), during the Term, that Cover or are embodied in any in vitro device orother companion diagnostic used to detect, identify and/or diagnose the presence of PD-1 or PD-L1 for theDevelopment or Commercialization of the Licensed Compound or Licensed Products, including Incyte’sinterest in any such Joint Patents or Joint Inventions (the “Incyte CDx IP”) and (iv) any other Patents orKnow-How Controlled by Incyte or its Affiliates, as of the Effective Date or, subject to Section 15.3(d),during the Term, that relate specifically to the Licensed Compound (and not, for clarity, to any CombinationRegimen), including Incyte’s interest in any such Joint Patents or Joint Inventions (such Patents, “IncytePatents” and such Know-How, “Incyte Know-How”; collectively, “Incyte Technology”), in each case (of(i)-(iv)) solely to Develop and Commercialize any MacroGenics Pipeline Asset as a component of aMacroGenics Combination Regimen in accordance with its approved label (but, for clarity, not to Develop orCommercialize the Licensed Compound or any Monotherapy Regimen, Incyte Pipeline Asset orCollaborator Pipeline Asset).38[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(c)MacroGenics shall provide to Incyte reasonable access to MacroGenics CDx IP for the purpose of Incyte’s performance ofthe Incyte Global Development Plan. Incyte shall provide to MacroGenics reasonable access to Incyte CDxIP for the purpose of MacroGenics’ performance of the MacroGenics Global Development Plan.(d)(i) Subject to the terms and conditions of this Agreement, Incyte hereby grants to MacroGenics a non-exclusive,worldwide, fully-paid, royalty-free license, non- transferable (except in accordance with Section 15.4)license, with the right to grant sublicenses to the extent provided in Section 3.2(c) and Section 3.3(b), to anyIncyte Method Claims under any Patent Controlled by Incyte or (subject to Section 15.3(d)) its Affiliates asof the Effective Date or during the Term, as necessary to Commercialize the MacroGenics Pipeline Asset incombination with the Licensed Compound or Licensed Product in accordance with the approved label of theapplicable MacroGenics Combination Regimen. As used herein, an “Incyte Method Claim” shall mean anyclaim that claims the method of using the Combination of the Licensed Compound or Licensed Product witha MacroGenics Pipeline Asset for the treatment of cancer in the Territory, excluding claims: (A) for whichIncyte does not have the contractual right to grant the license under this Section 3.4(d)(i); (B) that arise froman Incyte Pipeline Asset disclosed in the Incyte Global Development Plan under Exhibit B-1, as of theEffective Date; or (C) that read on or include as an element a Cancer Treatment Use.(ii) Subject to the terms and conditions of this Agreement and without limiting the license granted pursuant to Section3.1, MacroGenics hereby grants to Incyte a non-exclusive, worldwide, fully-paid, royalty-free, non-transferable (exceptin accordance with Section 15.4) license, with the right to grant sublicenses to the extent provided in Section 3.2(a) and3.2(b), to any MacroGenics Method Claims under any Patent Controlled by MacroGenics or (subject to Section15.3(d)) its Affiliates as of the Effective Date or during the Term, as necessary to Commercialize the LicensedCompound or Licensed Product in combination with the Incyte Pipeline Asset in accordance with the approved label ofthe applicable Incyte Combination Regimen. As used herein, a “MacroGenics Method Claim” shall mean any claimthat claims the method of using the Combination of the Licensed Compound or Licensed Product with an IncytePipeline Asset for the treatment of cancer in the Territory, excluding claims: (A) for which MacroGenics does not havethe contractual right to grant the license under this Section 3.4(d)(ii); (B) that arise from a MacroGenics Pipeline Assetdisclosed in the MacroGenics Global Development Plan under Exhibit B-2, as of the Effective Date; or (C) that read onor include as an element a Cancer Treatment Use.3.5 No Implied Licenses. All licenses and rights are granted only as expressly provided in this Agreement and no license or otherright is or shall be created or granted under this Agreement by implication, estoppel, or otherwise. All rights not expressly granted by aParty under this Agreement are reserved by such Party and may not be used by the other Party for any purpose.39[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDARTICLE 4DEVELOPMENT4.1 Transition of Ongoing Clinical Study.(a)Ongoing Clinical Study. During the period beginning on the Effective Date and ending on the Study Transition Date,MacroGenics shall use Commercially Reasonable Efforts to: (i) perform any Development activities assignedto MacroGenics in the Study Transition Plan; and (ii) subject to subsection (d) below, conduct (or haveconducted by an Affiliate or Third-Party contract research organization) the ongoing Clinical Study of theLicensed Compound and all related Development activities that are identified (together with an estimate ofthe costs thereof through [**]) on Exhibit E (collectively, the “Ongoing Clinical Study”).(b)IND Transition. Within [**] after the Effective Date, or such other period defined by the JDC, but in any event no laterthan [**] (the “IND Transition Date”), MacroGenics shall transfer to Incyte, and Incyte shall cooperate ingood faith to support MacroGenics’ transfer of, all INDs for the Licensed Compound (the “MGA012IND”), in accordance with a transition plan to be approved by the JDC promptly after the Effective Date (the“IND Transition”; such transition plan, the “IND Transition Plan”). Each Party shall bear all costs andexpenses incurred by such Party in connection with the IND Transition. Upon the completion of the INDTransition, Incyte shall be solely responsible, at its sole cost and expense, for all filings, reports andcommunications with all Regulatory Authorities, with respect to the Licensed Products. Upon completion ofthe IND Transition, MacroGenics shall, and hereby does, assign to Incyte all such RegulatoryDocumentation and shall take all steps reasonably necessary to effectuate the assignment of all INDs,Regulatory Approval Applications and Regulatory Approvals included in such Regulatory Documentation toIncyte.(c)Study Transition. MacroGenics and Incyte shall jointly cooperate to complete the transfer to Incyte of the Ongoing ClinicalStudy, in accordance with a transition plan and budget to be approved by the JDC (the “Study Transition”;such transition plan, the “Study Transition Plan”), but in any event to be completed no later than [**] (the“Study Transition Date”); provided that, MacroGenics may transfer certain responsibilities with respect tothe Ongoing Clinical Study prior to the Study Transition Date, as determined by the JDC and set forth in theStudy Transition Plan. At all times during the Term, Incyte shall cooperate in good faith to supportMacroGenics’ transfer of the Ongoing Clinical Study to Incyte.40[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(d)Decision-Making; Costs. At all times during the Term, whether prior to or after the IND Transition Date or the StudyTransition Date: (i) Incyte shall have final decision-making authority with respect to matters related to theOngoing Clinical Study (which Incyte shall exercise in good faith); and (ii) Incyte shall bear any and all FTECosts and Third Party Expenses incurred by MacroGenics following the Effective Date directly related to theOngoing Clinical Study in accordance with the Study Transition Plan, other than any costs specificallyrelated and allocable to any MacroGenics Combination Regimen. Incyte shall reimburse MacroGenics within[**] after receipt of any undisputed invoice from MacroGenics setting forth such costs.4.2 Incyte Development Responsibilities.(a)General.(i)Following the Study Transition Date, subject to Sections 2.2, 3.3, and 4.1, Incyte shall, at its sole cost andexpense, be solely responsible for and have sole authority over: (a) the Development of the MonotherapyRegimen in the Field in the Territory (other than pursuant to Section 5.9(c)); and (b) the Development of IncyteCombination Regimens and Collaborator Combination Regimens in the Field in the Territory, and will retainfinal decision-making authority with respect to each of the foregoing. Notwithstanding the foregoing,MacroGenics will continue to perform Manufacturing Development work as determined by the JMC withrespect to the Licensed Compound following the Study Transition Date, and with respect to any suchManufacturing Development that relates [**] to the Licensed Compound, Incyte shall pay any and all such coststo the extent required pursuant to subsection (ii) below, and will retain final decision-making authority withrespect to such Manufacturing Development.(ii)Incyte shall bear any and all costs and expenses incurred in connection with: (a) any Development activities thatrelate to the Monotherapy Regimen (other than any costs and expenses associated (i) with any monotherapyarms that are included in any MacroGenics Combination Study or (ii) Monotherapy Studies conducted pursuantto Section 5.9(c)) or any Incyte Combination Regimens and Collaborator Combination Regimens, including theDevelopment activities set forth in this Section 4.2; and (b) any Development activities that are needed to pursueRegulatory Approval of the Monotherapy Regimen (other than pursuant to Section 5.9(c)) or any IncyteCombination Regimens. For clarity, except as set forth in Section 4.1 and in clause (i) above, (x) MacroGenicsshall have no obligation to perform any Development activities that relate to the Monotherapy Regimen or anyIncyte Combination Regimens and Collaborator Combination Regimens and (y) Incyte shall not be responsiblefor, and MacroGenics shall bear, any and all costs and expenses related to the conduct of (A) any MacroGenicsCombination Studies or (B) other Development activities expressly required41[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDto be conducted by MacroGenics with respect to the Licensed Compound for which the Agreement does notspecify that Incyte shall reimburse MacroGenics for such Development expenses.(b)Clinical Study Registries. Incyte shall be responsible, in accordance with Applicable Law, for registering in the appropriateclinical trial registry and posting the results of all Clinical Studies of the Monotherapy Regimen (other thanpursuant to Section 5.9(c)) and Incyte Combination Regimens in the Field in the Territory. With respect toClinical Studies of Collaborator Combination Regimens in the Field in the Territory, either Incyte orCollaborator shall be responsible (as set forth in the applicable Collaborator Contract), in accordance withApplicable Law, for registering in the appropriate clinical trial registry and posting the results of such ClinicalStudies.(c)Documentation. Incyte shall prepare and maintain, or shall cause to be prepared and maintained, complete and accuratewritten records, accounts, notes, reports and data with respect to Development activities conducted by Incytepursuant to this Agreement (including the Incyte Global Development Plan) in good scientific manner and inconformity with Applicable Law and Incyte’s standard practices, provided that, in no case shall such recordsbe maintained for less than [**] following the Calendar Year to which such records pertain (or any longerperiod required by Applicable Law).(d)Progress Reports. No later than [**] and [**] of each Calendar Year, Incyte shall provide to MacroGenics in writing(PowerPoint presentations are acceptable) a report summarizing Incyte’s efforts and progress during the [**]prior to such date, as applicable, to Develop and seek Regulatory Approval of the Licensed Compound andany Licensed Products. Each such report shall describe, among other matters: (a) material Developmentactivities completed since the last report, including the object and parameters of the Development, wheninitiated and when completed; (b) a summary of all material results of any Monotherapy Studies orMonotherapy Regimens; (c) material Development activities planned to be undertaken before the next report,including the type and object of any Clinical Studies to be conducted and their projected starting andcompletion dates; (d) a summary of all material updates or developments with respect to the ManufacturingProcess since the date of the last report; and (e) material changes in Incyte’s Development plans; provided,however, that (i) Incyte shall not be required to include in such reports any (A) information relating solely tothe Incyte Pipeline Assets or (B) other confidential information related to the Incyte Pipeline Assets or IncyteCombination Regimens, in each case as reasonably determined by Incyte in its sole discretion; (ii) Incyteshall not be required to provide such a report for any Calendar Quarter in which it provided an update to theIncyte Global Development Plan pursuant to Section 4.4(a); and (iii) Incyte shall not be required to providesuch a report for any Calendar Quarter in which it provided materially similar information to any JointCommittee. In addition, Incyte shall promptly respond to reasonable requests by MacroGenics for42[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDinformation regarding Incyte’s Development and Commercialization activities for the Licensed Compound andLicensed Products, to the extent such information is necessary to assess Incyte’s compliance with its obligationshereunder.(e)Performance.(i)With respect to the performance of any Incyte Combination Study or Collaborator Combination Studyhereunder, Incyte shall (and shall require that Collaborator shall, with respect to any Collaborator CombinationStudies): (a) perform the Combination Study in accordance with this Agreement and all Applicable Law,including GCP; (b) obtain all approvals and clearances necessary to conduct each Combination Study, includingobtaining customs clearances and approvals from Regulatory Authorities, institutional review boards and ethicscommittees; (c) ensure that all consents required under Applicable Law in connection with such CombinationStudy have been obtained prior to commencing any Combination Study; and (d) not employ or subcontract withany Person or Third Party that has been debarred by the FDA, is the subject of a conviction described in Section306 of the FFDCA or is subject to any similar sanction of other Governmental Authorities in the Territory, andpromptly remove any such Person or Third Party from performing any activities related to any CombinationStudy.(ii)Incyte shall require that Collaborators shall perform all Collaborator Combination Studies in accordance withthe applicable Collaborator Contract and all applicable terms and conditions of this Agreement. For theavoidance of doubt, Incyte, as the Controlling Party, shall be responsible for the failure of a Collaborator tofulfill any obligation owed to MacroGenics pursuant to this Agreement in connection with any CollaboratorCombination Studies, Collaborator Pipeline Assets or any Collaborator Combination Regimen, including anyregulatory or other requirements related thereto, irrespective of which party performs the relevant obligation orto whom the relevant obligation is addressed.(f)Diligence. Incyte shall use Commercially Reasonable Efforts to: (i) complete the Ongoing Clinical Study as described inExhibit E, subject to amendments to the protocol therefor and to corresponding portions of the Incyte GlobalDevelopment Plan by Incyte in the exercise of its reasonable business judgment and (ii) Develop theMonotherapy Regimen and one (1) or more Incyte Combination Regimens.4.3 MacroGenics Development Responsibilities.(a)General. MacroGenics shall, at its sole cost and expense, have the sole right to conduct, or have conducted, MacroGenicsCombination Studies and shall retain final decision-making authority with respect thereto, subject to theremainder of this Section 4.3. Notwithstanding anything to the contrary in this Section 4.3, the protocolsynopses for the MacroGenics Combination Studies in Exhibit B-2 have been43[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDreviewed and pre-approved by Incyte prior to the Execution Date. Accordingly, Incyte will not have any further right toreview, approve or object to the design or conduct of any such studies, unless the components outlined in the protocolsynopsis reviewed by Incyte are materially different from the corresponding components in the protocol prior to its firstsubmission to a Regulatory Authority, in which case Incyte shall be given a subsequent opportunity and right to review,comment on and object to the updated protocol synopsis before such submission.(b)MacroGenics Combination Studies.(i)For a period of [**] following the Effective Date, MacroGenics shall provide to Incyte, through the JDC, aprotocol synopsis (in a consistent format as included in Exhibit B-2) for each MacroGenics Combination Study(but for clarity, excluding any Phase IV Studies) proposed to be conducted by or on behalf of MacroGenics(which synopsis may be redacted by MacroGenics with respect to any MacroGenics Pipeline AssetInformation), and:(1)Without limiting Section 4.3(c), Incyte shall have the right to object to the design or conduct of suchMacroGenics Combination Study in the event that Incyte [**] that [**] could[**] to its [**] ([**], a “[**]”; an objection pursuant to this Section 4.3(b)(i)(1), an “Incyte [**] Objection”), provided that, any such Incyte [**]Objection: (A) specifically identifies, in reasonable detail, the potential [**]such proposed MacroGenics Combination Study may pose; and (B) isprovided in writing to MacroGenics within [**] following the provision of theprotocol synopsis to the JDC. MacroGenics may proceed with any suchMacroGenics Combination Study in the event that Incyte does not providewritten notice of an Incyte [**] Objection within such [**] period, unless thecomponents outlined in the protocol synopsis reviewed by Incyte arematerially different from the corresponding components in the full protocolprior to its first submission to a Regulatory Authority, in which case Incyteshall be given a subsequent opportunity and right to review and comment onan updated protocol synopsis within [**] of receipt of such updated protocolsynopsis.(2)In the event Incyte timely delivers notice of an Incyte [**] Objection to MacroGenics: (A) the Parties shall,within [**] following the delivery of such notice, convene the JDC for thepurpose of discussing the MacroGenics Combination Study, and MacroGenicsshall consider in good faith any comments from Incyte related to the designand conduct of such study, with MacroGenics using CommerciallyReasonable Efforts to resolve the Incyte [**] Objection, and (B) without theprior written approval of Incyte (not to be unreasonably withheld, conditionedor delayed; provided, however, that44[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwithholding, conditioning or delaying such approval based on the continued existence of a [**] shall bedeemed not unreasonable), MacroGenics shall not conduct or have conducted such MacroGenicsCombination Study.(3)In the event of any dispute relating to a matter set forth in this subsection (i), if such dispute remainsunresolved after discussion through the JDC and escalation pursuant toSection 2.1(c), MacroGenics shall have final decision-making authority withrespect thereto. Notwithstanding anything to the contrary herein, the timeperiod for review of the protocol synopsis, from MacroGenics’ first provisionof the protocol synopsis to Incyte and any final casting vote in the JDC in theevent of a dispute shall never exceed [**].(4)For a period ending on the earlier (x) [**] following the Effective Date or (y) achievement of the firstLicensed Compound Approval by either the FDA or EMA, after the firstsubmission of any MacroGenics Combination Study protocol to a RegulatoryAuthority in accordance with Section 4.3(a) and Section 4.3(b), MacroGenicsshall provide to Incyte an updated protocol synopsis to reflect any materialamendments to the corresponding protocol as may be adopted from time totime, and Incyte shall have the right to review and comment on suchamendments.(ii)With respect to any MacroGenics Combination Study, but without limiting the rights of Incyte pursuant toSection 4.3(c) with respect to Clinical Studies including a MacroGenics PD-1 Control Arm, MacroGenics shallemploy a dosage or schedule of the Licensed Compound that (A) is consistent with a dosage or schedule of theLicensed Compound that has been previously tested in a Phase II Study or Phase III Study, (B) is consistentwith a dosage or schedule previously recommended or required by a Regulatory Authority, or (C) has not beenpreviously tested in any Clinical Study and is reasonably expected by the JDC not to pose any [**]. In the eventof any dispute relating to a matter set forth in this subsection (ii), if such dispute remains unresolved afterdiscussion through the JDC and escalation pursuant to Section 2.1(c), MacroGenics shall have final decision-making authority with respect thereto; provided that, the time period from the start of such dispute to itsresolution shall never exceed [**].(c)MacroGenics Combination Studies that Include a MacroGenics PD-1 Control Arm. Without limiting Incyte’s rightsunder Section 4.3(b), commencing on the Effective Date and lasting until achievement of the LicensedCompound Approval by either the FDA or EMA, MacroGenics shall provide to Incyte, through the JDC, (i)a copy of the detailed full protocol of each Clinical Study that includes a MacroGenics PD-1 Control Armplanned to be conducted by or on behalf of45[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDMacroGenics (which protocol may be redacted by MacroGenics with respect to any MacroGenics Pipeline AssetInformation), and (ii) a written statement explaining why such Clinical Study design is likely to be required orrecommended by a Core Regulatory Authority in order to achieve Regulatory Approval of the applicable MacroGenicsCombination Regimen:(i)Incyte shall have the right to reasonably object to the conduct of such Clinical Study that includes aMacroGenics PD-1 Control Arm, in the event that Incyte provides notice of such objection in writing toMacroGenics within [**] following the provision of the detailed full protocol to the JDC (the “IncyteObjection”). Subject to the provisions of Section 4.3(b), MacroGenics may proceed with any such study in theevent that Incyte does not provide written notice of an Incyte Objection within such [**] period.(ii)In the event Incyte timely delivers notice of an Incyte Objection to MacroGenics, the Parties shall, within [**]following the delivery of such notice, convene the JDC for the purpose of discussing the basis of the IncyteObjection. To the extent applicable, Incyte shall inform MacroGenics [**] that such MacroGenics PD-1 ControlArm is reasonably expected to [**] the [**] of the Licensed Compound (a “[**]”).(iii)If MacroGenics reasonably believes that the completion of the proposed MacroGenics PD-1 Control Arm willbe required or recommended by a Core Regulatory Authority in order to achieve Regulatory Approval of aMacroGenics Combination Regimen, MacroGenics shall notify Incyte (via the JDC), and the Parties shalldiscuss in good faith whether reasonable modifications to the study protocol can be made or if alternativestrategies can be employed (e.g., Incyte providing necessary components of care data to MacroGenics forsubmission to the applicable Regulatory Authority) in order to address the Incyte Objection or in order to avoidthe necessity for the MacroGenics PD-1 Control Arm. MacroGenics shall reasonably incorporate into itsprotocol any modifications mutually agreed upon by the Parties.(iv)If, following the procedures described in subsections (ii) and (iii) above, MacroGenics reasonably continues tobelieve that the completion of the proposed MacroGenics PD-1 Control Arm will be required in order toachieve Regulatory Approval of a MacroGenics Combination Regimen, MacroGenics shall have the right toproceed with the conduct of such proposed Clinical Study.(v)MacroGenics shall not conduct any Clinical Study that includes both the Licensed Compound and an anti-PD-1/PD-L1 Monoclonal Antibody owned or Controlled by MacroGenics (or any Acquirer of MacroGenics or itsor their Affiliates), and MacroGenics shall not enable any Third Party to conduct any such study.46[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(d)Clinical Study Registries. For all Clinical Studies of MacroGenics Combination Regimens in the Field in the Territory,MacroGenics shall be responsible, in accordance with Applicable Law, for registering in and maintaining theappropriate clinical trial registry and posting the results of such Clinical Studies.(e)Documentation. MacroGenics shall prepare and maintain, or shall cause to be prepared and maintained, complete andaccurate written records, accounts, notes, reports, data and all related documentation pertaining to eachMacroGenics Combination Study in good scientific manner and in compliance with Applicable Law andMacroGenics’ standard practices; provided that in no case shall such records be maintained for less than [**]following the Calendar Year to which such records pertain (or any longer period required by ApplicableLaw).(f)Progress Reports. No later than [**] and [**] of each Calendar Year, MacroGenics shall provide to Incyte in writing areport (PowerPoint presentations are acceptable) detailing MacroGenics’ efforts and progress during the [**]prior to such date, as applicable, to Develop and seek Regulatory Approval of any MacroGenicsCombination Regimen and to conduct other research and Development activities with respect to the LicensedCompound pursuant to Section 3.3(a). Each such report shall describe, among other matters: (i) materialDevelopment activities completed since the last report, including the object and parameters of theDevelopment, when initiated, when completed and, for a period of [**] following the Effective Date, asummary of all material results (provided, however, that MacroGenics shall not be required to include in suchsummary of material results any MacroGenics Pipeline Asset Information, as reasonably determined byMacroGenics in its sole discretion); (ii) material Development activities planned to be undertaken before thenext report, including the type and object of any MacroGenics Combination Studies to be conducted and theirprojected starting and completion dates; (iii) a summary of all material updates or developments with respectto the Manufacturing Process since the date of the last report; and (iv) material changes in MacroGenics’Development plans; provided however, that (x) MacroGenics shall not be required to provide such a reportfor any Calendar Quarter in which it provided an update to the MacroGenics Global Development Planpursuant to Section 4.4(b); and (y) MacroGenics shall not be required to provide such a report for anyCalendar Quarter in which it provided materially similar information to any Joint Committee. In addition,MacroGenics shall promptly respond to reasonable requests by Incyte for information regardingMacroGenics’ Development activities for the MacroGenics Combination Regimen, to the extent suchinformation is necessary to assess MacroGenics’ compliance with its obligations hereunder.(g)Performance. With respect to the performance of any MacroGenics Combination Study, MacroGenics shall: (i) perform theCombination Study in accordance with this Agreement, the applicable protocol and all Applicable Law,including GCP; (ii) obtain all approvals and clearances necessary to conduct each Combination Study,including obtaining customs clearances and approvals from Regulatory Authorities,47[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDinstitutional review boards and ethics committees; (iii) ensure that all consents required under Applicable Law inconnection with such Combination Study have been obtained prior to commencing any Combination Study; and (iv)not employ or subcontract with any Person or Third Party that has been debarred by the FDA, is the subject of aconviction described in Section 306 of the FFDCA or is subject to any similar sanction of other GovernmentalAuthorities in the Territory, and promptly remove any such Person or Third Party from performing any activities relatedto any Combination Study.4.4 Global Development Plans.(a)Incyte Global Development Plan. The Incyte Global Development Plan shall include, among other things: (i) materialDevelopment activities reasonably anticipated to be undertaken by Incyte to advance the Development of theLicensed Compound and any Products, including high level summaries of the design for any Clinical Study(which will specify key endpoints, projected dosing and/or scheduling for the Licensed Product, and numberof patients expected to be enrolled); (ii) activities to be undertaken by Incyte to further develop theManufacturing Process; and (iii) estimated timelines regarding the foregoing activities, including estimatedtimelines associated with the preparation of any material Regulatory Documentation. Incyte shall submit anyupdates and/or amendments to the then-current Incyte Global Development Plan to the JDC, for the JDC’sreview pursuant to Section 2.2. Incyte shall update the Incyte Global Development Plan no less frequentlythan [**] during the Term; provided that, any amended Incyte Global Development Plan shall be consistentwith Incyte’s diligence obligations set forth in Section 4.2(e), 4.2(f) and 6.1(d). In addition to the [**] updateof the Incyte Global Development Plan, the JDC shall review any Incyte updates to the then-current IncyteGlobal Development Plan. Upon reasonable advance notice, at the request of the JDC, Incyte agrees to makeits employees and consultants reasonably available at their respective places of employment to consult withMacroGenics on issues arising in connection with the Incyte Global Development Plan and the MacroGenicsGlobal Development Plan. Notwithstanding anything to the contrary herein, Incyte shall have final decision-making authority on all matters related to Monotherapy Studies or Incyte Combination Studies beingconducted by or on behalf of Incyte pursuant to the Incyte Global Development Plan.(b)MacroGenics Global Development Plan. The MacroGenics Global Development Plan shall include, among other things:(i) all material Development activities reasonably anticipated to be undertaken by MacroGenics to advancethe Development of the MacroGenics Combination Regimens, including high level summaries of (x) thedesign for any Clinical Study (which will specify key endpoints, projected dosing and/or scheduling for theLicensed Product, and number of patients expected to be enrolled, and (y) other research and Developmentactivities to be conducted by MacroGenics in connection with the Licensed Compound pursuant to Section3.3(a)); and (ii) estimated timelines regarding the foregoing activities,48[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDincluding estimated timelines associated with the preparation of any material Regulatory Documentation. MacroGenicsshall submit any updates and/or amendments to the then-current MacroGenics Global Development Plan to the JDC,for the JDC’s review and approval (to the extent required) pursuant to Section 2.2 and Section 4.3, MacroGenics shallupdate the MacroGenics Global Development Plan no less frequently than [**] during the Term; provided that, anyamended MacroGenics Global Development Plan shall be consistent with MacroGenics’ obligations set forth in Section4.1(a) and 4.3(g). In addition to the [**] update of the MacroGenics Global Development Plan, the JDC shall reviewany MacroGenics updates to the then-current MacroGenics Global Development Plan. Upon reasonable advancenotice, at the request of the JDC, MacroGenics agrees to make its employees and consultants reasonably available attheir respective places of employment to consult with Incyte on issues arising in connection with the Incyte GlobalDevelopment Plan and the MacroGenics Global Development Plan. Notwithstanding anything to the contrary herein,but subject to Section 4.3, MacroGenics shall have final decision-making authority on all matters related toMacroGenics Combination Studies being conducted by or on behalf of MacroGenics pursuant to the MacroGenicsGlobal Development Plan.4.5 Delegation of Development Activities. Each Party may delegate the performance of any Development activities conducted inaccordance with this Article 4 to any bona fide licensee in accordance with Section 3.2 or Third Party subcontractor, provided that: (a)such licensee or subcontractor has entered or shall enter into, prior to performing activities under this Agreement, an appropriate writtenagreement (“Development Agreement”) that shall require, among other things, such licensee or subcontractor to be bound byobligations of confidentiality that are no less restrictive than the obligations set forth in Article 11; (b) such Party shall oversee theperformance of any delegated activities in a manner that would be reasonably expected to result in their successful and timelycompletion; and (c) such Party shall at all times remain responsible for the performance of such delegated activities as if such activitieswere performed by such Party. In addition, if Incyte is the delegating Party, Incyte shall require that any Development Agreementexecuted between Incyte and any of its licensees or Third Party subcontractors shall permit the assignment of such agreement, in itsentirety, to MacroGenics, upon the termination of this Agreement (other than in connection with Section 12.9), without any objectionrights by the applicable licensee or subcontractor. For clarity: (i) MacroGenics may have funded or supported any MacroGenicsCombination Studies and related activities pursuant to this Article 4 as investigator-sponsored Clinical Studies or conducted suchClinical Studies in collaboration with any academic institution; and (ii) Incyte may have funded or supported any MonotherapyStudies, Incyte Combination Studies, or related activities pursuant to this Article 4 as investigator-sponsored Clinical Studies orconducted such Clinical Studies in collaboration with any academic institution.4.6 Compliance with Law; Other Requirements.(a)Each Party shall (and Incyte shall require that each Collaborator shall) conduct all Development activities related to anyCompounds or Products, in good scientific49[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDmanner and in compliance in all material respects with all Applicable Law, including applicable national andinternational (e.g., ICH, GCP, GLP, and GMP) guidelines.(b)With respect to the conduct of a Non-Registrational Study in or including the same Indication subtype and line of therapy(the “Indication Population”) for which the Licensed Compound has received Regulatory Approval in acountry in which the Non-Registrational Study is being conducted, if the Non-Registrational Study [**](each of which meets the Indication Population criteria) in the Indication Population with the LicensedProduct (on an Indication Population-by-Indication Population basis across all Clinical Studies and across allsuch country(ies) in which Regulatory Approval has been received) (the “[**]”), then, for clinical supply ofthe Licensed Compound to be administered to Indication Population patients [**] of the [**] in suchcountry(ies):(i)where MacroGenics is the Combination Sponsor, MacroGenics shall either (x) obtain such clinical supply fromIncyte at [**] of Incyte’s generally-applicable transfer price for commercial supply of the Licensed Compoundin the applicable countries, or (y) continue to provide such clinical supply to such Non-Registrational Study andpay to Incyte an amount that results in Incyte receiving the same consideration that Incyte would receivepursuant to clause (x) above net of Incyte’s Manufacturing Expenses for such clinical supply; and(ii)In addition to paying MacroGenics its Manufacturing Expenses for such clinical supply under Article 7, whereIncyte is the Combination Sponsor, Incyte shall pay to MacroGenics an additional amount equal to [**] ofIncyte’s generally-applicable transfer price for commercial supply of the Licensed Compound in the applicablecountries.For clarity, such use of the Licensed Compound under this Section 4.6(b) shall not give rise to any Net Sales.(c)Where MacroGenics is the Combination Sponsor, the restrictions in Section 4.6(b) above shall not apply to any Non-Registrational Study in an Indication Population to the extent MacroGenics achieved Regulatory Approval ofa MacroGenics Combination Regimen in such Indication Population before Incyte, its Affiliates, orsublicensees (including Collaborators) achieved Regulatory Approval of a Licensed Product in suchIndication Population. Where Incyte is the Combination Sponsor or conducting a Monotherapy Study, therestrictions in Section 4.6(b) above shall only apply to Non-Registrational Studies in an Indication Populationto the extent MacroGenics achieved Regulatory Approval of a MacroGenics Combination Regimen in suchIndication Population before Incyte, its Affiliates, or sublicensees (including Collaborators) achievedRegulatory Approval of a Licensed Product in such Indication Population (and, for clarity, only when suchNon-Registrational Studies otherwise meet the criteria set forth in the introductory paragraph to Section4.6(b)).50[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDARTICLE 5REGULATORY RESPONSIBILITIES5.1 Data Sharing: Licensed Compound.(a)Initial Information Transfer. Upon Incyte’s written request (but in no event later than [**] after the Effective Date),MacroGenics shall deliver to Incyte electronic copies (unless otherwise required by Applicable Law) of allRegulatory Documentation relating [**] to the Licensed Compound or Licensed Products that is Controlledby MacroGenics or its Affiliates, but excluding any MacroGenics Pipeline Asset Information or anyRegulatory Documentation or Information relating specifically to a MacroGenics Pipeline Asset (the“Transferred Documentation”; such transfer, the “Information Transfer”); provided that, to the extentthat, during the Term, MacroGenics or its Affiliates Control any other Information relating to the LicensedCompound or Licensed Products that is (i) solely related to the Licensed Compound or Licensed Product, (ii)necessary for Incyte to perform its obligations or exercise its rights under this Agreement, or (iii) reasonablyrequested by Incyte for such purpose in (i) or (ii), MacroGenics shall promptly provide such Information.(b)Incyte Monotherapy Data. During the Term, subject to Sections 5.2, 5.3 and 5.6, Incyte shall deliver to MacroGenicselectronic copies (unless otherwise required by Applicable Law) of any then-current data Controlled byIncyte relating to the Licensed Compound and derived from Development of the Monotherapy Regimen,including any applicable preclinical safety data or clinical safety data in accordance with thePharmacovigilance Agreement (including adverse event data), biocomparability data, biomarker data,response rate and other efficacy data, mechanistic data and other activity data, as reasonably requested byMacroGenics from time to time (subject to the Pharmacovigilance Agreement or as required by ApplicableLaw, such requests not to be made more frequently than [**] per Calendar Quarter following the [**] of theEffective Date). MacroGenics shall be free to use such Incyte data for any purpose consistent with the rightsexpressly retained by or granted to MacroGenics pursuant to Section 3.3 and the license granted pursuant toSection 3.4(b).(c)MacroGenics Monotherapy Data and Ongoing Clinical Study Data. During the Term, subject to Sections 5.2, 5.3 and5.6, MacroGenics shall deliver to Incyte electronic copies (unless otherwise required by Applicable Law) ofany then-current data Controlled by MacroGenics (i) relating to any anti-PD-1 Monoclonal Antibody beingevaluated as a MacroGenics PD-1 Control Arm, or (ii) relating to the Licensed Compound and arising out ofor in connection with the Ongoing Clinical Study or a Required Monotherapy Study conducted byMacroGenics, including in all cases (of (i) through (ii)) any applicable preclinical safety data or clinical safetydata in accordance with the Pharmacovigilance Agreement (including adverse event data), biocomparabilitydata, biomarker data, response rate and other efficacy data, mechanistic data and other activity data, asreasonably requested by Incyte from51[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDtime to time (but subject to the Pharmacovigilance Agreement or as required by Applicable Law, such request not to bemade more frequently than [**] per Calendar Quarter following the [**] of the Effective Date). Incyte shall be free touse such data for any purpose consistent with the license granted pursuant to Section 3.1.(d)MacroGenics Research and Development Activities. In addition, as reasonably requested by Incyte in writing from timeto time, MacroGenics shall deliver to Incyte electronic copies of all other material Information related to theLicensed Compound (but excluding Information related to the MacroGenics Combination Regimen or anyMacroGenics Pipeline Asset, unless such Information is necessary for Incyte to receive Regulatory Approvalof the Licensed Compound as a component of a MacroGenics Combination Regimen) arising out ofMacroGenics’ conduct of research and Development activities with respect to the Licensed Compoundpursuant to Section 3.3. Subject to the Pharmacovigilance Agreement or as required by Applicable Law,such request shall not be made more frequently than [**] per Calendar Quarter. Incyte shall be limited to usesuch MacroGenics data solely for purposes consistent with the license granted pursuant to Section 3.1.5.2 Data Sharing: Combination Regimens.(a)Incyte Responsibilities. Within [**] after Incyte’s receipt of a written request from MacroGenics, Incyte shall provide toMacroGenics, subject to Section 5.3, copies of and other access to any then-current data Controlled by Incyteor (to the extent Incyte is able to obtain permission to grant such right and access from the Collaborator inconnection with a Collaborator Combination Study, through the use of Commercially Reasonable Efforts, inthe case of such data that Collaborator is not required to provide pursuant to an applicable CollaboratorContract) any Collaborator, derived from the conduct of any Incyte Combination Studies and/or CollaboratorCombination Studies, that is [**] related to the Licensed Compound or Licensed Products, includingapplicable safety data (including adverse event data), as necessary for MacroGenics to comply withapplicable regulatory requirements or requests by Regulatory Authorities for the Development of, or seekingof Regulatory Approval of, any MacroGenics Pipeline Asset as a component of a MacroGenics CombinationRegimen or for the Commercialization of any MacroGenics Pipeline Asset in accordance with suchRegulatory Approval. If Incyte conducts a Clinical Study with respect to the Licensed Compound involvinga Third Party collaborator who owns or Controls an Ancillary Therapy that is being studied in connectionwith an Incyte Combination Regimen, (x) Incyte shall provide to MacroGenics all data Controlled by Incytederived from any arm of the Clinical Study that solely comprises both the Licensed Compound and theAncillary Therapy, and (y) Incyte shall grant and hereby grants to Incyte a non-exclusive, irrevocable,perpetual, transferable, fully paid-up, royalty-free, sublicenseable license under any Information or anyintellectual property arising out of any arm of the Clinical Study that solely comprises both the LicensedCompound and the Ancillary Therapy for any use consistent with the license granted pursuant to Section3.4(b), in each case52[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(of (x) and (y)) to the extent that Incyte has the contractual right to extend such rights, licenses, or sublicenses toMacroGenics, as applicable (and Incyte shall use Commercially Reasonable Efforts to obtain such contractual rightsfrom the applicable Third Party collaborator).(b)Collaborator Responsibilities. Without limiting the generality of the foregoing, Incyte shall require that each CollaboratorContract contains terms as least as protective of Incyte as the following terms set forth in this Section 5.2(b).Promptly, but in any event within [**] after Collaborator’s receipt of a written request from Incyte,Collaborator shall provide to Incyte copies of and other access to any then-current Information Controlled byCollaborator, derived from the Development of any Collaborator Combination Studies, including anyapplicable preclinical safety data or clinical safety data (including adverse event data on terms generallyconsistent with the Pharmacovigilance Agreement), biocomparability data, biomarker data, response rate andother efficacy data, mechanistic data and activity data, as reasonably requested by Incyte from time to time,as necessary for Incyte to seek Regulatory Approval of the Licensed Compound as a component of theCollaborator Combination Regimen or Commercialize the Licensed Compound as a component of aCollaborator Combination Regimen.(c)MacroGenics Responsibilities.(i)Within [**] after MacroGenics’ receipt of a written request from Incyte, MacroGenics shall provide to Incyte,subject to Section 5.3, copies (unless otherwise required by Applicable Law) of and access to any then-currentInformation Controlled by MacroGenics or its Affiliates or licensees derived from the conduct of theMacroGenics Combination Studies that relates [**] to the Licensed Compound or Licensed Product, includingany applicable preclinical safety data or clinical safety data (including adverse event data in accordance with thePharmacovigilance Agreement), biocomparability data, biomarker data, mechanistic data and activity data asreasonably requested by Incyte from time to time (the “MacroGenics Licensed Compound Data”). Incyteshall be free to use such MacroGenics Licensed Compound Data for any purpose consistent with the licensegranted pursuant to Section 3.1.(ii)At least [**] prior to the anticipated database lock of any MacroGenics Combination Study that MacroGenicsintends to submit for Regulatory Approval of a MacroGenics Combination Regimen, the Parties shall initiatediscussions to negotiate and finalize a mutually agreeable Regulatory Agreement.(iii)Within [**] after database lock of any such MacroGenics Combination Study, MacroGenics shall provide toIncyte, subject to Section 5.3, copies (unless otherwise required by Applicable Law) of and access to any then-current Information Controlled by MacroGenics or its Affiliates or licensees derived53[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDfrom the conduct of such MacroGenics Combination Study that relates to the Licensed Compound, a LicensedProduct or any MacroGenics Combination Regimen, which may include applicable preclinical safety data orclinical safety data (including adverse event data in accordance with the Pharmacovigilance Agreement),biocomparability data, biomarker data, mechanistic data and activity data as reasonably requested by Incytefrom time to time (but excluding, in all cases, Information that is solely related to any MacroGenics PipelineAsset unless such Information is necessary for Incyte to seek Regulatory Approval of the Licensed Compoundas a component of a MacroGenics Combination Regimen in accordance with Section 5.8) to the extent suchInformation is necessary for Incyte to (A) comply with any request or requirement by a Regulatory Authority,(B) seek Regulatory Approval of the Licensed Compound as a component of a MacroGenics CombinationRegimen and expand the Licensed Compound label to include such Regulatory Approval in accordance withSection 5.8(c) or (C) to conduct MacroGenics Combination Regimen Detailing (and excluding in all cases, theright to Commercialize any MacroGenics Pipeline Asset) (the “Required Regulatory Data”). For clarity, eachParty will separately submit any non-clinical and any chemistry, manufacturing and controls (CMC) informationspecific to its Compound directly to any Regulatory Authorities.5.3 Data Sharing Limitations. Neither Party nor its Affiliates or sublicensees (including Collaborators) (the “delivering Party”)shall have the obligation to provide to any other Party or any Collaborator (the “receiving Party”), and the receiving Party shall haveno right to access, any of the delivering Party’s data that is not [**] related to the Licensed Compound or Licensed Products (unless,and to the extent, such Information is necessary for the other Party to perform its obligations or exercise its rights under thisAgreement). Notwithstanding the foregoing, MacroGenics will provide all data under its Control that is necessary for Incyte toDevelop and/or Commercialize the Monotherapy Regimen and seek Regulatory Approval of the Licensed Compound as a componentof a MacroGenics Combination Regimen in accordance with Section 5.8. Incyte and Collaborators will each provide to MacroGenicscopies of all data under Incyte’s Control related specifically and solely to the Licensed Compound that is derived from anyMonotherapy Regimen as necessary for MacroGenics to Develop any MacroGenics Combination Regimen or Commercialize theMacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen. Notwithstanding the foregoing, any safety datathat is related to the Licensed Compound or MacroGenics Combination Regimen shall not be excluded from the data sharingobligations under Sections 5.1, 5.2 and 5.3 but rather shall be shared to the extent set forth in the Pharmacovigilance Agreement.Additionally, notwithstanding anything to the contrary herein, any data or other information disclosed by the delivering Party pursuantto Sections 5.1 or 5.2 shall, to the extent permissible: (A) be subject to reasonable redaction with respect to any information that thedelivering Party deems commercially sensitive, confidential or proprietary, including any data or information relating [**] toproprietary product(s) of the delivering Party, its Affiliates or any Third Party that is not a receiving Party hereunder (e.g., PipelineAssets), to the extent the same would not unreasonably limit the receiving Party’s ability (i) to interpret any Clinical Study results, and(ii)54[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwhere Incyte is the receiving Party, to seek Regulatory Approval of the Licensed Compound as a component of the MacroGenicsCombination Regimen; and (B) to the extent disclosed, constitute Confidential Information of the delivering Party (provided that, asbetween the Parties, any information disclosed by Collaborator shall be deemed Incyte’s Confidential Information). Notwithstandinganything to the contrary herein, each Party shall provide the other Party with any Licensed Compound “components of care” data thatis owned or Controlled by such Party, as required or requested by a Regulatory Authority to support Regulatory Approval by the otherParty of any Monotherapy Regimen, Incyte Combination Regimen, Collaborator Combination Regimen, or MacroGenicsCombination Regimen, as applicable. Nothing contained in this Section 5.3 shall limit the obligations of either Party or a Collaboratorpursuant to Sections 5.1(a), 5.2 and 5.3 as applicable, except that in all cases, the delivering Party shall have no obligation pursuant toSection 5.2 to provide any data generated pursuant to a blinded Clinical Study until such time as the applicable Clinical Study has beenunblinded.5.4 Right of Reference.(a)Incyte Responsibilities. Within [**] after Incyte’s receipt of a written request from MacroGenics, Incyte shall grant, andhereby grants, and shall require its sublicensees to grant, to MacroGenics and/or the applicable RegulatoryAuthorities, subject to Section 5.3, a cross-reference letter or similar communication to grant MacroGenics aRight of Reference to any Regulatory Documentation related specifically to the Licensed Compound or anyLicensed Product, in connection with any Monotherapy Studies, Incyte Combination Studies or CollaboratorCombination Studies, as necessary for MacroGenics to comply with applicable regulatory requirements orrequests by Regulatory Authorities to Develop any MacroGenics Combination Regimen, seek RegulatoryApproval of a MacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen orCommercialize a MacroGenics Pipeline Asset in accordance with its approved label (but, for clarity, not toCommercialize any Incyte Pipeline Asset or Collaborator Pipeline Asset).(b)Collaborator Responsibilities. Without limiting the generality of the foregoing, Incyte shall require that each CollaboratorContract contain the following terms set forth in this subsection (b). Promptly, but in no event later than [**],following receipt of a written request from Incyte, Collaborator shall grant, and hereby grants to Incyteand/or all applicable Regulatory Authorities, subject to Section 5.3, a cross-reference letter or similarcommunication to grant Incyte a Right of Reference to any Regulatory Documentation (including INDs andNDAs) related to any Collaborator Combination Studies, to enable Incyte to comply with applicableregulatory requirements or requests by Regulatory Authorities, in connection with (i) the Development orCommercialization of the Monotherapy Regimen, and (ii) seeking Regulatory Approval of the LicensedCompound as a component of a Collaborator Combination Regimen, and Commercializing the LicensedCompound or any Licensed Product in accordance with such approved label (but, for clarity, not toCommercialize any Collaborator Pipeline Asset).55[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(c)MacroGenics Responsibilities. Within [**] after MacroGenics’ receipt of a written request from Incyte, MacroGenics shallgrant, and hereby grants, and shall require its sublicensees to grant, to Incyte and/or all applicable RegulatoryAuthorities, subject to Section 5.3, a cross-reference letter or similar communication to grant Incyte a Right ofReference to any Regulatory Documentation related to any MacroGenics Combination Studies, as necessaryfor Incyte to comply with applicable regulatory requirements or requests by Regulatory Authorities, inconnection with (i) the Development or Commercialization of the Monotherapy Regimen, (ii) seekingRegulatory Approval of the Licensed Compound as a component of a MacroGenics Combination Regimenand expanding the label of the Licensed Compound to include such Regulatory Approval as a component ofa MacroGenics Combination Regimen or (iii) conducting MacroGenics Combination Regimen Detailing(but, for clarity, not to otherwise Commercialize any MacroGenics Pipeline Asset).5.5 Regulatory Documentation; Regulatory Communications.(a)Regulatory Communications Relating to Ongoing Clinical Study.(i)Prior to the IND Transition Date, MacroGenics shall notify Incyte in advance of any material communicationswith Regulatory Authorities, including telephone conferences or discussions, in each case with respect to theOngoing Clinical Study, to the extent permitted by the applicable Regulatory Authority; provided that, ifMacroGenics is unable to provide Incyte with prior notice of any such communication, MacroGenics shallnotify Incyte as soon as practicable after the occurrence of such communication. Incyte shall have the right toparticipate in all such material communications with Regulatory Authorities (it being understood that Incyteshall have the sole right to lead any discussion, or portion thereof, that relates [**] to the MonotherapyRegimen) and provide comments thereto, and MacroGenics shall consider such comments in good faith prior toresponding to any Regulatory Authority.(ii)At all times during the Term after the IND Transition Date, Incyte shall be solely responsible, at its sole cost andexpense, for all filings, reports and communications with all Regulatory Authorities with respect to the OngoingClinical Study, in its own name.(b)Regulatory Communications Relating to Monotherapy Studies. As between the Parties, at all times during the Termafter the IND Transition Date, Incyte shall be solely responsible, at its sole cost and expense, for all filings,reports and communications with all Regulatory Authorities with respect to any Monotherapy Studies, in itsown name, provided however, with respect to Monotherapy Studies conducted by MacroGenics pursuant toSection 5.9(c), MacroGenics shall be solely responsible for all costs and expenses associated with theapplicable Monotherapy Studies, and the Parties will discuss in good faith how to handle communications56[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwith Regulatory Authorities in connection therewith. Without limiting the foregoing, each Combination Sponsor shallnotify Incyte in advance of any material communications with Regulatory Authorities, including telephone conferencesor discussions, in each case with respect to matters related to the Monotherapy Regimen, to the extent permitted by theapplicable Regulatory Authority; provided that, if Combination Sponsor is not permitted by the applicable RegulatoryAuthority to provide Incyte with prior notice of any such communication, Combination Sponsor shall notify Incyte assoon as practicable after the occurrence of such communication. Incyte shall have the right to participate in suchmaterial communications and provide comments thereto, which comments the Combination Sponsor shall consider ingood faith prior to responding to any Regulatory Authority.(c)Regulatory Communications Relating to MacroGenics Combination Studies.(i)At all times during the Term, without limitation of any other obligations of MacroGenics under this Agreement,MacroGenics shall keep Incyte reasonably informed of any material interactions and documentation relatedthereto with any Core Regulatory Authority that relate [**] to the Licensed Compound. Incyte will be given areasonable opportunity to review and to provide input with respect to all such interactions and documentationrelated thereto, and MacroGenics will consider such input in good faith, to the extent reasonably practicable.(ii)In addition to the rights described in paragraph (i) above, on a region-by-region basis, until the earlier of (x) [**]after the Effective Date, or (y) achievement of the first Licensed Compound Approval by each of the applicableCore Regulatory Authorities, Incyte shall be entitled to either participate in or provide input on, at Incyte’schoosing, any Licensed Compound Regulatory Discussions (except that, in the event of any Change of Controlof Incyte, Incyte shall be permitted to participate in only those parts of any Licensed Compound RegulatoryDiscussions that relate [**] to the Licensed Compound, as reasonably determined by MacroGenics in its solediscretion); provided that, Incyte shall not have the right to control or influence the timing or the agenda settingof any such regulatory discussion. MacroGenics shall notify Incyte in advance of each such LicensedCompound Regulatory Discussion and shall provide any such communications to Incyte, with respect to mattersrelated to the Licensed Compound in connection with any MacroGenics Combination Studies (except that, inthe event of any Change of Control of Incyte, MacroGenics shall provide to Incyte any such communicationswith respect to matters [**] related to the Licensed Compound in connection with any MacroGenicsCombination Studies, as reasonably determined by MacroGenics in its sole discretion), to the extent permittedby the applicable Regulatory Authority; provided that, if MacroGenics is unable to provide Incyte with priornotice of any such Licensed Compound Regulatory Discussion, MacroGenics shall57[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDnotify Incyte as soon as practicable after the occurrence of such Licensed Compound Regulatory Discussion.MacroGenics shall provide to Incyte copies of all material regulatory-related communications in connection withany Licensed Compound Regulatory Discussions, subject to reasonable redaction by MacroGenics with respectto any MacroGenics Pipeline Asset Information. Incyte shall have the right to lead, in coordination withMacroGenics, any such discussion, or portion thereof, that relates [**] to the Licensed Compound as amonotherapy arm or as a component of a MacroGenics Combination Regimen, as reasonably determined byMacroGenics in its sole discretion, and provide comments thereto. MacroGenics shall consider such commentsin good faith prior to responding to the applicable Regulatory Authority; provided, however, that Incyte shallnot have the right to participate in any portion of any Licensed Compound Regulatory Discussion where anyMacroGenics Pipeline Asset Information is discussed.(d)Regulatory Documentation and Communications Relating to Combination Studies. Without limitation of subsection(c) (in connection with MacroGenics Combination Studies), Combination Sponsor shall be solelyresponsible, at its sole cost and expense, for all filings, reports and communications with all RegulatoryAuthorities (including any INDs) with respect to its Pipeline Asset (including as a component of aCombination Regimen), as applicable, in its own name. Combination Sponsor shall sponsor its respectiveCombination Study under its existing IND for its Pipeline Asset or a separate IND for the CombinationRegimen, with a Right of Reference to the IND of the Licensed Compound or Licensed Product solely ifrequired by a Regulatory Authority and only as it relates specifically to the Licensed Compound or LicensedProduct. Combination Sponsor shall be responsible for (i) drafting, and updating as necessary for itsrespective Combination Study, an investigator’s brochure for its Pipeline Asset and (ii) preparing, obtainingand maintaining, as applicable, all necessary Regulatory Documentation to its existing IND for its PipelineAsset (including as a component of a Combination Regimen), including submitting to such IND any seriousadverse event and adverse drug reaction cases emerging from its Combination Study, as applicable. WhereIncyte is not the Combination Sponsor, Incyte shall have the right to provide boilerplate language that relatesspecifically to the Licensed Compound, and MacroGenics will reasonably include such language in itsapplicable Regulatory Documentation.(e)Regulatory Documentation and Communications Relating to Manufacturing Development. Prior to the INDTransition Date, MacroGenics shall be solely responsible for all filings and reports, and shall lead anydiscussions between the Parties, related to Manufacturing Development of the Licensed Compound.Following the IND Transition Date, both Incyte and MacroGenics shall prepare, and Incyte shall be solelyresponsible for making, all filings and reports, and shall lead any discussion between the Parties, related toManufacturing Development for any Clinical Studies (including any Pivotal Studies) and commercial supply.58[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED5.6 Adverse Event Reporting and Safety Data Exchange.(a)Incyte Responsibilities. On and after the IND Transition Date, Incyte shall assume sole responsibility, at its sole expense,for monitoring all clinical experiences, maintaining the Global Safety Database, safety monitoring,pharmacovigilance surveillance, compliance and filing all required safety reports, including annual safetyreports, to all applicable Regulatory Authorities with respect to the Development or Commercialization of theLicensed Compound and any Licensed Products in the Field in the Territory, and shall be responsible forcompliance with all Applicable Law pertaining to safety reporting and all other safety-related matters,including its responsibilities under the Pharmacovigilance Agreement, with respect to the LicensedCompound and Licensed Products. Incyte shall provide MacroGenics with, and MacroGenics shall have theright to access, any safety Information related to the Licensed Compound or any Licensed Products forwhich Incyte is responsible pursuant to this subsection (a), pursuant to the terms of the PharmacovigilanceAgreement.(b)Combination Sponsor Responsibilities. Subject to subsection (a) above, each Combination Sponsor shall (and withrespect to any Collaborator as the Combination Sponsor, Incyte shall require that Collaborator shall) besolely responsible for monitoring all clinical experiences, maintaining the global safety database, safetymonitoring, pharmacovigilance surveillance, compliance and filing all required safety reports, includingannual safety reports, to all applicable Regulatory Authorities with respect to the Development orCommercialization of its Pipeline Asset in the Territory (including as a component of a CombinationRegimen), and shall be responsible for compliance with all Applicable Law pertaining to safety reporting andall other safety-related matters, including its responsibilities under the Pharmacovigilance Agreement, withrespect to its Pipeline Asset, including as a component of a Combination Regimen.(c)Safety Information Exchange; Pharmacovigilance Agreement. The Parties will initiate negotiations and useCommercially Reasonable Efforts to execute a pharmacovigilance agreement (“PharmacovigilanceAgreement”) within [**] after the Effective Date. The executed Pharmacovigilance Agreement shall be in anappropriate format to enable the Parties to fulfill local and international regulatory reporting obligations and tofacilitate appropriate safety reviews. The Pharmacovigilance Agreement will include safety data exchangeprocedures governing the coordination of collection, monitoring, investigation, reporting, and exchange ofinformation, consistent with Applicable Law. Such guidelines and procedures shall be in accordance with,and enable the Parties and their Affiliates to fulfill, local and international regulatory reporting obligations toGovernmental Authorities. Among other things, the Pharmacovigilance Agreement shall requireMacroGenics and any Collaborators to submit safety data concerning any adverse experiences and any othersafety information arising from or related to the use of the Licensed Compound as a single agent or as acomponent of any Combination59[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDRegimen in any MacroGenics Combination Study or Collaborator Combination Study, as applicable, as necessary forIncyte to maintain the Global Safety Database.5.7 Recalls and Voluntary Withdrawals.(a)Licensed Product. Incyte shall use reasonable efforts to notify MacroGenics promptly, but in no event later than [**],following its determination that any event, incident, or circumstance related to safety issues or regulatoryconcerns has occurred that is reasonably likely to result in the need for a recall, market suspension or marketwithdrawal of the Licensed Compound or any Licensed Product in the Territory, provided that, prior to theimplementation of such a recall, market suspension or market withdrawal, Incyte shall, to the extent practical,consult with MacroGenics and shall consider MacroGenics’ comments in good faith, and shall include insuch notice the reasoning behind such determination and any supporting facts. Incyte shall have the sole rightto make the final determination of whether to voluntarily implement any such recall, market suspension ormarket withdrawal in the Territory. For all recalls, market suspensions or market withdrawals undertakenpursuant to this subsection (a), Incyte shall be solely responsible for the execution thereof, and MacroGenicsshall reasonably cooperate in all such recall efforts. Subject to the provisions of Section 14.2 and except asmay otherwise be set forth in the Clinical Supply Agreement or the Commercial Supply Agreement, Incyteshall be responsible for all costs of conducting any such recall, market suspension, or market withdrawal ofthe Licensed Product.(b)Pipeline Asset. The Controlling Party shall use reasonable efforts to notify the other Party promptly, but in no event laterthan [**], following its determination that any event, incident, or circumstance related to safety issues orregulatory concerns has occurred that may result in the need for a recall, market suspension or marketwithdrawal of its Pipeline Asset, in whole or in part, in the Territory, and shall include in such notice thereasoning behind such determination, and any supporting facts. The Controlling Party shall have soleauthority to decide whether to implement any recall, market suspension or market withdrawal of its PipelineAsset, and shall be solely responsible for, and control, the execution thereof. The non-recalling Party shallreasonably cooperate in all such efforts to implement a recall, market suspension or market withdrawal of theControlling Party’s Pipeline Asset. The Controlling Party shall be responsible for all costs of any such recall,market suspension, or market withdrawal of its respective Pipeline Asset.5.8 Labeling.(a)If, at the time of submission of the Regulatory Approval Application for a MacroGenics Combination Regimen, there is noMonotherapy Regimen, Incyte Combination Regimen or Collaborator Combination Regimen that hasreceived Regulatory Approval, Incyte shall use Commercially Reasonable Efforts to, contemporaneously andin coordination with MacroGenics, seek Regulatory Approval of a label for such Licensed Compound as acomponent of a MacroGenics60[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDCombination Regimen that, if such Licensed Compound label is approved, will sufficiently enable Commercializationby MacroGenics of the applicable MacroGenics Pipeline Asset as a component of a MacroGenics CombinationRegimen and Commercialization by Incyte of the Licensed Compound as a component of a MacroGenics CombinationRegimen (provided that, Incyte shall have no right to conduct any Medical Affairs Activities or activities directed tomarketing, detailing, promoting, educating or any Phase IV Studies with respect to the Licensed Compound as acomponent of a MacroGenics Combination Regimen other than MacroGenics Combination Regimen Detailing).(b)For each Regulatory Approval of a MacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen,MacroGenics shall have the right to determine in its sole discretion, whether to include the RegulatoryApproval for the MacroGenics Combination Regimen in its label for the applicable MacroGenics PipelineAsset included in such MacroGenics Combination Regimen.(c)Without limiting Incyte’s obligations under Section 5.8(a), Incyte may, at its discretion, reference all RegulatoryDocumentation and other Information submitted by MacroGenics to the applicable Regulatory Authority asrequired by Incyte for the purposes of (i) seeking Regulatory Approval of the Licensed Compound as acomponent of a MacroGenics Combination Regimen and expanding the label of the Licensed Compound toinclude such Regulatory Approval as a component of a MacroGenics Combination Regimen or (ii)exercising its rights under Section 3.1(c). Notwithstanding anything to the contrary herein, the rights grantedto Incyte in this Section 5.8(c) to include in the label for the Licensed Compound newly-generatedRegulatory Documentation and other Information submitted by MacroGenics to the applicable RegulatoryAuthority shall immediately terminate on a going-forward basis (but, for clarity, the right of Incyte tocontinue to exercise its rights under Section 3.1(c) shall continue) upon the following: (A) after any Changeof Control of Incyte, except that the right of Incyte to include in the label for the Licensed Compound newly-generated Regulatory Documentation and other Information submitted by MacroGenics to the applicableRegulatory Authority shall continue with respect to any Regulatory Documentation and other Informationsubmitted by MacroGenics in connection with a Pivotal Study by MacroGenics (or an Acquirer ofMacroGenics) that was Initiated prior to date upon which the Change of Control of Incyte was publiclyannounced; or (B) on a MacroGenics Combination Regimen-by-MacroGenics Combination Regimen basis,in the event that the then-current label of the Licensed Compound includes a Regulatory Approval for anIndication Population based on a Combination Study, other than a Combination Study conducted byMacroGenics, that is the same Indication Population for which MacroGenics seeks Regulatory Approval forthe applicable MacroGenics Combination Regimen.61[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED5.9 Other Studies. Notwithstanding anything to the contrary herein, in the event that an applicable Regulatory Authority requires orrecommends, as a condition to the grant or maintenance of Regulatory Approval for a MacroGenics Combination Regimen, that aMonotherapy Study be conducted (the “Required Monotherapy Study”), then MacroGenics shall notify Incyte in writing, and:(a)Incyte shall provide reasonable assistance to MacroGenics, including provision of then-current Licensed Compound andAncillary Therapy “components of care” data it Controls (subject to availability) and using CommerciallyReasonable Efforts to continue the conduct of any then-current on-going Clinical Studies that include theRequired Monotherapy Study that would provide relevant Licensed Compound and Ancillary Therapy“components of care” data it Controls, at Incyte’s sole cost and expense.(b)In the event that Incyte does not have any Monotherapy Study on-going that includes the Required Monotherapy Study, butthe then-current Incyte Global Development Plan includes such a Monotherapy Study planned to be Initiatedwithin the [**] period following the date on which MacroGenics provides written notice pursuant to the firstsentence in this Section 5.9, then Incyte shall use Commercially Reasonable Efforts to conduct suchMonotherapy Study, and shall provide to MacroGenics relevant Licensed Compound and Ancillary Therapy“components of care” data derived from such Study and Controlled by Incyte (subject to availability) atIncyte’s sole cost and expense.(c)In the event that Incyte does not have any Monotherapy Study on-going that includes the Required Monotherapy Study, andthe then-current Incyte Global Development Plan does not contemplate the Initiation of such MonotherapyStudy within the [**] period as described in subpart (b), then MacroGenics may design and conduct suchMonotherapy Study solely to compare the Monotherapy Regimen to an Ancillary Therapy to produce thedata required by the Regulatory Authority, at MacroGenics’ sole cost and expense, subject to Incyte’s priorright of review and approval of such Monotherapy Study (not to be unreasonably withheld, conditioned, ordelayed), and Incyte shall provide reasonable assistance and cooperation to MacroGenics in connectiontherewith, at MacroGenics’ sole cost and expense.ARTICLE 6COMMERCIALIZATION6.1 Commercialization Activities.(a)Licensed Product. Subject to Sections 2.5, 5.2, 5.4, 5.8, 6.1(b), 6.1(c) and 6.1(d), Incyte shall be solely responsible for andhave sole authority with respect to, at its own expense, all aspects of the Commercialization of LicensedProducts in the Field in the Territory, in accordance with its approved label, including as a component of aCollaborator Combination Regimen, and, subject to Section 3.1(c), as a component of a MacroGenicsCombination Regimen, and will retain final decision-making62[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDauthority with respect thereto, including: (i) developing and executing a commercial launch and pre-launch plan; (ii)marketing, promotion, and branding; (iii) booking sales and distribution and performance of related services; (iv)handling all aspects of order processing, invoicing and collection, inventory and receivables; (v) providing customersupport, including handling medical queries, and performing other related functions; (vi) the review and approval of allpromotional materials for compliance with Applicable Law, including submission, where appropriate, to applicableRegulatory Authorities and (vii) conforming its practices and procedures in all material respects to Applicable Lawrelating to the marketing, detailing and promotion of Licensed Products in the Field in the Territory.(b)Pipeline Assets. Subject to Sections 2.5, 6.1(a), and 6.1(c), each Combination Sponsor shall have sole authority over andcontrol of the Commercialization of its respective Pipeline Asset in the Field in the Territory, in accordancewith its approved label, and will retain final decision-making authority with respect thereto, including suchactivities set forth in Section 6.1(a)(i)-(vii) as applied to its Pipeline Asset.(c)MacroGenics Combination Regimens. MacroGenics shall have sole authority over and control of all promotional activitieswith respect to any MacroGenics Pipeline Asset as a component of a MacroGenics Combination Regimen inthe Field in the Territory, in accordance with the MacroGenics Pipeline Asset approved label, and will retainfinal decision-making authority with respect thereto. In the event that a MacroGenics Pipeline Asset receivesRegulatory Approval as a component of a MacroGenics Combination Regimen and is included in theLicensed Compound approved label, then without limiting Section 6.1, Incyte may conduct MacroGenicsCombination Regimen Detailing with respect to the Licensed Product in accordance with Incyte’s approvedlabel of the Licensed Product as component of a MacroGenics Combination Regimen; provided further, thatto the extent Incyte elects to be involved in any additional promotional activities specific to the MacroGenicsCombination Regimen, these activities shall be subject to MacroGenics’ sole discretion and, if agreed by theParties, a separate co-promotion agreement to be negotiated by the Parties (such agreement, the “Co-Promotion Agreement”).(d)Diligence. Incyte shall use Commercially Reasonable Efforts to seek Regulatory Approval for, and if the applicableRegulatory Approval is granted, Commercialize a Licensed Product in each of the U.S., [**] of the [**]European Major Markets, and Japan. Incyte will, subject to MacroGenics satisfying its supply obligationshereunder to the extent necessary for Incyte to satisfy such obligation, use Commercially Reasonable Effortsto make the Licensed Product commercially available in quantities sufficient to fulfill global market demandat all times during the Term after the date of Licensed Compound Approval.6.2 Pricing of Licensed Product. Incyte shall have sole and exclusive control over the pricing of Licensed Products on a worldwidebasis and shall retain final decision-making authority with respect to obtaining and maintaining pricing and reimbursement approval,subject to Section 8.5(b)63[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDand the following procedures and/or restrictions in subsections (a)-(e) below. Unless otherwise specified to the contrary, a referenceprice as it relates to the [**] and [**] calculations shall be established using the following criteria: (1) [**] [**]; (2) for [**]; and (3) thedosage of the Licensed Product for [**]. By way of example, [**], which is calculated using the following [**]: (i) [**] [**], (ii) [**][**]. To the extent permitted under Applicable Law:(a)For Licensed Products sold in the U.S., Incyte shall not be permitted to [**] the [**] of the Licensed Compound [**] than[**] ([**]%) [**] (the “[**]”).(b)Subsequent to receipt of Regulatory Approval for a Licensed Product [**], for a Licensed Product sold in [**] for which theLicensed Compound has received Regulatory Approval, the monthly Net Price of the Licensed Compoundshall not be, on average across [**] in which the Licensed Compound has received Regulatory Approval,[**] than [**] ([**]%) [**] the [**] of [**] in which the Licensed Compound has received RegulatoryApproval (the “[**]”).(c)For Licensed Products sold in [**], Incyte shall not submit a Net Price to the MHLW that is [**] than [**] ([**]%) [**] the[**] of the [**] in [**] (the “[**]”).(d)For Licensed Products sold in [**], the monthly Net Price of the Licensed Compound shall not be [**] than [**] ([**]%)[**] the monthly [**] price of the [**] in [**] (the “[**]”).(e)Incyte shall calculate any [**] of the Licensed Product (including any [**], [**], [**], and [**]) and any [**] of theLicensed Product (including any [**], [**], [**], and [**]) in accordance with this Section 6.2 upon launchof the Licensed Product, and shall thereafter update such [**] and [**] on an annual basis and at any time theLicensed Compound Net Price is changed in the relevant territory. Any disputes regarding such calculation(s)shall be resolved pursuant to Article 13.(f)For Licensed Products sold in [**], [**], [**] or [**], Incyte shall not be restricted in setting the pricing of the LicensedProduct through the use of a [**] or be required to pay royalties similar to Section 8.5(b) as if there were a[**], but rather, Incyte shall use Commercially Reasonable Efforts to achieve a Net Price that is at [**] the[**] of [**] in such market, assuming such [**] is ascertainable.(g)Incyte will have the sole right to establish all terms of commercial sale (including pricing, discounts and rebates) in all othercountries of the world, and subject to Section 8.5(a), royalties will be calculated based on actual Net Sales insuch country pursuant to Section 8.3._____________________1 For clarity, the [**].2 [**] as of the Execution Date are [**] and [**]. [**].3 [**] as of the Execution Date is [**]. [**].64[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(h)If at any time during the Royalty Term Incyte determines that it is not in compliance with the [**], [**], [**] or [**], Incyteshall initiate a process, and use Commercially Reasonable Efforts to complete such process, to bring Incyteinto compliance with the applicable [**] (for example, initiating pricing negotiations with an applicableregulatory authority); provided that Incyte’s non-compliance with the [**], [**], [**] or [**] shall notconstitute a material breach of this Agreement so long as Incyte utilizes Commercially Reasonable Efforts toresolve such non-compliance.6.3 Pricing of Pipeline Assets. Each Controlling Party shall have sole and exclusive control over (a) the pricing of its Pipeline Assetand (b) any negotiation of the pricing, discounts and rebates applicable to its Pipeline Asset with any Regulatory Authorities or otherThird Parties.6.4 Transparency Reporting. Each Party shall be responsible for tracking and reporting transfers of value initiated and controlled byor on behalf of such Party’s or its Affiliates’ employees, contractors, and agents pursuant to the requirements of the marketing reportinglaws of any Governmental Authority in the Territory, including Section 6002 of ACA, commonly referred to as the “Sunshine Act.”ARTICLE 7MANUFACTURING7.1 Manufacturing Technology Transfer.(a)Any time after the [**] anniversary of the Effective Date, Incyte may request, upon [**] written notice (which notice may begiven prior to the [**] anniversary of the Effective Date) to MacroGenics (or immediately upon writingnotice to MacroGenics, in the case of a Clinical Supply Shortage), that MacroGenics transfer or havetransferred the Manufacturing Process to a manufacturing facility under the control of Incyte (or its designee,which designee may be an Affiliate) or, subject to subsection (d) below, to a facility of a Third Party contractmanufacturer that is mutually agreed upon by the Parties. MacroGenics shall not withhold such agreement toa proposed contract manufacturer that has not experienced any material documented safety, compliance orquality issues in the preceding [**] and has demonstrated the ability to manufacture products at the volumesand quality anticipated under this Agreement (such Incyte facility or Third Party facility, the “IncyteFacility” and such Third Party, an “Approved CMO”). Such transfer and implementation shall be sufficientto enable Incyte or such designee to perform the Manufacturing Process and Manufacture of LicensedCompound Bulk Drug Substance and Licensed Compound Drug Product in accordance with ApplicableLaw, as more fully described in this Section 7.1 (the “Manufacturing Technology Transfer”), and shall besubject to a written plan approved by the JSC with respect to the Manufacturing Technology Transfer (the“Manufacturing Transition Plan”), with Incyte having final decision-making authority on theManufacturing Technology Transfer (provided that Incyte may not expand the scope of the Know-How andInformation to be transferred pursuant to Section 7.1(b) beyond that which is required hereunder). TheParties shall use Commercially Reasonable Efforts to65[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDeffect the Manufacturing Technology Transfer to Incyte or its designee pursuant to this Section 7.1. The implementationof the Manufacturing Technology Transfer and Manufacturing Transition Plan shall be subject to the Incyte Facilitybeing suitable for the Manufacture of the Licensed Compound Bulk Drug Substance as determined in accordance withthis Section 7.1(a), as applicable, using the Manufacturing Process in compliance with Applicable Laws.(b)MacroGenics shall provide all reasonable assistance requested by Incyte to enable Incyte to implement the ManufacturingProcess at the Incyte Facility, including by transferring to Incyte or such designee all Know-How andInformation necessary for the Manufacturing Technology Transfer. In connection with the ManufacturingTechnology Transfer, MacroGenics shall cause appropriate employees and representatives of MacroGenicsto meet with employees and/or representatives of Incyte and the Approved CMO (to the extent applicable) atreasonable times to assist with the working up and use of the Manufacturing Process and with the training ofthe personnel of the Incyte Facility to the extent reasonably necessary or useful to use and practice theManufacturing Process. Incyte shall reimburse MacroGenics’ FTE Costs and reimburse all reasonable ThirdParty Expenses incurred by MacroGenics in order to complete the Manufacturing Technology Transfer,within [**] after receipt of any undisputed invoice from MacroGenics setting forth such costs. Subsequent tothe occurrence of the Manufacturing Technology Transfer, at any time during the Term, upon either Party’sreasonable request, the other Party will provide to the requesting Party updated manufacturing process(including associated Know-How) Controlled by such other Party necessary or useful for the Manufacture ofthe Licensed Compound Bulk Drug Substance or the Licensed Compound Drug Product, at the requestingParty’s cost and expense.(c)Notwithstanding the occurrence of the Manufacturing Technology Transfer pursuant to this Section 7.1, Incyte shall havethe right to Manufacture or have Manufactured clinical and/or commercial supplies of Licensed Compoundor Licensed Products, to the extent set forth in Sections 7.2(d), 7.3(a), 7.3(b), and 12.9.(d)Any time after the completion of the Manufacturing Technology Transfer during the Term, to the extent that either Partymakes any material modifications, improvements or other alterations to the Manufacturing Process, suchParty shall use Commercially Reasonable Efforts, at the other Party’s sole cost and expense, to provideaccess to such modifications, improvements or other alterations to such other Party, and to reasonablycooperate with the other Party in its efforts to ensure (including through the implementation of subsequentmodifications to the Manufacturing Process, to the extent required) that the Incyte Facility and theMacroGenics Manufacturing Facilities (as applicable) Manufacture the Licensed Compound using suchmodified and/or improved Manufacturing Process and yielding comparable product.66[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(e)Incyte shall require that all agreements executed between Incyte and any Approved CMO with respect to such ApprovedCMO’s performance under this Agreement shall permit the assignment of such agreement, in its entirety inthe event of termination of this Agreement (other than by Incyte pursuant to Section 12.3 or 12.6), toMacroGenics, without any consent rights by the Approved CMO (subject to MacroGenics agreeing to suchassignment and the assumption of relevant obligations under such agreement).7.2 General Clinical Supply Terms.(a)Clinical Supply Agreement. Except as otherwise provided herein, MacroGenics shall have the responsibility forManufacturing clinical supplies of the Licensed Compound Bulk Drug Substance (and at any time prior tothe completion of the Manufacturing Technology Transfer, MacroGenics shall also have the responsibilityfor Manufacturing clinical supplies of the Licensed Compound Drug Product) for (i) MacroGenics’ use inconnection with any MacroGenics Combination Studies, (ii) Incyte’s use in connection with anyMonotherapy Studies or Incyte Combination Studies, and (iii) Collaborator’s or Incyte’s use in connectionwith any Collaborator Combination Studies. Within [**] after the Effective Date, the Parties shall initiatenegotiations for a clinical supply agreement (the “Clinical Supply Agreement”) that will set forth the termsand conditions for MacroGenics’ (or Incyte’s per Section 7.2(d)) provision of clinical supplies of theLicensed Compound Bulk Drug Substance and Licensed Compound Drug Product, as applicable, to Incyte,MacroGenics, and any Collaborators and which will include all applicable provisions set forth in this Article7 with respect to clinical supply and such other provisions as are customary and reasonable under thecircumstances. The Parties shall also initiate negotiations to execute a quality agreement that shall furtheraddress and govern issues related to the quality of the Licensed Compound Bulk Drug Substance andLicensed Compound Drug Product to be supplied by MacroGenics pursuant to the Clinical SupplyAgreement (the “Clinical Quality Agreement”). All negotiations for the Clinical Supply Agreement andClinical Quality Agreement shall be undertaken by each Party in good faith. MacroGenics (or Incyte, perSection 7.2(d)) will use Commercially Reasonable Efforts to supply, or cause to be supplied, the LicensedCompound Bulk Drug Substance or Licensed Compound Drug Product, as applicable, in accordance withthe provisions of this Agreement, and once executed, the Parties shall comply with their respectiveobligations to supply, or cause to be supplied, the Licensed Compound Bulk Drug Substance or LicensedCompound Drug Product, as applicable, in accordance with the provisions of the Clinical Supply Agreementand the Clinical Quality Agreement. MacroGenics shall supply all quantities of Licensed Compound BulkDrug Substance from the MacroGenics Manufacturing Facilities, and shall not have the right to subcontractthe Manufacture of the Licensed Compound Bulk Drug Substance. Further, MacroGenics shall supply allquantities of Licensed Compound Bulk Drug Substance that are required for any particular IncyteMonotherapy Study or Incyte Combination Study from the same MacroGenics Manufacturing Facility,provided67[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDthat such supply requirements do not exceed the reasonably available then-current planned capacity of the applicableManufacturing Facility.(b)Clinical Supply Costs. MacroGenics shall provide clinical supplies of the Licensed Compound Bulk Drug Substanceand/or Licensed Compound Drug Product, in accordance with the Clinical Supply Agreement and ClinicalQuality Agreement, (i) at a cost equal to [**] of the Manufacturing Expenses incurred by MacroGenics withrespect to such quantities of the Licensed Compound Bulk Drug Substance and/or Licensed CompoundDrug Product, to (x) Incyte for Monotherapy Studies, Incyte Combination Studies and for any CombinationStudies conducted by Incyte’s licensees and (y) any Collaborator for any Collaborator Combination Studiesfor which at least [**] of the costs are co-funded by Incyte (“Funded Collaborator CombinationStudies”), and (ii) at a cost equal to [**] of the Manufacturing Expenses incurred by MacroGenics withrespect to such quantities of the Licensed Compound Bulk Drug Substance and/or Licensed CompoundDrug Product, to any Collaborator for Collaborator Combination Studies other than Funded CollaboratorCombination Studies. Within [**] after the end of each month during which MacroGenics is conductingactivities under the Clinical Supply Agreement, MacroGenics shall submit an invoice to Incyte for amountsowed by Incyte pursuant to the Clinical Supply Agreement. Incyte or Collaborator, as applicable, shall payMacroGenics the full undisputed amount of such invoice within [**] after receipt of such invoice.(c)Clinical Supply Shortage. In the event of a projected Clinical Supply Shortage of clinical supplies of the LicensedCompound Bulk Drug Substance and/or Licensed Compound Drug Product, as determined by either Party inits reasonable discretion, the following shall occur: (i) MacroGenics shall provide to Incyte reasonableassurances that the projected Clinical Supply Shortage will not actually occur, or promptly alert Incyte as tothe nature of the Clinical Supply Shortage and cause of such shortage; and (ii) the JMC shall convene andboth Parties shall use Commercially Reasonable Efforts to remedy the situation giving rise to such ClinicalSupply Shortage and to take action to minimize the impact of the Clinical Supply Shortage, including (1) thereallocation of any material from either Party’s safety stock to match actual projected usage in the applicableClinical Study(ies) causing such Clinical Supply Shortage and (2) triaging any clinical supply allocation forongoing Clinical Studies of either Party. If MacroGenics does not provide such assurances, or if the situationis not remedied through good faith efforts by both Parties within the [**] following such notification in amanner to avoid an actual Clinical Supply Shortage, then, without limiting any remedies available to Incyteunder this Agreement or the Clinical Supply Agreement, during a period extending for [**] from theEffective Date, the clinical supplies would first be allocated to fulfill [**] of Incyte’s clinical supply needsover the first [**] of the actual Clinical Supply Shortage period and thereafter the Parties will proratesubsequent supplies of Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Productbased on the then-Binding Portion (“Committed Supply”), as of the date68[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDof either Party’s notification to the other Party of such projected Clinical Supply Shortage, as further described in theClinical Supply Agreement. In the event that an actual Clinical Supply Shortage occurs with respect to MacroGenics’supply of Licensed Compound Bulk Drug Substance or Licensed Compound Drug Product for each of [**] calendaryears, Incyte shall thereafter have the right to Manufacture or have Manufactured up to [**] percent ([**]%) of Incyte’sclinical supply requirements of Licensed Compound Bulk Drug Substance or Licensed Compound Drug Product. AClinical Supply Shortage due to the following causes shall not be deemed to be a breach of MacroGenics’ clinicalsupply obligations pursuant to this Article 7 but shall still constitute a Clinical Supply Shortage for the purposes of thisSection 7.2(c) and Section 7.2(d): (A) events of Force Majeure or (B) a mutually-agreed change in the specifications forManufacture of the Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product which causesa Clinical Supply Shortage within [**] following the implementation of such change in specifications.(d)Incyte Clinical Supply Rights. Notwithstanding anything to the contrary herein, Incyte shall have the right to Manufacture(or have Manufactured) clinical supplies of the Licensed Compound Bulk Drug Substance and/or LicensedCompound Drug Product at the Incyte Facility, (i) in the event of a Clinical Supply Shortage, solely to theextent necessary to cover the projected shortfall of Licensed Compound Bulk Drug Substance and/orLicensed Compound Drug Product relative to committed Orders, or as otherwise set forth in subsection (c)above, or (ii) for the purpose of any Pivotal Studies of Licensed Product that are funded by Incyte. In theevent that Incyte Manufactures, or has Manufactured, clinical supplies of the Licensed Compound BulkDrug Substance and/or Licensed Compound Drug Product for MacroGenics (it being understood thatMacroGenics may request such Licensed Compound Bulk Drug Substance and/or Licensed CompoundDrug Product for MacroGenics Combination Studies and Acquirer Combination Studies), Incyte shall useCommercially Reasonable Efforts to provide to MacroGenics the quantities of Licensed Compound BulkDrug Substance and/or Licensed Compound Drug Product requested by MacroGenics pursuant tocommitted Orders, and MacroGenics shall reimburse Incyte, with respect to a MacroGenics CombinationStudy, [**] ([**]%) of Incyte’s Manufacturing Expenses, irrespective of whether such Licensed CompoundBulk Drug Substance and/or Licensed Compound Drug Product is used by MacroGenics.(e)Forecasts and Orders.(i)Rolling Forecast. Commencing on the Effective Date, and on or before the [**] day of each Calendar Quarterthereafter, each Party shall furnish the other Party via the JMC with (A) a rolling forecast of the quantities of theLicensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product for which the other Party(for Incyte on behalf of itself and any Collaborators) reasonably expects to submit Orders in each calendarmonth69[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDduring the following [**] calendar months (the “Rolling Forecast”), and (B) a rolling, non-binding forecast ofthe quantities of the Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product forwhich the other Party reasonably expects to submit Orders in each calendar quarter for months [**] through [**](the “Long Term Forecast”), in each case of (A) and (B), for the purpose of conducting Monotherapy Studies,Incyte Combination Studies, Collaborator Combination Studies, or MacroGenics Combination Studies, asapplicable. For the avoidance of doubt, the Long Term Forecast and months [**] through [**] of the RollingForecast will not be binding on the Party submitting such forecast, and months [**] through [**] of the RollingForecast will be binding on the Party submitting such forecast (the “Binding Portion”).(ii)Orders. From time to time during the Term, Incyte and MacroGenics will enter into mutually-agreeable ordersthat reflect the Binding Portion of the Rolling Forecast (each, an “Order”) pursuant to which Incyte will order,and MacroGenics will agree to supply, (or, if Incyte is Manufacturing clinical supply for MacroGenics’ use,pursuant to which MacroGenics will order, and Incyte will agree to supply) such quantities of clinical suppliesof the Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product as specified in theOrder, on the terms agreed upon by the Parties therein and the Clinical Supply Agreement. An Order shall bebinding on the Parties in accordance with the terms and conditions of the Clinical Supply Agreement; providedthat each Party shall submit and the other Party shall accept all orders consistent with the most recent RollingForecast and the provisions of this Section 7.2(e)(ii). Each Order will specify: (A) the quantities of LicensedCompound Bulk Drug Substance and/or Licensed Compound Drug Product to be supplied by MacroGenics,(B) the estimated cost of Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Productto be supplied, (C) the delivery date for such quantities of Licensed Compound Bulk Drug Substance and/orLicensed Compound Drug Product and (D) the testing to be conducted and documentation to be provided forthe Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product supplied under suchOrder. For all units of Licensed Compound Bulk Drug Substance and Licensed Compound Drug Product thatMacroGenics Manufactures for its own use or use by its Development Partners in connection with aMacroGenics Combination Study, MacroGenics shall submit to Incyte in advance of such supply aconfirmatory “Order” indicating the information set forth in (A) through (D) with respect to the quantities that itwill supply.7.3 General Commercial Supply Terms.(a)Licensed Compound Bulk Drug Substance.70[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(i)Beginning [**] prior to the anticipated Initiation of the [**] Pivotal Study, and at least [**] prior to January 1stof each Calendar Year, Incyte, with input from MacroGenics, shall (x) determine the amounts of LicensedCompound Bulk Drug Substance to fulfill the annual projected global commercial supply of LicensedCompound Drug Product for such Calendar Year (the “Annual Global Commercial Supply Forecast”) and(y) provide a non-binding summary of the projected global commercial supply of Licensed Compound DrugProduct for the following [**] Calendar Years. Each applicable forecast shall reasonably reflect MacroGenics’reasonably forecasted market demand for Licensed Compound Drug Product in connection with theCommercialization of MacroGenics Pipeline Assets as a component of a MacroGenics Combination Regimensin the applicable Calendar Year.(ii)Except as otherwise provided herein, (x) MacroGenics shall have the right, but not the obligation, toManufacture, at its expense, the lesser of (A) up to [**] of the global commercial supply of the LicensedCompound Bulk Drug Substance corresponding to the Annual Global Commercial Supply Forecast, and (B)the annual then-current planned capacity of the MacroGenics Manufacturing Facilities (such amount thatMacroGenics elects to Manufacture as set forth in this Section 7.3(a), the “MacroGenics Commercial SupplyCommitment”), and (y) subject to successful Manufacturing Technology Transfer, FDA or EMA sitevalidation, and Incyte’s notification that it is prepared to deliver the Incyte Commercial Supply Commitment,Incyte shall have the right and obligation to Manufacture, or have Manufactured, at the Incyte Facility, thepercentage of the global commercial supply of the Licensed Compound Bulk Drug Substance other than theMacroGenics Commercial Supply Commitment, which shall be at least [**] (such amount, the “IncyteCommercial Supply Commitment”). On an annual basis, the Parties will review and update, upon mutualagreement taking into consideration the prior year delivery, the Commercial Supply Commitments, including thepercentage allocations for each Party to Manufacture (or in the case of Incyte, have Manufactured) its share ofthe global commercial supply of Licensed Compound Bulk Drug Substance. MacroGenics shall notify Incyte ofits percent MacroGenics Commercial Supply Commitment within [**] after its receipt of the Annual GlobalCommercial Supply Forecast, and each Party shall be obligated to deliver the full quantity of its CommercialSupply Commitment.(iii)In the event that MacroGenics delivers [**] the MacroGenics Commercial Supply Commitment in [**] out ofany [**] consecutive Calendar Year period (a “Commercial Shortfall”), Incyte shall have the right to limitMacroGenics’ future annual commercial supply volume such that it does not exceed the [**] volume thatMacroGenics delivered in either of such [**] in which the Commercial Shortfall occurred (i.e. Incyte may adjustMacroGenics’ future right to manufacture [**] by dividing the [**] volume71[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDthat MacroGenics delivered in either of such [**] years in which the Commercial Shortfall occurred by the totalprojected volume demand for future years).(iv)In addition, in the event that (x) MacroGenics Manufactures [**] the entirety of the MacroGenics CommercialSupply Commitment, or (y) Incyte Manufactures or has Manufactured [**] the entirety of the IncyteCommercial Supply Commitment, then without limitation of any other rights or remedies available to theParties, the other Party shall have the right (but not the obligation) to Manufacture, itself (in the case ofMacroGenics) or through the Incyte Facility (in the case of Incyte), the remaining amount of the LicensedCompound Bulk Drug Substance, to fulfill demand for [**] of the Licensed Compound Bulk Drug Substancerelative to the Annual Global Commercial Supply Forecast, in accordance with the terms of the CommercialSupply Agreement; provided that, at all times during the Term, MacroGenics shall use CommerciallyReasonable Efforts to fulfill the MacroGenics Commercial Supply Commitment, and Incyte shall useCommercially Reasonable Efforts to fulfill the Incyte Commercial Supply Commitment; provided further, that,neither Party shall reallocate its then-current planned Manufacturing capacity to fulfill its respective CommercialSupply Commitment to any other compounds or products.(v)In the event that Incyte Manufactures or has Manufactured [**] the entirety of the Incyte Commercial SupplyCommitment in a given Calendar Year, to the extent that MacroGenics has any Licensed Compound Bulk DrugSubstance available at such time that is not committed for MacroGenics Clinical Studies, Incyte may purchasesuch Licensed Compound Bulk Drug Substance from MacroGenics in accordance with Section 7.3(c).MacroGenics shall supply all quantities of Licensed Compound Bulk Drug Substance from the MacroGenicsLarge-Scale Supply Plant or the MacroGenics 1,000L Supply Plant, and shall not have the right to subcontractthe Manufacture of the Licensed Compound Bulk Drug Substance to any Third Party without Incyte’s priorwritten approval.(b)Licensed Compound Drug Product. Incyte shall be solely responsible, at its sole cost and expense, for Manufacturingfrom the Licensed Compound Bulk Drug Substance, itself or through an Approved CMO, [**] of theprojected global commercial supply of the Licensed Compound Drug Product.(c)Commercial Supply Costs. To the extent MacroGenics provides any commercial supply of the Licensed Compound DrugProduct to Incyte pursuant to Section 7.3(a), the provisions of this Section 7.3(c) shall apply. MacroGenicsshall provide such supply at a cost equal to [**] of the Manufacturing Expenses incurred by MacroGenicswith respect to such quantities of the Licensed Compound Drug Product. MacroGenics shall thereafterprovide Incyte with an invoice, and Incyte72[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwould have up to [**] following its receipt of such invoice to request reasonable supporting documentation fromMacroGenics to confirm the amount of Manufacturing Expenses set forth therein. MacroGenics shall provide any suchreasonable supporting documentation within [**] following Incyte’s request. Incyte shall pay MacroGenics the fullundisputed amount of any invoice with respect to commercial supply of the Licensed Compound Drug Product withinthe later of (i) [**] after Incyte’s receipt of such invoice from MacroGenics, or (ii) [**] after Incyte’s receipt of thesupporting documentation in accordance with the procedure described above.(d)Commercial Supply Agreement. No later than [**] after Initiation of the first Pivotal Study, the Parties shall useCommercially Reasonable Efforts to execute a commercial supply agreement (the “Commercial SupplyAgreement”) that will set forth the terms and conditions governing the provision of commercial supply ofthe Licensed Compound Bulk Drug Substance and/or Licensed Compound Drug Product fromMacroGenics to Incyte.(e)MacroGenics Commercial Supply Rights. Notwithstanding anything to the contrary herein, in the event that Incyte (asdetermined by Incyte in its reasonable discretion) is, or could reasonably be expected to be unable toManufacture or have Manufactured the Incyte Commercial Supply Commitment, then Incyte shall promptlyinform MacroGenics upon becoming aware of the events giving rise to such inability or expected inability,and (i) MacroGenics shall have the right to Manufacture such quantities of the Licensed Compound BulkDrug Substance that Incyte is unable to Manufacture or have Manufactured until such time that Incyte isprepared to deliver the Incyte Commercial Supply Commitment, and (ii) Incyte shall Manufacture or haveManufactured quantities of the Licensed Compound Drug Product using the Licensed Compound Bulk DrugSubstance provided by MacroGenics. In the event that Incyte notifies MacroGenics in writing that Incytedoes not have an Incyte Facility that is equipped for commercial supply purposes (in Incyte’s reasonablediscretion), MacroGenics shall have the right to Manufacture such quantities of the Licensed CompoundDrug Product, in order to meet [**] of the global supply requirement for the MacroGenics CombinationRegimen.7.4 Records; Audit Rights. Incyte and MacroGenics shall (and Incyte shall require that each Collaborator shall) keep complete andaccurate records pertaining to its use and disposition of the Licensed Compound (including its storage, shipping and chain of custodyactivities) and, upon request of the other Party, shall make such records open to review by the other Party for the purpose ofconducting investigations for the determination of the safety and/or efficacy of the Licensed Compound or a Party’s and theCollaborator’s compliance with this Agreement with respect to the Licensed Compound.7.5 Operation of MacroGenics Manufacturing Facilities.(a)Subject to MacroGenics’ compliance with its obligations under this Agreement and the Ancillary Agreements, MacroGenicsshall have the sole discretion in the73[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDoperation and use of the MacroGenics Manufacturing Facilities to fulfill its obligations to supply the LicensedCompound Bulk Drug Substance under this Agreement and any Ancillary Agreements, including with respect to thefollowing:(i)scheduling of production runs to fulfill Orders and meet forecasts;(ii)scheduling of cleaning and maintenance and shut down to perform such activities; and(iii)allocation of staff to activities and tasks to be performed in each MacroGenics Manufacturing Facility.7.6 Quality Assurance.(a)Clinical Supply. MacroGenics shall use Commercially Reasonable Efforts to implement and perform operating proceduresand controls for sampling, stability and other testing of the Licensed Compound Bulk Drug Substance andLicensed Compound Drug Product, and for validation, documentation and release of the LicensedCompound Bulk Drug Substance and Licensed Compound Drug Product and such other quality assuranceand quality control procedures as are required by the specifications, GMP and the Clinical QualityAgreement (collectively, “Quality Assurance Measures”), for clinical supply purposes. To the extent anyclinical or commercial supplies of the Licensed Compound are Manufactured at the Incyte Facility pursuantto this Article 7, all parties in involved in such Manufacture shall adhere to the Quality Assurance Measures,subject to any modifications that may be mutually agreed upon by the Parties in writing from time to time.MacroGenics shall lead any discussions between the Parties related to Quality Assurance Measures forclinical supply of the Licensed Compound Bulk Drug Substance and Licensed Compound Drug Product forPhase I Studies and Phase II Studies. Incyte shall lead any discussions between the Parties related to QualityAssurance Measures for clinical supply of the Licensed Compound Bulk Drug Substance and LicensedCompound Drug Product for Phase III Studies and Pivotal Studies.(b)Commercial Supply. Both Parties shall use Commercially Reasonable Efforts to implement and perform Quality AssuranceMeasures for commercial supply of the Licensed Compound Bulk Drug Substance and Licensed CompoundDrug Product. To the extent MacroGenics or an Approved CRO Manufactures any Phase III Study orPivotal Study clinical supply or any commercial supplies of the Licensed Compound Bulk Drug Substanceand Licensed Compound Drug Product pursuant to this Article 7, such parties shall adhere to the QualityAssurance Measures implemented by Incyte in its production of the Licensed Compound Bulk DrugSubstance and Licensed Compound Drug Product, subject to any modifications that may be mutually agreedupon by the Parties in writing from time to time. Incyte shall lead any discussions between the Parties relatedto Quality Assurance Measures for commercial supply of the Licensed Compound Bulk Drug Substance andLicensed Compound Drug Product.74[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED7.7 Compliance with Law. Each Party shall conduct all Manufacturing activities related to the Licensed Compound Bulk DrugSubstance and Licensed Compound Drug Product in compliance with all Applicable Law, including applicable national andinternational (e.g., ICH, GCP, GLP, and GMP) guidelines.ARTICLE 8CONSIDERATION8.1 Upfront Payment. MacroGenics shall invoice Incyte after the Effective Date and, within [**] after receipt of such invoice, Incyteshall pay to MacroGenics, One Hundred Fifty Million Dollars ($150,000,000) as a one-time, non-refundable, non-creditable upfrontlicense payment.8.2 Milestone Payments. The applicable Party will notify the other Party within [**] following the achievement of each milestone setforth below (each, a “Milestone”). Thereafter, MacroGenics shall submit an invoice to Incyte for the applicable Milestone payment,and within [**] after Incyte’s receipt of such invoice, Incyte shall remit the applicable Milestone payment to MacroGenics. In addition,except with respect to the Breakthrough Designation Milestone, if for any reason any other Development Milestone corresponding to aMilestone payment does not occur prior to the occurrence of Regulatory Approval, then such prior non-occurring DevelopmentMilestone shall be deemed to occur concurrently with Regulatory Approval, and the applicable Milestone payments for the applicableDevelopment Milestones shall become due and payable in accordance with this Section 8.2.(a)Proof of Concept Milestone. The following payments shall be payable once as specified in the table below with respect tothe first applicable Clinical Study (conducted by: (i) Incyte, its Affiliates, or sublicensees (excludingCollaborators); (ii) MacroGenics, in the case of the Ongoing Clinical Study, to the extent it meets thedefinition of a Phase II Study or Phase III Study; (iii) MacroGenics, if Incyte agrees in writing, in its solediscretion, that such study satisfies the POC Development Milestone; or (iv) MacroGenics, in the case of aMacroGenics Clinical Study in an Indication for which the then-current Incyte Global Development Planalso includes the Initiation of a Clinical Study in the same Indication within the [**] period following the dateon which MacroGenics’ Clinical Study achieved Proof of Concept) to achieve the corresponding Milestone:Proof of Concept MilestonePayment (USD) 1st Indication2nd Indication3rd Indication[**] or [**] Establishing Proof of Concept (the “POCDevelopment Milestone”)[**][**][**]75[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(b)Development Milestones. The following payments shall be payable once as specified in the table below with respect to thefirst applicable Monotherapy Regimen, or Incyte Combination Regimen Developed by Incyte, its Affiliates,or sublicensees (excluding Collaborators) to achieve the corresponding Milestone (together with the POCDevelopment Milestone, each, a “Development Milestone”):Development MilestonePayment (USD) 1st Indication2nd Indication3rd IndicationTreatment of [**] cumulative subjects across all IncyteClinical Studies (including Incyte Monotherapy Studiesand Incyte Combination Studies) in a single Indication forgreater than [**] continuously at a recommended Phase IIor Phase III defined dose and schedule[**][**][**]Initiation of a Pivotal Study[**][**][**]Breakthrough Designation Granted[**]N/AN/A(c)Regulatory Filing Milestones. The following payments shall be payable once as specified in the table below, with respectto the first Monotherapy Regimen or Incyte Combination Regimen Developed by Incyte, its Affiliates, orsublicensees (excluding Collaborators) to achieve the corresponding Milestone (each, a “Regulatory FilingMilestone”):Regulatory Filing MilestonePayment (USD) 1st Indication2nd Indication3rd IndicationFirst filing of BLA in the U.S.[**][**][**]First filing of MAA with EMA or in [**] EuropeanMajor Market countries[**][**][**](d)Regulatory Approval Milestones. The following payments shall be payable once as specified in the table below, withrespect to the first Monotherapy Regimen or Incyte Combination Regimen Developed by Incyte, itsAffiliates, or sublicensees (excluding Collaborators) to achieve the corresponding Milestone (each, an“Approval Milestone”):Approval MilestonePayment (USD) 1st Indication2nd Indication3rd Indication76[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDApproval MilestonePayment (USD) 1st Indication2nd Indication3rd IndicationReceipt of Regulatory Approval in U.S.[**][**][**]Receipt of Regulatory Approval in EU[**][**][**]Receipt of Regulatory Approval in Japan[**][**][**](e)Annual Net Sales Milestones. The Milestone payments set forth in this Section 8.2(e) shall each be payable toMacroGenics one time only, upon the first time during the Term that the total aggregate Net Sales ofLicensed Products in any Calendar Year in the Territory during the applicable Royalty Term for the LicensedProducts in the applicable country exceed the amounts set forth in the following table (each, a “SalesMilestone”).Annual Aggregate Worldwide Net Sales MilestonesSales MilestonePayment (USD)Upon the first occasion that aggregate annual Net Sales of LicensedProducts exceeds [**][**]Upon the first occasion that aggregate annual Net Sales of LicensedProducts exceeds [**][**]Upon the first occasion that aggregate annual Net Sales of LicensedProducts exceeds [**][**]Upon the first occasion that aggregate annual Net Sales of LicensedProducts exceeds [**][**]If more than one Sales Milestone described in this Section 8.2(e) is achieved during the same Calendar Year, thenIncyte shall pay MacroGenics only the Sales Milestone payment that corresponds to the highest Sales Milestone thatwas achieved in such Calendar Year, and any Sales Milestone that was earned in such Calendar Year but not paid shallbe paid with respect to the first Calendar Year in which no other Sales Milestone was achieved. For purposes of clarity,only one Sales Milestone payment shall be owed, on each of the first occasions that aggregate annual Net Sales ofLicensed Products exceed [**], [**], [**] and [**] under this Section 8.2(e).8.3 Royalty Obligations. Incyte shall pay to MacroGenics royalties on the aggregate annual Net Sales of Licensed Products in theTerritory, on a Licensed Product-by-Licensed Product basis, at the following rates set forth in this Section 8.3, in each case, subject toSections 8.5 and 8.10:77[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDAnnual Net SalesRoyalty RateOn the portion of worldwide annual Net Sales of Licensed Productsless than or equal to [**]15%On the portion of worldwide annual Net Sales of Licensed Productsgreater than [**] and less than or equal to [**][**]On the portion of worldwide annual Net Sales of Licensed Productgreater than [**] and less than or equal to [**][**]On the portion of worldwide annual Net Sales of Licensed Productgreater than [**] and less than or equal to [**][**]On the portion of worldwide annual Net Sales of Licensed Productgreater than [**]24%8.4 Royalty Term. Royalties under Section 8.3 shall be payable on Net Sales on a Licensed Product-by-Licensed Product andcountry-by-country basis during the Royalty Term applicable to such Licensed Product in the applicable country. Following theexpiration of the Royalty Term with respect to a Licensed Product in the applicable country (but not following an earlier termination ofthis Agreement), subject to the terms and conditions of this Agreement, Incyte shall have a perpetual, irrevocable, non-exclusive, fully-paid and royalty-free right and license, with the right to grant sublicenses, under the Licensed Technology and Label CombinationPatents, to Exploit such Licensed Product in the Field in such country, and Net Sales of such Licensed Product in such country shallnot count toward the milestones or royalty thresholds under Sections 8.2 or 8.3.8.5 Royalty Rate Adjustments; Licensed Product Pricing.(a)The royalty rates set forth in Section 8.3 shall be subject to reduction as follows:(i)On a country-by-country basis, to the extent a Licensed Product is sold in a country in the Territory in whichone (1) or more Third Parties is selling or has previously sold one or more Biosimilar Products, and suchBiosimilar Products, collectively, have achieved a [**] or more market share of the aggregate market share ofsuch Licensed Product and such Biosimilar Products (based on data provided by IMS Health Incorporated,Fairfield, Connecticut) as measured on a units sold basis in any Calendar Quarter, or if such data is notavailable, such other methodology for estimating the percentage of unit sales based market share of suchBiosimilar Products in such country as agreed upon by the Parties, then Incyte’s royalty obligations with respectto sales of such Licensed Product in such country during such Calendar Quarter and all future CalendarQuarters shall be reduced by [**] of the applicable rate set forth in Section 8.3 (as such rate may be adjustedpursuant to Section 8.5(b) below);78[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(ii)On a country-by-country basis and Licensed Product-by-Licensed Product basis, the royalty rates shall bereduced by [**], in each country in the Territory in which, at the time applicable Net Sales occur, no ValidClaim of Licensed Patents Covers the Commercialization of the applicable Licensed Product; and(iii)In no event shall the reduction available to Incyte pursuant to Sections 8.5(a)(i) and 8.5(a)(ii) reduce theroyalties payable to MacroGenics for a given Calendar Quarter to less than [**] of the royalty amount otherwisepayable with respect to the applicable Licensed Product (the “Royalty Floor”) for such Calendar Quarterduring the Royalty Term, provided that Incyte may credit against royalty obligations payable with respect to oneor more future Calendar Quarter(s) any royalty reductions that Incyte was unable to take in any previousCalendar Quarter due to the Royalty Floor to the extent such credited royalty deductions do not cause thepayments owed to MacroGenics in such future Calendar Quarter to be reduced below the Royalty Floor.(b)Notwithstanding anything to the contrary herein, in the event that Incyte or its Affiliates or sublicensees sell the LicensedCompound [**] in a Calendar Year such that the [**] for such Calendar Year is [**] the [**], [**], [**] or[**], as applicable, then, as Incyte’s [**] and MacroGenics’ [**] with respect to such sales, within [**]following the end of such Calendar Year, Incyte shall pay MacroGenics a one-time payment in an amountequal to the shortfall of the royalty that would have been owed had the [**] of the [**] been equal to the[**], [**], [**], or [**], as applicable. By way of example, if MacroGenics received $[**] in U.S. royaltiesover the course of a Calendar Year based on a [**], and the [**] in such Calendar Year was [**], then Incytewould owe MacroGenics a shortfall payment of $[**] ([**]).8.6 Manner of Royalty Payment. Within [**] following the end of each Calendar Quarter ending during an applicable RoyaltyTerm as to a Licensed Product in the Territory, Incyte shall provide MacroGenics with a report setting forth, on a Licensed Product-by-Licensed Product and country-by-country basis: (a) the Net Sales of such Licensed Product in such country, calculated in accordancewith GAAP and (b) a calculation of the royalty payment due with respect to such Net Sales. Such report shall also include theexchange rates and other methodology used in converting Net Sales into U.S. Dollars from the currencies in which such sales weremade for purposes of calculating the appropriate royalty rate and the royalty payment due, and the application of the adjustments, ifany, made in accordance with the terms of Section 8.5 and Section 8.10. Following MacroGenics’ receipt of an undisputed report,MacroGenics shall send an invoice to Incyte for the royalty payment due for such Calendar Quarter. Within [**] after Incyte’s receiptof such invoice, Incyte shall pay all undisputed amounts due to MacroGenics pursuant to Section 8.3 with respect to Net Sales byIncyte, its Affiliates and their respective sublicensees for such Calendar Quarter.79[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED8.7 Monotherapy Development Sublicense Fees. Incyte shall pay to MacroGenics [**] of upfront fees and milestones receivedfollowing the Effective Date but prior to the end of the Royalty Term by Incyte and its Affiliates from any Third Party with whichIncyte enters into, during the [**] after the Effective Date, a bona fide collaboration (such collaboration being limited solely toDevelopment of the Monotherapy Regimen in the U.S., EU or Japan), pursuant to which Incyte grants such Third Party a sublicenseunder this Agreement (“Monotherapy Sublicense Fees”).8.8 Collaborator Sublicense Fees. With respect to each sublicense granted by Incyte under this Agreement with respect to aCollaborator Combination Regimen, throughout the Term, Incyte shall have the right, but not the obligation, to charge Collaborators anupfront fee, milestone or royalties on the net sales of the Collaborator’s Pipeline Asset in exchange for access to use the LicensedCompound in a Collaborator Combination Regimen, and shall pay to MacroGenics [**] of any such upfront fee, milestones orroyalties received during the Royalty Term by Incyte and its Affiliates from such Collaborator in connection with the applicableCollaborator Contract (“Collaborator Sublicense Fees”).8.9 Currency. All payments under this Agreement shall be payable in U.S. Dollars. With respect to sales of a Licensed Productinvoiced in a currency other than U.S. Dollars, such amounts and the amounts payable hereunder shall be expressed in their U.S.Dollars equivalents using the exchange rate Incyte uses for its public financial accounting purposes.8.10 Third Party Financial Obligations.(a)Subject to Section 8.10(b) and 8.10(c) below, in the event that Incyte in its reasonable discretion determines that it isnecessary or useful to obtain a license under any Patents controlled by a Third Party in order to Exploit theMonotherapy Regimen (such license, a “Third Party License”), then Incyte may credit up to [**] of theamount of [**], milestone payments, royalties, and other amounts actually paid by Incyte or its applicableAffiliate or, solely to the extent passed through to Incyte, its sublicensee, as the case may be, to such ThirdParty in connection with such Third Party License in a given Calendar Quarter, in each case to the extentallocable to rights to Exploit the Monotherapy Regimen, against future milestone payments and royaltypayments owed to MacroGenics under Section 8.3 (as such royalties may be adjusted pursuant to Section8.5(b)) in such Calendar Quarter (such credit, the “Third Party License Credit”); provided, however, thatin no event will such Third Party License Credit reduce any royalty or milestone payment payable toMacroGenics to less than [**] of the royalty or milestone amount otherwise payable with respect to theapplicable Licensed Product. Any share of such Third Party obligations that [**] due to the [**]. For clarity,the Third Party License Credit shall not be [**].(b)As of the Execution Date, MacroGenics has the existing Third Party licenses set forth in Exhibit C (such licenses, the“Existing Third Party Licenses”). Incyte shall be solely responsible for paying to MacroGenics, withrespect to the Existing Third Party Licenses, all license fees, milestone payments, and royalties (includingroyalty buyout payments) payable to the applicable Third Party licensor under such Existing80[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDThird Party License, to the extent resulting from Incyte’s Exploitation of the Licensed Compound and/or LicensedProduct; provided that, [**] shall have [**] of the amount of such fees as a [**] in the manner provided in [**], subjectto the [**] and [**] set forth in such [**].(c)Notwithstanding anything to the contrary herein, Incyte shall be solely responsible for the payment of any and all costs andexpenses, including upfront fees, milestone payments and royalty payments (without deduction pursuant tosubsection (a)), and the assumption of any and all liabilities owed or incurred by Incyte or its Affiliates priorto the Effective Date or during the Term in connection with obtaining from [**] any Third Party License forthe Exploitation of the Licensed Compound (including the promotion of the Licensed Compound as acomponent of a MacroGenics Combination Regimen) under those Patents identified on Exhibit G that areowned or Controlled by [**] as of the Effective Date (such [**], the “[**]”; such license, the “[**]”). Duringthe Term, Incyte will use Commercially Reasonable Efforts to (x) [**] a [**] that [**] the [**] under the [**]by [**] to [**], [**] generally consistent with the license set forth in Section 3.4(b) (except that the [**] willbe solely for the Exploitation of the Licensed Compound and any further sublicensing thereof shall be subjectto the provisions to Section 3.2(c)); and (y) maintain the [**] for so long as it is commercially reasonable forIncyte to do so. For so long as Incyte maintains the [**] in effect, Incyte will not amend or modify the [**] ina manner that would have a material adverse effect on MacroGenics’ rights under this Agreement withoutMacroGenics’ prior written consent. For clarity, the [**] hereunder with respect to the [**] shall not include[**] to the Exploitation of any Pipeline Asset or the Combination of any Pipeline Asset with the LicensedCompound.(d)[**]. Notwithstanding Section 8.10(a) and 8.10(c), during the Term and in the event that Incyte determines it is necessary toobtain from [**] any Third Party License for the Exploitation of the Licensed Compound (including thepromotion of the Licensed Compound as a component of a MacroGenics Combination Regimen) underthose Patents identified on Exhibit H that are owned or Controlled by [**] as of the Effective Date (such[**], the “[**]”; such license, the “[**]”), Incyte shall use Commercially Reasonable Efforts to [**] and [**]the [**], either as an extension of the [**] or a [**], and ensure that the terms of the [**] permit the [**]under the [**] by Incyte to MacroGenics, on terms generally consistent with the license set forth in Section3.4(b) and the provisions of Section 8.10(c), except that the [**] will be solely for the Exploitation of theLicensed Compound, and any [**] thereof shall be subject to the provisions of Section 3.2(c). To the extentIncyte determines it is necessary to obtain the [**], Incyte shall be solely responsible for the payment of anyand all costs and expenses, including upfront fees, milestone payments and royalty payments, withoutdeduction pursuant to 8.10(a) or any other provision of this Agreement.81[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED8.11 Taxes. All payments due and payable under this Agreement will be made without any deduction or withholding of Taxes,unless such deduction or withholding Tax is required by Applicable Law in effect at the time of payout. If the paying Party is sorequired to deduct or withhold any Taxes, such Party shall (a) promptly notify the other Party of such requirement; (b) pay to therelevant authorities the full amount required to be deducted or withheld promptly upon the earlier of determining that such deduction orwithholding is required or receiving notice that such amount has been assessed against the other Party; and (c) promptly forward to theother Party an official receipt (or certified copy), or other documentation reasonably acceptable to the other Party evidencing suchpayment to such authorities. Notwithstanding the foregoing, if as a result of (i) the assignment or transfer by operation of law orotherwise, of this Agreement by either Party to an Affiliate or Third Party outside of the U.S., or (ii) the exercise by either Party of itsrights under this Agreement through an Affiliate or Third Party outside the U.S., withholding Tax in excess of the withholding Taxamount that would have been payable in the absence of such assignment or exercise of rights becomes payable with respect to anyamount due to the other Party under this Agreement, then: (x) where the paying Party is the assigning or exercising Party described in(i) and (ii), the paying Party shall pay to the other Party such additional amounts as are necessary so that the other Party receives theamounts it would have received if such payments were not subject to such withholding Tax as a consequence of such assignment orexercise; and (y) where the receiving Party is the assigning or exercising Party described in (i) and (ii), the paying Party shall not berequired to pay any amount in excess of the aggregate payment it would have been required to make based on the withholding Taxamount that would have been payable in the absence of such assignment or exercise of rights.8.12 Audit. Each Party shall maintain complete and accurate records in the ordinary course of such Party’s operations in order topermit the other Party to confirm the accuracy of the calculation of royalties, milestones, FTE Costs, Third Party Expenses,Manufacturing Expenses and other payments under this Agreement. Upon reasonable prior notice, but not more than [**] per CalendarYear, such records shall be available during regular business hours for a period of [**] from the end of the Calendar Year to whichthey pertain for examination by a “Big Four” independent certified public accounting firm (i.e., PriceWaterhouseCoopers, Deloitte &Touche, Ernst & Young or KPMG) selected by the requesting Party, having no prior engagement with the requesting Party, andreasonably acceptable to the other Party for the sole purpose of verifying the accuracy of the financial reports and correctness of thepayments furnished by the other Party pursuant to this Agreement (it being agreed that if the Parties have collectively engaged withmore than [**] of the foregoing Big Four firms at the time of selection for an audit hereunder, then at such time the Parties shallreasonably cooperate and determine additional acceptable certified public accounting firms who may conduct such audit pursuant tothis Section 8.12). Any such auditor shall not disclose the other Party’s Confidential Information, except to the extent such disclosure isnecessary to verify the accuracy of the financial reports furnished by the other Party or the amount of payments due by the other Partyunder this Agreement. Any amounts shown to be owed but unpaid shall be paid within [**] from the accountant’s report, plus interest,as set forth in Section 8.13, from the original due date. Any amounts shown to have been overpaid shall be refunded within [**] fromthe accountant’s report. The requesting Party shall bear the full cost of such audit unless such audit discloses an underpayment by theother Party of more than [**] of the amount due, in which case the other Party shall bear the full cost of such audit.82[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED8.13 Manner of Payment. All payments due to a Party hereunder shall be made in U.S. Dollars by wire transfer of immediatelyavailable funds into an account designated by the receiving Party. If a Party does not receive payment of any sum due to it on or beforethe due date, such Party shall notify the other Party, and the paying Party shall have [**] following receipt of such notice to pay anyundisputed amount. Thereafter, interest shall accrue on the undisputed sum due to such Party until the date of payment at the perannum rate of [**] over the then current prime rate quoted by Citibank in New York City of the maximum rate allowable byApplicable Law, whichever is lower.ARTICLE 9INTELLECTUAL PROPERTY MATTERS9.1 Inventorship; Ownership and Disclosure of Inventions.(a)Inventorship. For purposes of this Section 9.1, inventorship with respect to any Inventions made by a Party’s (or itsAffiliates’) own employees, agents, licensees or independent contractors in the course of conducting itsactivities under this Agreement, together with all intellectual property rights therein, shall be determined inaccordance with U.S. patent laws.(b)Ownership by Incyte. As between the Parties, any Invention made solely by Incyte’s (or its Affiliates’) own employees,agents, licensees or independent contractors that arises in the course of performing any Monotherapy Study,Incyte Combination Study and/or any Collaborator Combination Study under this Agreement or performingany other activity under this Agreement, together with all intellectual property rights in each of the foregoing(collectively, “Incyte Development IP”) and Incyte’s interest in Collaborator Development IP shall, asbetween Incyte and MacroGenics, be solely owned by Incyte.(c)Ownership by MacroGenics. As between the Parties, any Invention made solely by MacroGenics’ (or its Affiliates’) ownemployees, agents, licensees or independent contractors that arises in the course of performing anyMacroGenics Combination Study under this Agreement or, performing any other activity under thisAgreement, together with all intellectual property rights therein (collectively, “MacroGenics DevelopmentIP”) shall, as between MacroGenics and Incyte, be solely owned by MacroGenics and, to the extent useful ornecessary to Exploit the Licensed Compound or Licensed Product, shall, subject to Section 15.3(d),constitute Licensed Patents or Licensed Know-How (as applicable) for purposes of this Agreement.(d)Joint Ownership. The Parties shall jointly own any Inventions for which the inventors include at least one employee, agent,or independent contractor of each Party that arise in the course of performing activities under this Agreement,together with all intellectual property rights therein (“Joint Inventions”). Subject to any licenses grantedunder this Agreement, each Party will have the right to practice and exploit any Joint Inventions without theduty of accounting to the other Party or seeking consent (for licensing, assigning or otherwise exploitingJoint Inventions) from the other Party by reason of the joint ownership thereof; and each Party hereby83[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDwaives any right such Party may have under the Applicable Law of any jurisdiction to require any such approval oraccounting, and, to the extent Applicable Law prohibits such a waiver, each Party shall be deemed to so consent. Infurtherance thereof, upon the reasonable written request of a Party, the other Party will in writing grant such consentsand confirm that no such accounting is required to effect the foregoing regarding Joint Inventions. Each Party shallpromptly disclose to the other Party any invention disclosures, or other similar documents, submitted to it by itsemployees, agents or independent contractors describing the Joint Inventions, and all Information relating to such JointInventions to the extent necessary for the use of such Joint Invention in the Development or commercialization of theLicensed Compounds or the Licensed Products in the Field and, to the extent patentable, for the preparation, filing andmaintenance of any Patent with respect to such Joint Invention. Any such Information provided to the other Partypursuant to this Section 9.1(d) shall, to the extent it refers to or describes the Pipeline Asset of the Disclosing Party, beConfidential Information of the Disclosing Party, and the Disclosing Party shall have the right to require that anyConfidential Information related to its Pipeline Assets be redacted from any Patent application(s) Covering JointInventions, provided that such Confidential Information shall not be redacted to the extent it is necessary to understandthe Joint Invention, or is otherwise required for the patentability of the Joint Invention.(e)Assignment by Representatives. Each Party shall (and Incyte shall require that each Collaborator shall) bind its Affiliates,and its or their employees, agents, consultants and contractors (collectively, “Representatives”) to disclose tosuch Party, and to assign to such Party or its Affiliate (or to Collaborator, as applicable) all right, title andinterest in, any Invention that is made by such Representative in the course of conducting its activities underthis Agreement, together with all intellectual property therein.9.2 Prosecution of Patents.(a)Licensed Patents. Subject to the oversight of the JIPC and in accordance with the remainder of this Section 9.2(a),MacroGenics shall have the primary right and authority to prepare, file, prosecute and maintain the LicensedPatents (other than the Joint Patents, which are the subject of Section 9.2(e)) on a worldwide basis, and shallprepare, file, prosecute or maintain the Licensed Patents in any jurisdiction requested by Incyte to the extentpermitted under Applicable Law using independent outside counsel mutually agreed upon by the Parties.(b)Costs. Such activities under Section 9.2(a) shall be conducted by MacroGenics (including through outside counsel selectedin accordance with Section 9.2(a) above) at MacroGenics’ own expense; provided that, Incyte shallreimburse MacroGenics for [**] of the reasonable, out-of-pocket costs incurred by MacroGenics inpreparing, filing, prosecuting and maintaining the Licensed Patents in accordance with this Section 9.2,within [**] after receipt of any undisputed invoice from MacroGenics84[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDsetting forth such costs; provided, further, that if, pursuant to MacroGenics’ agreement with any Third Party,MacroGenics is reimbursed by such Third Party for any such out-of-pocket costs in the preparing, filing, prosecution ormaintenance of any such Licensed Patent, Incyte’s share of such out-of-pocket costs will be determined by [**].Notwithstanding the foregoing, if Incyte wishes to seek Patent protection for a Licensed Patent in a jurisdiction otherthan those set forth on Exhibit F (a “Requested Licensed Patent”), then Incyte shall so notify MacroGenics in writingand shall reimburse MacroGenics for [**] of the reasonable, out-of-pocket costs incurred by MacroGenics in preparing,filing, prosecuting and maintaining such Requested Licensed Patent in such jurisdiction in accordance with this Section9.2, within [**] after receipt of any undisputed invoice from MacroGenics setting forth such costs; provided that, if theRequested Licensed Patent Covers a MacroGenics Pipeline Asset, then Incyte shall only be required to pay [**] of thereasonable, out-of-pocket costs incurred by MacroGenics in preparing, filing, prosecuting and maintaining theRequested Licensed Patents in accordance with this Section 9.2; provided, further, that if, pursuant to MacroGenics’agreement with any Third Party, MacroGenics is reimbursed by such Third Party for any such out-of-pocket costs inthe preparing, filing, prosecution or maintenance of any such Requested Licensed Patent, Incyte’s share of such out-of-pocket costs will be determined by [**].(i)Opt-Out Right. Incyte may cease reimbursement of MacroGenics’ costs associated with any Licensed Patentpursuant to Section 9.2(a) by providing MacroGenics with at least [**] written notice (an “Opt Out Notice”).Upon receipt of an Opt Out Notice, MacroGenics may cease to pursue any efforts to prepare, file, prosecute ormaintain the applicable Licensed Patent(s). Upon expiration of the notice period set forth in the Opt Out Notice,any Licensed Patent which is the subject of such Opt-Out Notice shall cease to be a Licensed Patent for allpurposes under this Agreement, including for purposes of the licenses granted by MacroGenics to Incyte underSection 3.1.(ii)Incyte Review and Comment Rights. Subject to the oversight of the JIPC, MacroGenics shall provide Incytewith a reasonable opportunity to review and comment on its efforts to prepare, file, prosecute and maintainLicensed Patents, including by providing Incyte with a copy of material communications from any patentauthority regarding any Licensed Patent, and by providing drafts of any material filings or responses to be madein advance of submitting such filings or responses. MacroGenics shall consider Incyte’s comments andcooperate with Incyte regarding such communications and drafts in good faith, and shall use CommerciallyReasonable Efforts to address Incyte’s comments. If MacroGenics determines in its discretion to abandon or notmaintain any Licensed Patent(s) in any country(ies) of the world, then MacroGenics shall provide Incyte withwritten notice of such determination within a period of time reasonably necessary to allow Incyte to determineits interest in such Licensed Patent(s)85[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(which notice from MacroGenics shall be given no later than [**] prior to any final deadline for any pendingaction or response that may be due with respect to such Licensed Patent(s) with the applicable patent authority).If Incyte provides written notice indicating that it wishes to acquire such Licensed Patent(s), MacroGenics shall,free of charge, assign and transfer to Incyte the ownership of, and interest in, such Licensed Patent(s) in suchcountry(ies), at Incyte’s own expense, and MacroGenics shall cooperate with Incyte for assignment and transferof such Licensed Patent(s) in such country. Thereafter, all such assigned and transferred Patents will be deemedIncyte Patents and not Licensed Patents, and Incyte shall have the right to prepare, file, prosecute and maintainsuch Patents as set forth in Section 9.2(e), at its sole expense. Notwithstanding the foregoing, Incyte shall haveno right to prepare, file, prosecute or maintain (a) any Licensed Patents, in connection with settlementproceedings, oppositions, inter-partes proceedings and other similar circumstances; and (b) any Patents that areotherwise owned or Controlled by MacroGenics that are not Licensed Patents.(c)Incyte Patents; Incyte Development IP. Incyte shall have the sole right and authority to prepare, file, prosecute andmaintain Incyte Patents and Patents within the Incyte Development IP on a worldwide basis at its ownexpense.(i)MacroGenics Review and Comment Rights. Incyte shall provide MacroGenics with a reasonable opportunityto review and comment on its efforts to prepare, file, prosecute and maintain Incyte Patents and Patents withinthe Incyte Development IP in each case that specifically relate to the Licensed Compound or Licensed Product(collectively, the “Subject Patents”), including by providing MacroGenics with a copy of materialcommunications from any patent authority regarding any Subject Patent, and by providing drafts of any materialfilings or responses to be made in advance of submitting such filings or responses. Incyte shall considerMacroGenics’ comments regarding such communications and drafts in good faith, and shall use CommerciallyReasonable Efforts to address MacroGenics’ comments where practicable. If Incyte determines in its discretionto abandon or not maintain any Subject Patent(s) in any country(ies) of the world, then Incyte shall provideMacroGenics with written notice of such determination within a period of time reasonably necessary to allowMacroGenics to determine its interest in such Subject Patent(s) (which notice from Incyte shall be given no laterthan [**] prior to any final deadline for any pending action or response that may be due with respect to suchSubject Patent(s) with the applicable patent authority). If MacroGenics provides written notice indicating that itwishes to acquire such Subject Patent(s), Incyte shall, in return for MacroGenics’ payment to Incyte of [**] ofIncyte’s accrued costs for filing, prosecution, and maintenance of such Subject Patent, assign and transfer toMacroGenics the ownership of, and interest in, such Subject Patent(s) in such country(ies), at MacroGenics’own expense, and Incyte shall cooperate with86[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDMacroGenics for assignment and transfer of such Subject Patent(s) in such country. Thereafter, MacroGenicsshall have the right to prepare, file, prosecute and maintain such Patents at its sole expense and Incyte shall haveno further rights in or obligation to MacroGenics with respect to such Subject Patent(s). Notwithstanding theforegoing, MacroGenics shall have no right to prepare, file, prosecute or maintain (a) any Subject Patents, inconnection with settlement proceedings, oppositions, inter-partes proceedings and other similar circumstances;and (b) any Patents that are otherwise owned or Controlled by Incyte or its Affiliates that are not SubjectPatents.(d)Collaborator Development IP. As between the Parties, Incyte shall have the sole right and authority to prepare, file,prosecute and maintain Patents within the Collaborator Development IP on a worldwide basis at its ownexpense.(e)Joint Patents.(i)Subject to the governance of the JIPC and in accordance with the remainder of this Section 9.2(e), Incyte shallhave the primary right and authority to prepare, file, prosecute and maintain the Patents included in the JointInventions (“Joint Patents”) at its own expense; provided, however, to the extent that claims of Joint PatentsCover MacroGenics Pipeline Assets, that MacroGenics shall have the right and authority to prepare, file,prosecute and maintain the Patents included in the Joint Inventions that specifically relate to MacroGenicsCombination Regimens or MacroGenics Pipeline Assets (but not to the Licensed Compound or LicensedProduct) (“MacroGenics-Responsible Joint Patents”).(ii)Costs. Such activities under Section 9.2(e)(i) shall be conducted by the responsible Party (the “ResponsibleParty”) (including through outside counsel) at the Responsible Party’s own expense; provided that, the otherParty shall reimburse the Responsible Party for fifty percent (50%) of the reasonable, out-of-pocket costsincurred by the Responsible Party in preparing, filing, prosecuting and maintaining the applicable Joint Patent(s)in accordance with this Section 9.2(e)(i), within [**] after receipt of any undisputed invoice from theResponsible Party setting forth such costs.(iii)Review and Comment Rights. Subject to the governance of the JIPC, the Responsible Party shall provide theother Party with a reasonable opportunity to review and comment on its efforts to prepare, file, prosecute andmaintain the Joint Patents, including by providing such Party with a copy of material communications from anypatent authority regarding any Joint Patent, and by providing drafts of any material filings or responses to bemade in advance of submitting such filings or responses. The Responsible Party shall consider the other Party’scomments and cooperate with the other Party regarding such communications and drafts in good faith, and shalluse Commercially Reasonable Efforts to address the other Party’s comments. If the Responsible87[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDParty determines in its discretion to abandon or not maintain any Joint Patent(s) for which it has prosecution andmaintenance right pursuant to Section 9.2(e)(i) in any country(ies) of the world, then the Responsible Party shallprovide the other Party with written notice of such determination within a period of time reasonably necessary toallow the other Party to determine its interest in acquiring the Responsible Party’s interest in such Joint Patent(s)(which notice from the Responsible Party shall be given no later than [**] prior to any final deadline for anypending action or response that may be due with respect to such Joint Patent(s) with the applicable patentauthority). Upon written notice from such Party that it wishes to acquire the Responsible Party’s interest in suchJoint Patent(s), the Responsible Party shall, free of charge, assign and transfer to the other Party the ResponsibleParty’s interest in such Joint Patent(s) in such country(ies), at the other Party’ own expense, and the ResponsibleParty shall cooperate with the other Party for assignment and transfer of such Joint Patent(s) in such country.Thereafter, all such assigned and transferred Patents will be deemed Patents of the assignee party and not JointPatents, and the other Party shall have the right to prepare, file, prosecute and maintain such Patents at its soleexpense and the Responsible Party shall have no further rights (including any license rights hereunder) in orobligation to the other Party (including payment obligations hereunder) with respect to such Joint Patent(s).(f)Cooperation in Prosecution.(i)Each Party shall provide the other Party all reasonable assistance and cooperation in the prosecution efforts withrespect to Licensed Patents (including Joint Patents) provided above in Sections 9.2(a) through 9.2(e). TheParties will discuss and consider in good faith filing separate Patent Rights that include claims that CoverLicensed Compound, Licensed Product and Combinations thereof (e.g., methods of manufacturing and uses ofsuch Licensed Compound and Licensed Product) specifically or generically and claims that Cover only othercompounds and methods of making and using such other compounds. Each Party shall provide the other Partyall reasonable assistance and cooperation in providing any necessary powers of attorney and executing anyother required documents or instruments for such prosecution, as well as further actions as set forth below. Suchassistance and cooperation shall include making a Party’s inventors and other scientific advisors reasonablyavailable to assist the other Party’s Patent prosecution efforts.(ii)All communications between the Parties relating to the prosecution efforts provided above in Sections 9.2(a)through 9.2(e), including copies of any draft or final documents or any communications received from or sent topatent offices or patenting authorities with respect to the applicable Patents, shall be considered ConfidentialInformation of the Party controlling the88[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDprosecution of the applicable Patents pursuant to Sections 9.2(a) through 9.2(e) (the “Prosecuting Party”),except that, other than as set forth in Section 9.1(d), such communications in connection with Joint Patents shallbe considered the Confidential Information of both Parties.(iii)The Prosecuting Party shall keep the other Party reasonably informed of its prosecution activities with respect tothe applicable Patents.9.3 Infringement of Patents by Third Parties.(a)Notification. Each Party shall promptly notify the other Party in writing of any existing, alleged or threatened infringementof any Licensed Patent, Joint Patent, or Subject Patent, of which it becomes aware, and shall provide allInformation in such Party’s possession or control relating to such infringement.(b)Infringement of Licensed Patents.(i)Subject to Section 9.3(b)(ii) through 9.3(b)(vii), Incyte shall have the first right, but not the obligation, to bringan appropriate suit or other action against any Third Party engaged in any existing, alleged or threatenedinfringement of any Licensed Patent or Joint Patent, including the filing by a Third Party of any BiosimilarApplication under the BPCI Act, and to compromise or settle such action by counsel of its choice.(ii)Incyte shall notify MacroGenics of its election to take any action in accordance with Section 9.3(b)(i) at least[**] before any time limit set forth in Applicable Law or regulation, including the time limits set forth under theBPCI Act. Notwithstanding the foregoing sentence, Incyte shall not initiate any such suit or take such otheraction with respect to any Licensed Patent or Joint Patent without first consulting with MacroGenics and givinggood faith consideration to any reasonable objection from MacroGenics regarding Incyte’s proposed course ofaction. MacroGenics shall cooperate in the prosecution of any suit under this Section 9.3 as may be reasonablyrequested by Incyte. In the event that Incyte elects not to initiate a lawsuit or take other reasonable action withrespect to an infringement described in Section 9.3(b)(i), MacroGenics shall have the right, but not theobligation, to initiate such suit or take such other action, after providing [**] (or [**] in the event there is a timelimit) notice to Incyte and giving good-faith consideration to Incyte’s reason(s) for not initiating a suit or takingother action; provided, however, that if Incyte has notified MacroGenics that it is not proceeding with an actionon the advice of competent outside counsel that has evaluated patent scope, validity, enforceability, and/orpossible infringement defenses, then MacroGenics shall not commence an action as described in this Section9.3(b)(ii) until such time that (A) the Parties have agreed that such action should be commenced or (B) amutually-agreeable Third Party expert has mediated such disagreement and determined that such action isreasonably unlikely to89[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDhave a material adverse effect on the Licensed Patents, Joint Patents, or Subject Patents. If, prior to the outcomeof such determination by such Third Party expert, a time limit will expire or deadline occur that will prevent orlimit the ability to initiate or conduct such suit or action, MacroGenics shall have the right to proceed with suchsuit or action until the outcome of the determination, at which point MacroGenics may continue with such suitor action only in accordance with the determination.(iii)Without limiting the obligations of the Parties under subsection (ii) above, if one Party elects to bring suit or takeaction under this Section 9.3(b) against an infringement, then the other Party shall have the right, prior tocommencement of the suit or action, to join any such suit or action at its own cost and expense.(iv)Incyte will have sole decision-making authority with respect to the determination of which Incyte Patents, andprimary decision-making authority with respect to the determination of which Licensed Patents or Joint Patents,to submit to a Third Party that files a Biosimilar Application, or any other act of patent information exchange orlisting as required by the BPCI Act or other similar measure in any other country in the Territory; provided that(A) to the extent permitted by Applicable Law, Incyte shall confer in good faith with MacroGenics regardingwhich, if any, Licensed Patents or Joint Patents are listed pursuant to 42 U.S.C. § 262(l)(3)(A) (or any successorlegislation) or included in any litigation with the Third Party applicant and (B) prior to the submission of suchlist to the Third Party, MacroGenics shall have the right to review and comment on and (if agreed by the Parties)require Incyte to include additional Licensed Patents or Joint Patents therein.(v)Each Party shall provide to the Party enforcing any such rights under this Section 9.3(b) reasonable assistance insuch enforcement, at such enforcing Party’s reasonable request and expense, including joining such action as aparty plaintiff if required by Applicable Law to pursue such action. The enforcing Party shall keep the otherParty regularly informed of the status and progress of such enforcement efforts, shall reasonably consider theother Party’s comments on any such efforts, and shall consult with the other Party in any important aspects ofsuch enforcement, including determination of material litigation strategy and filing of important papers to thecompetent court.(vi)Each Party shall bear all of its own internal costs incurred in connection with its activities under this Section9.3(b). In the event that the Parties are joined in suit or action against the infringement or the non-enforcingParty elects to join such suit or action and, in either case, elects to be represented by the same outside counsel asthe enforcing Party, then the enforcing Party shall be responsible for all expenses arising from such outsidecounsel, provided90[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDthat the enforcing Party consents to such joint representation by outside counsel, such consent not to beunreasonably withheld, delayed or conditioned.(vii)The Party not bringing an action with respect to infringement in the Territory under this Section 9.3(b) shall beentitled to separate representation in such matter by counsel of its own choice and at its own expense, but suchParty shall at all times cooperate fully with the Party bringing such action.(viii)Neither Party shall settle any claim, suit or action that it brought under this Section 9.3 involving LicensedPatents or Joint Patents that would either (A) involve any admission of invalidity or unenforceability of aLicensed Patent or Joint Patent or (B) result in the imposition of any liability on the non-enforcing party forwhich the enforcing party is not indemnifying the non-enforcing party pursuant to Article 14, without the priorwritten consent of the other Party, such consent not to be unreasonably withheld, delayed or conditioned.(c)Infringement of Patents Claiming MacroGenics Pipeline Assets / MacroGenics Combination Regimens. With respectto any infringement of any Patent that (i) Covers any MacroGenics Pipeline Asset or MacroGenicsCombination Regimen and (ii) either (A) does not Cover the Licensed Compound or any Licensed Productor (B) did not exist as of the Execution Date and is being enforced with respect to activity that does notinfringe (x) any composition of matter or formulation Patent with respect to the Licensed Compound nor (y)any method Patent that Covers the Licensed Compound as a Monotherapy Regimen, MacroGenics shallhave the sole and exclusive right, but not the obligation, to bring, at MacroGenics’ expense and in its solecontrol, an appropriate suit or other action against any Person engaged in such infringement of such Patent.(d)Infringement of Incyte Patents; Incyte Development IP. With respect to any infringement of any Incyte Patent or anyPatent within the Incyte Development IP, Incyte shall have the sole and exclusive right, but not theobligation, to bring, at Incyte’s expense and in its sole control, an appropriate suit or other action against anyPerson engaged in such infringement of such Patent.(e)Infringement of Patents Claiming Incyte Pipeline Assets / Collaborator Pipeline Assets / Incyte CombinationRegimens / Collaborator Combination Regimens. With respect to any infringement of any Patent thatCovers any Incyte Pipeline Asset, Collaborator Pipeline Asset, Incyte Combination Regimen or CollaboratorCombination Regimen, as between the Parties, Incyte shall have the sole and exclusive right, but not theobligation, to bring, at Incyte’s expense and in its sole control, an appropriate suit or other action against anyPerson engaged in such infringement of such Patent.91[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(f)Allocation of Proceeds. If either Party recovers monetary damages or a monetary settlement from any Third Party in a suitor action brought under Section 9.3(b) or any royalties, milestones or other payments from a licenseagreement with a Third Party related to any alleged infringement as to which such Party had a right to bring asuit or other action pursuant to Section 9.3(b), then to the extent such damages or royalties result from theinfringement of Licensed Patents, such recovery (“Infringement Recovery”) shall first be allocated to thereimbursement of any expenses incurred by the Parties in such litigation, action or license negotiations; then,any remaining amounts shall be allocated to Incyte and treated as Net Sales for purposes of this Agreement;provided, however, that if MacroGenics is the party bringing the applicable suit or action, any amountsremaining amounts shall be allocated [**] to MacroGenics and [**] to Incyte. For clarity, with respect to allother infringement suits or actions brought by a Party (e.g., with respect Incyte Patents or Patents within theIncyte Development IP or MacroGenics Development IP), the owning Party shall keep all recoveries.9.4 Patent Term Extensions. The Parties shall consult and cooperate with each other in obtaining patent term extensions,adjustments, or restorations or supplemental protection certificates or their equivalents (each a “Patent Extension” and collectively“Patent Extensions”) in the Territory for the Licensed Patents and Joint Patents to the extent they Cover Licensed Compounds,Licensed Products, or the Monotherapy Regimen; provided that, (a) Incyte shall have the primary right and authority to seek and applyfor Patent Extensions with respect to Licensed Patents and Joint Patents that [**] claim Monoclonal Antibodies, subject to review andcomment by MacroGenics, which Incyte shall consider in good faith; (b) MacroGenics shall have the primary right and authority toseek and apply for Patent Extensions with respect to Licensed Patents and Joint Patents that [**] claim bi- or multi-specific antibodies,subject to review and comment by Incyte, which MacroGenics shall consider in good faith; and (c) the Parties shall discuss in goodfaith and shall mutually agree upon whether to seek and apply for Patent Extensions with respect to any Patents [**] MonoclonalAntibodies and [**]. In the event that a Party does not intend to seek a Patent Extension that is or will become available for a LicensedPatent or Joint Patent, it shall so inform the other Party in writing in sufficient time to permit the other Party to seek such PatentExtension. The Party that does not apply for a Patent Extension hereunder will cooperate fully with the other Party in making suchfilings or actions, including making available all required regulatory data and Information and executing any required authorizations toapply for such Patent Extension. All out-of-pocket expenses incurred in connection with activities of each Party with respect to theLicensed Patent(s) or Joint Patent(s) for which such Party seeks a Patent Extension pursuant to this Section 9.4 shall be entirely borneby such Party.9.5 Infringement of Third Party Rights in the Territory.(a)Notice. In the event that a Third Party makes any claim, gives notice, or brings any suit or other inter-partes proceedingagainst MacroGenics or Incyte, or any of their respective Affiliates or sublicensees (including Collaborators)for infringement or misappropriation of any intellectual property rights of a Third Party arising out of theExploitation of any Licensed Product in the Field (“Third Party Infringement92[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDClaim”), the Party receiving notice of a Third Party Infringement Claim shall promptly notify the other Party.(b)Defense. Subject to Article 14, the Party or its respective Affiliate or sublicensee against which such Third PartyInfringement Claim is brought shall have the sole right to defend such Third Party Infringement Claim.9.6 Patent Oppositions and Other Proceedings.(a)Licensed Patents. If any Licensed Patent or Joint Patent becomes the subject of any proceeding commenced by a ThirdParty within the Territory in connection with an opposition, reexamination request, action for declaratoryjudgment, nullity action, interference, inter-partes review, post-grant review, other patent officeadministrative proceedings or other attack upon the validity, title or enforceability thereof (a “Third PartyPatent Challenge”) (except insofar as such action is a counterclaim to or defense of, or accompanies adefense of, an action for infringement against a Third Party under Section 9.5, in which case the provisionsof Section 9.5 shall govern), the Prosecuting Party as to such Licensed Patent or Joint Patent shall have thediscretion whether to defend and shall control any defense of such Licensed Patent or Joint Patent, at its ownexpense; provided, however, that if the Prosecuting Party, declines or fails to take any action to defend suchThird Party Patent Challenge within [**] of the commencement thereof, then the other Party shall have theright to defend and shall control any defense of such Licensed Patent or Joint Patent, at its own expense.(b)Third Party Patent Rights. Except with respect to any Patents within the [**] or [**] (in which case the provisions ofSection 10.2(j) shall govern), if either Party desires to bring an opposition, reexamination request, action fordeclaratory judgment, nullity action, interference, inter partes review, post grant review, or other patentoffice administrative proceedings or other attack upon the validity, title or enforceability of a Patent owned orControlled by a Third Party and that claims the Licensed Compound or a Licensed Product (eitherspecifically or generically), or the use, manufacture, sale, offer for sale or importation of the LicensedCompound or a Licensed Product (either specifically or generically) (except insofar as such action is acounterclaim to or defense of, or accompanies a defense of, a Third Party’s claim or assertion of infringementunder Section 9.5, in which case the provisions of Section 9.5 shall govern), such Party shall so notify theother Party and the Parties shall promptly confer to determine whether to bring such action or the manner inwhich to settle such action. Each Party shall have the right, but not the obligation, to bring at its own expensesuch action in the Territory, provided that the Parties shall use reasonable efforts as practicable to coordinateand cooperate in bringing such action(s). The Party not bringing an action under this Section 9.6(b) shall beentitled to separate representation in such proceeding by counsel of its own choice and at its own expense,and shall cooperate fully with the Party bringing such action. Any awards or amounts received in bringingany such action shall be first allocated93[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDto reimburse the initiating Party’s expenses in such action, and any remaining amounts shall be allocated between theParties as provided in Section 9.3(f).ARTICLE 10REPRESENTATIONS, WARRANTIES AND COVENANTS10.1 Mutual Representations, Warranties and Covenants. Each of the Parties hereby represents and warrants to the other Party asof the Execution Date and, as applicable, hereinafter covenants that:(a)Organization. It is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction ofits organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver, andperform this Agreement.(b)Binding Agreement. This Agreement is a legal and valid obligation binding upon such Party and enforceable inaccordance with its terms, subject to the effects of bankruptcy, insolvency, or other laws of generalapplication affecting the enforcement of creditor rights, judicial principles affecting the availability of specificperformance, and general principles of equity (whether enforceability is considered a proceeding at law orequity).(c)Authorization. The execution, delivery, and performance of this Agreement by such Party have been duly authorized by allnecessary corporate action and do not conflict with any agreement, obligation, instrument, or understanding,oral or written, to which it is a party or by which it is bound, nor violate any Applicable Law or any order,writ, judgment, injunction, decree, determination, or award of any Governmental Authority presently in effectapplicable to such Party.(d)No Further Approval. It is not aware of any government authorization, consent, approval, license, exemption of or filingor registration with any Governmental Authority under any Applicable Law, currently in effect, necessaryfor, or in connection with, the transactions contemplated by this Agreement or any other agreement orinstrument executed in connection herewith, or for the performance by it of its obligations under thisAgreement and such other agreements (save for Regulatory Approvals and similar authorizations fromGovernmental Authorities necessary for the Exploitation of Licensed Compound and Licensed Products ascontemplated hereunder), except as may be required to obtain clearance of this Agreement under the HSRAct.(e)No Inconsistent Obligations. It is not under any obligation, contractual or otherwise, to any Person that conflicts with or isinconsistent in any material respect with the terms of this Agreement, or that would impede the diligent andcomplete fulfillment of its obligations hereunder.94[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(f)Certain Actions. It shall not take any actions between the Execution Date and the Effective Date that would, or would bereasonably likely to, cause any representations or warranties made by such Party in this Article 10 to beuntrue or inaccurate in any material respect as of the Effective Date.10.2 Additional Representations and Warranties of MacroGenics. MacroGenics represents and warrants as of the ExecutionDate and covenants to Incyte that:(a)To MacroGenics’ Knowledge, there is no actual or threatened infringement or misappropriation of the Licensed Technologyor Label Combination Patents by any Person in the Territory. MacroGenics (or its Affiliates) is the sole andexclusive owner of, or otherwise Controls pursuant to an Existing Third Party License, the LicensedTechnology, Label Combination Patents and the Transferred Documentation. MacroGenics has all rightsnecessary to grant the licenses under the Licensed Technology and Label Combination Patents, and Rights ofReference to Regulatory Documentation that it grants to Incyte hereunder. During the Term, MacroGenicsshall not, and shall cause its Affiliates not to, grant to any Third Party any rights that encumber or conflictwith the rights granted to Incyte hereunder with respect to the Licensed Technology, Label CombinationPatents or Transferred Documentation.(b)The Licensed Patents set forth on Exhibit A, together with the Label Combination Patents, represent all Patents Controlledby MacroGenics (or its Affiliates) that Cover or disclose the Licensed Compound or any Invention necessaryor useful for the Exploitation of the Licensed Compound or Licensed Products in the Territory in the Field asof the Execution Date. The Licensed Patents and Label Combination Patents are free and clear of liens,charges or encumbrances other than licenses granted to Third Parties that are not inconsistent with the rightsand licenses granted to Incyte hereunder. To MacroGenics’ Knowledge, no Third Party has challenged orthreatened in writing to challenge the scope, validity or enforceability of any Licensed Patent or LabelCombination Patents (including, by way of example, through opposition or the institution or written threat ofinstitution of interference, nullity or similar invalidity proceedings before the U.S. Patent and TrademarkOffice or any analogous foreign Governmental Authorities). MacroGenics or its Affiliates have timely paidall filing and renewal fees payable with respect to any Licensed Patents for which MacroGenics controlsprosecution and maintenance, and with respect to all Label Combination Patents. The development of theLicensed Patents and Label Combination Patents has not been funded, in whole or in part, by the U.S.government. To MacroGenics’ Knowledge, as of the Execution Date, the Exploitation of the LicensedCompound as a Monotherapy Regimen does not infringe or misappropriate the intellectual property orproprietary rights of any Third Party in the Territory, [**].(c)The Licensed Know-How is free and clear of liens, charges or encumbrances other than licenses granted to Third Partiesthat are not inconsistent with the rights and95[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDlicenses granted to Incyte hereunder. MacroGenics and its Affiliates have taken commercially reasonable measuresconsistent with industry practices to protect the secrecy, confidentiality and value of all Licensed Know-How thatconstitutes trade secrets under Applicable Law (including requiring all employees, consultants and independentcontractors to execute binding and enforceable agreements requiring all such employees, consultants and independentcontractors to maintain the confidentiality of such Licensed Know-How), and, to MacroGenics’ Knowledge, there hasnot occurred any unauthorized access, use, or disclosure of the Licensed Know-How. The development of the LicensedKnow-How has not been funded, in whole or in part, by the U.S. government.(d)MacroGenics has not received any written notice or threat of any material suit, legal claim, action, proceeding orinvestigation against MacroGenics or any of its Affiliates that relates to the Licensed Technology or LabelCombination Patents, and no judgment or settlement is owed by MacroGenics or any of its Affiliates inconnection with the Licensed Technology or Label Combination Patents.(e)All current and former officers, employees, agents, advisors, consultants, contractors or other representatives ofMacroGenics or any of its Affiliates who are inventors of or have otherwise contributed or are otherwiseexpected to contribute to the creation or development of any Licensed Technology or Label CombinationPatents have or will have executed and delivered to MacroGenics or any such Affiliate, prior to contributingto the creation or development of any Licensed Technology or Label Combination Patents, a valid andenforceable assignment or other agreement regarding the protection of proprietary Information and theassignment to MacroGenics or any such Affiliate of such person’s entire right, title and interest in and to anyLicensed Technology and Label Combination Patents. To MacroGenics’ Knowledge, no current officer,employee, agent, advisor, contractor, consultant or other representative of MacroGenics or any of itsAffiliates is in violation of any term of any assignment or other agreement regarding the assignment,protection, or confidentiality of Licensed Patents, other Licensed Technology, or Label Combination Patents,or of any employment contract or any other contractual obligation relating to the relationship of any suchPerson with MacroGenics or any such Affiliate. Incyte has no obligation to contribute to any remuneration ofany inventor employed or previously employed by MacroGenics or any of its Affiliates in respect of any suchInventions, Information and discoveries and intellectual property rights therein that are so assigned toMacroGenics or its Affiliate(s).(f)MacroGenics has prepared, maintained and retained all Transferred Documentation for the Licensed Compound and theLicensed Products in the Territory pursuant to and in accordance with all Applicable Law, including, asapplicable, GLP. All activities conducted by or on behalf of MacroGenics with respect to LicensedCompound have been conducted in accordance with Applicable Law (including GLP and GMP).96[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(g)To MacroGenics’ Knowledge, other than under the Existing Third Party Licenses and [**], no royalties, milestones, or otherpayments are owed to any Third Party for Patents controlled by such Third Party that are reasonably likely tobe necessary or useful in order to Exploit the Licensed Compound or Licensed Products.(h)Neither MacroGenics nor any of its Affiliates has been debarred by the FDA, is the subject of a conviction described inSection 306 of the FFDCA or is subject to any similar sanction of other Governmental Authorities in theTerritory, and neither MacroGenics nor any of its Affiliates has used, in any capacity, any Person who eitherhas been debarred by the FDA, is the subject of a conviction described in Section 306 of the FFDCA or issubject to any such similar sanction. MacroGenics shall not engage, and shall ensure that its licensees andRepresentatives shall not engage in any capacity in connection with this Agreement or any ancillaryagreements, any Person who either has been debarred by the FDA, is the subject of a conviction described inSection 306 of the FFDCA or is subject to any such similar sanction. MacroGenics shall inform Incyte inwriting promptly if it or any Person engaged by MacroGenics or any of its Affiliates who is performingservices under this Agreement or any ancillary agreements is debarred or is the subject of a convictiondescribed in Section 306 of the FFDCA, or if any action, suit, claim, investigation or legal or administrativeproceeding is pending or, to MacroGenics’ Knowledge, is threatened, relating to the debarment or convictionof MacroGenics, any of its Affiliates or any such Person performing services hereunder or thereunder.(i)MacroGenics is not subject to any agreement with any Third Party which would limit or restrict its ability to perform itsobligations under this Agreement in any material respect.(j)MacroGenics covenants and agrees, and shall cause its Affiliates and any sublicensees (subject to the remainder of thissubsection (j)) to covenant and agree, not to directly or indirectly challenge the validity, enforceability,patentability, or inventorship of any claim of any Patent within the [**] or the [**], except in response to aclaim of infringement of the Patent within the [**] or the [**], as applicable. MacroGenics further agrees notto provide assistance or support, financial or otherwise, to any Third Party in bringing any such challenge tothe infringement, validity, enforceability, patentability, or inventorship of any claim of any Patent within the[**] or the [**]. The foregoing restrictions with respect to the [**] shall, subject to Section 10.3(e), applyuntil, upon inquiry by MacroGenics and confirmation by Incyte, the existence and continued effectiveness ofthe sublicense granted to MacroGenics with respect to the [**] and/or any [**] thereto have terminated,changed or been amended otherwise. For clarity, the foregoing restrictions shall apply only to those [**] thathave received a [**] or [**], as applicable; provided further, that to the extent a Third Party who [**] otherthan [**] or [**] within the [**] or the [**], the [**] to such Third Party under such other intellectual propertyshall not be construed as an [**] under this Section 10.2(j).97[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED10.3 Additional Representations and Warranties of Incyte. Incyte represents and warrants as of the Execution Date andcovenants to MacroGenics that:(a)Incyte has all rights necessary to grant to MacroGenics the licenses under the Incyte Patents and Rights of Reference toRegulatory Documentation related to the Licensed Compound or Licensed Products that it grants toMacroGenics hereunder.(b)Neither Incyte nor any of its Affiliates or any Collaborators, has been debarred by the FDA, is the subject of a convictiondescribed in Section 306 of the FFDCA or is subject to any similar sanction of other GovernmentalAuthorities in the Territory, and neither Incyte nor any of its Affiliates or any Collaborators has used, in anycapacity, any Person who either has been debarred by the FDA, is the subject of a conviction described inSection 306 of the FFDCA or is subject to any such similar sanction. Incyte shall not engage, and shallensure that its Affiliates, Representatives and Collaborators shall not engage, in any capacity in connectionwith this Agreement or any ancillary agreements, any Person who either has been debarred by the FDA, isthe subject of a conviction described in Section 306 of the FFDCA or is subject to any such similar sanction.Incyte shall inform MacroGenics in writing promptly if it or any Person engaged by Incyte or any of itsAffiliates or Collaborators who is performing services under this Agreement or any ancillary agreements isdebarred or is the subject of a conviction described in Section 306 of the FFDCA, or if any action, suit,claim, investigation or legal or administrative proceeding is pending or, to Incyte’s Knowledge, is threatened,relating to the debarment or conviction of Incyte, any of its Affiliates or Collaborators performing serviceshereunder or thereunder.(c)Incyte is not subject to any agreement with any Third Party which would limit or restrict its ability to perform its obligationsunder this Agreement in any material respect.(d)To Incyte’s Knowledge, [**], no royalties, milestones, or other payments are owed to any Third Party for Patents controlledby such Third Party that are reasonably likely to be necessary or useful in order to Exploit the LicensedCompound or Licensed Products.10.4 No Other Representations or Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 10, THEPARTIES MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS ORIMPLIED, WRITTEN OR ORAL, IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACHPARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, INCLUDING ANY EXPRESS OR IMPLIEDWARRANTY OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OFNON-INFRINGEMENT OR AS TO THE VALIDITY OF ANY PATENTS. EACH PARTY HEREBY DISCLAIMS ANYREPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OFANY COMPOUND OR PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL98[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDOR THAT ANY PARTICULAR SALES LEVEL WITH RESPECT TO ANY COMPOUND OR PRODUCT WILL BEACHIEVED.ARTICLE 11CONFIDENTIALITY11.1 Nondisclosure. Each Party agrees that, during the Term and for a period of [**] thereafter, the Party receiving ConfidentialInformation (the “Receiving Party”) of the other Party (the “Disclosing Party”) shall (a) maintain in confidence such ConfidentialInformation using not less than the efforts such Receiving Party uses to maintain in confidence its own confidential or proprietaryInformation of similar kind and value, (b) not disclose such Confidential Information to any Third Party without the prior writtenconsent of the Disclosing Party, except for disclosures expressly permitted below, and (c) not use such Confidential Information forany purpose except those permitted by this Agreement (it being understood that this Section 11.1 shall not create or imply any rights orlicenses not expressly granted under this Agreement). Notwithstanding anything to the contrary in the foregoing, the obligations ofconfidentiality and non-use with respect to any trade secret within such Confidential Information shall survive such [**] period for solong as such Confidential Information remains protected as a trade secret under Applicable Law.11.2 Exceptions. The obligations in Section 11.1 shall not apply with respect to any portion of the Confidential Information that theReceiving Party can show by competent, written evidence:(a)is publicly disclosed by the Disclosing Party, either before or after it is disclosed to the Receiving Party hereunder;(b)is known to the Receiving Party or any of its Affiliates, without any obligation to keep it confidential or any restriction on itsuse, prior to disclosure to the Receiving Party or any of its Affiliates by the Disclosing Party;(c)is subsequently disclosed to the Receiving Party or any of its Affiliates on a non-confidential basis by a Third Party that tothe Receiving Party’s Knowledge is not bound by a duty of confidentiality or restriction on its use;(d)is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party or any of its Affiliates,generally known or available, either before or after it is disclosed to the Receiving Party by the DisclosingParty;(e)is independently discovered or developed by or on behalf of the Receiving Party or any of its Affiliates without the use of orreference to the Confidential Information belonging to the Disclosing Party; or(f)is the subject of written permission to disclose provided by the Disclosing Party.11.3 Authorized Disclosure. The Receiving Party may disclose Confidential Information belonging to the Disclosing Party only tothe extent such disclosure is reasonably necessary in the following instances:99[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(a)filing, prosecuting, maintaining, enforcing or defending Patents as permitted by this Agreement;(b)as reasonably required in generating Regulatory Documentation and obtaining Regulatory Approvals;(c)prosecuting or defending litigation, including responding to a subpoena in a Third Party litigation;(d)complying with Applicable Law or court or administrative orders;(e)complying with any obligation under this Agreement;(f)in communications with existing or bona fide prospective acquirers, merger partners, financing sources, investment bankers,lenders or investors, and consultants and advisors of the Receiving Party in connection with transactions orbona fide prospective transactions with the foregoing, in each case on a need to know basis and underappropriate confidentiality provisions substantially equivalent to those of this Agreement; provided, however,that the Receiving Party shall remain responsible for any violation of such confidentiality provisions by anyPerson receiving such Confidential Information; or(g)to its Affiliates, sublicensees or prospective sublicensees, subcontractors or prospective subcontractors, consultants, agentsand advisors on a “need-to-know” basis in order for the Receiving Party to exercise its rights or fulfill itsobligations under this Agreement, each of whom prior to disclosure must be bound by written obligations ofconfidentiality and restrictions on use of such Confidential Information that are no less restrictive than thoseset forth in this Article 11; provided, however, that, in each of the above situations, the Receiving Party shallremain responsible for any failure by any Person who receives Confidential Information pursuant to thisSection 11.3(g) to treat such Confidential Information as required under this Article 11.If and whenever any Confidential Information is disclosed in accordance with this Section 11.3, such disclosure shall not causeany such information to cease to be Confidential Information except to the extent that such disclosure results in a publicdisclosure of such information (other than by breach of this Agreement). Notwithstanding the foregoing, in the event a Party isrequired to make a disclosure of the other Party’s Confidential Information pursuant to Section 11.3(a) through Section 11.3(e),it will, except where impracticable or not legally permitted, give reasonable advance notice to the other Party of such disclosureand use not less than the same efforts to secure confidential treatment of such information as it would to protect its ownconfidential information from disclosure.11.4 Terms of this Agreement. The Parties acknowledge that this Agreement and all of the respective terms of this Agreement shallbe treated as Confidential Information of both Parties, subject to the provisions of Section 11.3(f), 11.3(g) and 11.6.100[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED11.5 Publicity. Without limiting the Parties’ rights and obligations pursuant to Section 11.9 with respect to publications:(a)Each Party shall make a public announcement of the execution of this Agreement in the form attached as Exhibit D to thisAgreement, which shall be issued at a time to be mutually agreed by the Parties, but no later than [**] afterthe Execution Date. Except as required to comply with Applicable Law or as set forth in subsection (b), eachParty agrees not to issue any other press release or other public statement disclosing other information relatingto this Agreement or the transactions contemplated hereby without the prior written consent of the otherParty, such consent not to be unreasonably withheld, delayed or conditioned.(b)The Parties acknowledge the importance of supporting each other’s efforts to publicly disclose results and significantdevelopments regarding the Licensed Products and other activities in connection with this Agreement thatmay include information that is not otherwise permitted to be disclosed under this Article 11, and that may bebeyond what is required by Applicable Law, but in each case consistent with the need to keep investorsinformed regarding such Party’s business in accordance with customary investor relations, and each Partymay request to the right to make such disclosures from time to time. Such disclosures may includeachievement of milestones, significant events in the Development and regulatory process, Commercializationactivities and the like. Except for the initial press release(s) described in subsection (a), whenever a Party (the“Requesting Party”) desires to make any such public disclosure, it shall first notify the other Party (the“Cooperating Party”) of such planned press release or public announcement and provide a draft for reviewat least [**] in advance of issuing such press release or making such public announcement (or, with respectto press releases and public announcements that are required by Applicable Law, or by regulation or rule ofany public stock exchange (including NASDAQ), with as much advance notice as possible under thecircumstances if it is not possible to provide notice at least [**] in advance). The Requesting Party andCooperating Party will discuss such proposed public disclosure in good faith. Unless otherwise permittedpursuant to Section 11.6 or required by Applicable Law, or by regulation or rule of any public stockexchange (including NASDAQ), the Requesting Party will not issue such press release or make such publicannouncement without the prior written consent of the Cooperating Party, not to be unreasonably withheld,conditioned or delayed, provided that the Requesting Party may issue such press release or make such publicannouncement if: (i) the contents of such press release or public announcement have previously been madepublic other than through a breach of this Agreement by the Requesting Party, (ii) such press release orpublic announcement does not materially differ from, or relies solely on facts publicly disclosed in, apreviously-approved press release or other publicly available information, and (iii) the Requesting Partynotifies the Cooperating Party reasonably in advance of issuance. The principles to be observed indisclosures pursuant to this Section 11.5(b) shall include accuracy, compliance with Applicable Law andregulatory guidance documents, reasonable sensitivity to101[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDpotential negative reactions of the FDA (and its foreign counterparts), and the need to protect competitively sensitiveinformation regarding Licensed Products and the legal obligations and responsibility to keep investors informedregarding the Requesting Party’s business.11.6 Securities Filings. Notwithstanding anything to the contrary in this Article 11, in the event either Party proposes to file with theSecurities and Exchange Commission or the securities regulators of any state or other jurisdiction a registration statement or any otherdisclosure document that describes or refers to the terms and conditions of this Agreement or any related agreements between theParties, or requires the filing of this Agreement as an exhibit to such registration, statement or disclosure document, such Party shallnotify the other Party of such intention and shall provide the other Party with a copy of relevant portions of the proposed filing at least[**] prior to such filing (and any revisions to such portions of the proposed filing a reasonable time prior to the filing thereof),including any exhibits thereto that refer to the other Party or the terms and conditions of this Agreement or any related agreementsbetween the Parties. The Party making such filing shall cooperate in good faith with the other Party to obtain confidential treatment ofthe terms and conditions of this Agreement or any related agreements between the Parties that the other Party reasonably requests bekept confidential or otherwise afforded confidential treatment, and shall only disclose Confidential Information that it is advised byoutside counsel is legally required to be disclosed. Each Party acknowledges that the other Party may be required by securitiesregulators, including the Securities and Exchange Commission, or advised by such other Party’s outside counsel that the financialterms, including the milestone amounts and/or royalty rates must be included in such filings. No notice shall be required under thisSection 11.6 if the description of or reference to this Agreement or a related agreement between the Parties contained in the proposedfiling has been included in any previous filing made by either Party in accordance with this Section 11.6 or otherwise approved by theother Party.11.7 Relationship to Confidentiality Agreement. This Agreement supersedes the Prior CDA; provided, however, that all“Confidential Information” disclosed or received by the Parties and their Affiliates thereunder shall be deemed ConfidentialInformation hereunder and shall be subject to the terms and conditions of this Agreement.11.8 Equitable Relief. Given the nature of the Confidential Information and the competitive damage that could result to a Party uponunauthorized disclosure, use or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damagesmay not be a sufficient remedy for any breach of this Article 11. In addition to all other remedies, a Party shall be entitled to seekspecific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 11.11.9 Publications. The publishing Party shall have the right to publish results of all Clinical Studies and Development activitiesconducted pursuant to this Agreement, (a) with respect to Incyte as the publishing Party, in connection with any Incyte Pipeline Asset,Collaborator Pipeline Asset, Incyte Combination Regimen, Collaborator Combination Regimen or Monotherapy Regimen and anyother activity Incyte is permitted to conduct under this Agreement related to the Licensed Compound or a Licensed Product and (b)with respect to MacroGenics as the publishing Party, in102[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDconnection with any MacroGenics Pipeline Asset or MacroGenics Combination Regimen (and including, for clarity, any MacroGenicsCombination Study (including translational data related thereto, pre-clinical data and other data related to Development activitiesconducted pursuant to this Agreement, but excluding pre-clinical data that is solely related to the Licensed Compound after the StudyTransition Date), and the Ongoing Clinical Study (prior to the Study Transition Date)); provided, in each case ((a) and (b)) however,that the reviewing Party shall have the right to review all proposed publications with respect to the Licensed Compound or LicensedProducts (including as a component of a Monotherapy Regimen or a MacroGenics Combination Regimen) prior to submission of suchpublication, for the purposes of identifying any relevant intellectual property or Confidential Information belonging in whole or in partto the reviewing Party and recommending any changes the reviewing Party reasonably believes are necessary to preserve any suchintellectual property or Confidential Information. The publishing Party shall provide reviewing Party with a copy of the applicableproposed abstract, manuscript, or presentation no less than [**] ([**] in the case of abstracts) prior to its intended submission forpublication. The reviewing Party shall respond in writing promptly and in no event later than [**] after receipt of the proposed materialwith one or more of the following: (i) comments on the proposed material, which the publishing Party will consider in good faith but isnot obligated to accept ([**], for any such publications made or proposed to be made before the earlier of Licensed CompoundApproval or [**] after the Effective Date, to the extent [**] to the proposed material (x) [**] or [**] and (y) may be incorporatedconsistent with the [**], MacroGenics shall [**]); or (ii) any concerns regarding patentability or protection of its ConfidentialInformation. In the event of concern over Patent protection, the publishing Party agrees not to submit such publication or to make suchpresentation that contains such information until the reviewing Party is given a reasonable period of time, and in no event less than[**], to seek Patent protection for any material in such publication or presentation which it believes is patentable. Subject to Section11.3, any Confidential Information of the reviewing Party shall, absent the prior written consent of the reviewing Party, be removed bythe publishing Party from such publication or presentation. In the case of conference abstracts and other rapid scientificcommunications, the Parties will use reasonable efforts to complete the review process in [**] or less.11.10 Additional Obligations Relating to Competing Antibodies.(a)In the event that MacroGenics or an Affiliate [**] (i) [**] owned or Controlled by MacroGenics (or its Affiliates); or (ii) [**]by MacroGenics or an Affiliate, in each case (of (i) and (ii)) other than Licensed Compound, MacroGenicsshall and shall cause its Affiliates to: (x) adopt reasonable written procedures to prevent any of MacroGenics’Representatives (excluding any MacroGenics [**] or [**], and [**] or [**], it being understood that suchemployees are otherwise subject to the applicable confidentiality obligations under this Agreement) involvedin conducting such Clinical Studies or Commercialization from accessing or using any ConfidentialInformation of Incyte or its Affiliates or sublicensees, or any of their commercially-sensitive information orpricing information relating to the Licensed Compound or Licensed Products and (y) require suchRepresentatives to [**] and [**] between MacroGenics and Incyte under this Agreement (including JointCommittee meetings) and [**] to the Licensed Compound or any Licensed Product.103[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(b)In the event that Incyte or an Affiliate directly or indirectly [**], in each case which [**] or [**] (e.g. [**]), Incyte shall andshall cause its Affiliates to: (x) adopt reasonable written procedures to prevent any of Incyte’sRepresentatives ([**] or [**], and [**], it being understood that such employees are otherwise subject to theapplicable confidentiality obligations under this Agreement) involved in conducting such Clinical Studies orCommercialization from accessing or using any Confidential Information of MacroGenics or its Affiliates orsublicensees, or any of their commercially-sensitive information or pricing information relating to theMacroGenics Pipeline Asset and (y) require such Representatives to [**] and [**] between MacroGenicsand Incyte under this Agreement (including Joint Committee meetings) and [**] to the MacroGenics PipelineAsset.ARTICLE 12TERM AND TERMINATION12.1 Term. This Agreement shall become effective as of the Execution Date and, unless earlier terminated pursuant to this Article 12,shall continue in full force and effect as long as Incyte continues to Exploit the Licensed Compound or Licensed Products inaccordance with the terms and conditions of this Agreement (the “Term”). The provisions of Article 1 (Definitions), Article 10(Representations, Warranties and Covenants), Article 11 (Confidentiality), Article 13 (Dispute Resolution), Article 14(Indemnification) and Article 15 (Miscellaneous), and Section 12.3 (Termination for Material Breach) and Section 12.7 (HSR Filing;Termination Upon HSR Denial), shall become effective on the Execution Date; the other provisions of this Agreement shall notbecome effective until the Effective Date.12.2 Unilateral Termination by Incyte. Incyte shall have the right to terminate this Agreement in its entirety, or on a LicensedProduct-by-Licensed Product basis, at any time after the Execution Date, for any or no reason, upon providing [**] prior written noticeto MacroGenics.12.3 Termination for Material Breach. Either Party (the “Terminating Party”) may terminate this Agreement in its entirety, or ona country-by-country and Licensed Product-by-Licensed Product basis, in the event the other Party (the “Breaching Party”) hasmaterially breached this Agreement, and such material breach has not been cured within [**] after receipt of written notice of suchbreach by the Breaching Party from the Terminating Party (the “Cure Period”). The written notice describing the alleged materialbreach shall provide sufficient detail to put the Breaching Party on notice of such material breach. Any termination of this Agreementpursuant to this Section 12.3 shall become effective at the end of the Cure Period, unless the Breaching Party has cured any suchmaterial breach prior to the expiration of such Cure Period (or, if such material breach is not reasonably able to be cured within theCure Period, the Breaching Party has notified the Terminating Party of its plan for curing such material breach, has commenced andsustained its efforts to cure such material breach during the Cure Period and does cure such material breach within [**] after the end ofthe Cure Period). The right of either Party to terminate this Agreement as provided in this Section 12.3 shall not be affected in any wayby such Party’s waiver of or failure to take action with respect to any previous breach under this Agreement.104[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED12.4 Termination by Incyte for Safety Reasons. Incyte shall have the right to terminate this Agreement, at any time after theEffective Date at any time upon providing [**] prior written notice to MacroGenics: (a) if [**] responsible for Incyte’s [**] in goodfaith that the [**] of the Licensed Product is such that the Licensed Product cannot continue to be Developed or administered topatients safely; or (b) upon the occurrence of [**] serious safety-related events related to the use of the Licensed Product that causeIncyte [**] safety [**] of the Licensed Product [**] of the Licensed Products.12.5 Termination for Patent Challenge. MacroGenics may terminate this Agreement with respect to a Licensed Product (or thisAgreement in its entirety if such Licensed Product is the only Product for which this Agreement is applicable), if Incyte or any of itsAffiliates directly or indirectly disputes, or assists any Third Party to dispute, the validity of any granted Patent within the LicensedPatents in a litigation or other court proceeding with respect to such Licensed Product; provided, however, MacroGenicsacknowledges and agrees that nothing in this Section 12.5 prevents Incyte from taking any of the actions referred to in this Section12.5 and, provided further that MacroGenics shall not have the right to terminate if Incyte:(a)opposes, or assists any Third Party to oppose, the grant of a Patent pursuant to any application in relation to the LicensedPatents in an administrative proceeding, such as a patent re-examination, inter-partes review, or other postgrant proceeding or opposition;(b)asserts invalidity as a defense in any court proceeding brought by MacroGenics, its Affiliates, sublicensees, successors ordesignees asserting infringement of a Licensed Patent; and/or(c)either (i) acquires a Third Party that has an existing challenge, whether in a court or administrative proceeding, against aLicensed Patent or (ii) licenses a product for which the licensor has an existing challenge, whether in a courtor administrative proceeding, against a Licensed Patent.12.6 Termination for Bankruptcy.(a)Either Party may terminate this Agreement in its entirety upon providing written notice to the other Party on or after the timethat such other Party makes a general assignment for the benefit of creditors, files an insolvency petition inbankruptcy, petitions for or acquiesces in the appointment of any receiver, trustee or similar officer toliquidate or conserve its business or any substantial part of its assets, commences under the laws of anyjurisdiction any proceeding involving its insolvency, bankruptcy, reorganization, adjustment of debt,dissolution, liquidation or any other similar proceeding for the release of financially distressed debtors, orbecomes a party to any proceeding or action of the type described above (each, an “Insolvency Event”), andsuch proceeding or action remains un-dismissed or un-stayed for a period of more than [**].105[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(b)All rights and licenses granted under or pursuant to this Agreement, including, for the avoidance of doubt, the licensesgranted to Incyte pursuant to Section 3.1, are, and shall otherwise be deemed to be, for purposes of Section365(n) of Title 11 of the U.S. Code (“Section 365(n)”) and other similar laws in any jurisdiction outside theU.S. (collectively, the “Bankruptcy Laws”), licenses of rights to “intellectual property” as defined under theBankruptcy Laws. Upon the occurrence of any Insolvency Event with respect to a Party (the “InsolventParty”), the Insolvent Party agrees that the other Party (the “Non-Insolvent Party”), as licensee of suchrights under this Agreement, shall retain and may fully exercise all of its rights and elections under theBankruptcy Laws. Further, each Party agrees and acknowledges that all payments hereunder, other than theupfront payment pursuant to Section 8.1, milestone payments pursuant to Section 8.2 the royalty paymentspursuant to Section 8.3, and the payments pursuant to Section 8.10 do not constitute royalties within themeaning of Section 365(n) or relate to licenses of intellectual property hereunder. Each Party shall, during theterm of this Agreement, create and maintain current copies or, if not amenable to copying, detaileddescriptions or other appropriate embodiments, to the extent feasible, of all such intellectual property(Licensed Technology in the case of MacroGenics and Incyte Technology in the case of Incyte). Each Partyagrees and acknowledges that “embodiments” of intellectual property within the meaning of Section 365(n)include laboratory notebooks, cell lines, product samples and inventory, research studies and data,Regulatory Approvals and Regulatory Documentation in each case to the extent related to the LicensedCompound and Licensed Products. If: (i) a case is commenced during the Term by or against a Party underthe Bankruptcy Laws, (ii) this Agreement is rejected as provided for under the Bankruptcy Laws, and (iii)the Non-Insolvent Party elects to retain its rights hereunder as provided for under the Bankruptcy Laws, thenthe Insolvent Party (in any capacity, including debtor-in-possession) and its successors and assigns (includinga Title 11 trustee), shall (x) provide to the Non-Insolvent Party immediately upon the Non-Insolvent Party’swritten request copies of all such intellectual property (including embodiments thereof) held by the InsolventParty and such successors and assigns, or otherwise available to them, and (y) not interfere with the Non-Insolvent Party’s rights under this Agreement, or any related agreements between the Parties, to suchintellectual property (including such embodiments), including any right to obtain such intellectual property(or such embodiments) from another entity, to the extent provided in the Bankruptcy Laws. Whenever theInsolvent Party or any of its successors or assigns provides to the Non-Insolvent Party any of the intellectualproperty licensed hereunder (or any embodiment thereof) pursuant to this Section 12.6(b), the Non-InsolventParty shall have the right to perform the Insolvent Party’s obligations hereunder with respect to suchintellectual property, but neither such provision nor such performance by the Non-Insolvent Party shallrelease the Insolvent Party from liability resulting from rejection of the license or the failure to perform suchobligations. All rights, powers and remedies of the Non-Insolvent Party as provided herein are in addition toand not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or inequity (including the Bankruptcy Laws) in the event of the106[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDcommencement of a case by or against a Party under the Bankruptcy Laws. In particular, it is the intention andunderstanding of the Parties to this Agreement that the rights granted to the Parties under this Section 12.6 are essentialto the Parties’ respective businesses and the Parties acknowledge that damages are not an adequate remedy. The Partiesagree that they intend the following rights to extend to the maximum extent permitted by Applicable Law, and to beenforceable under Section 365(n): (A) the right of access to any intellectual property (including embodiments thereof)of the Insolvent Party, or any Third Party with whom the Insolvent Party contracts to perform an obligation of theInsolvent Party under this Agreement, and, in the case of the Third Party, which is necessary for the Exploitation of theLicensed Compound or Licensed Products; and (B) the right to contract directly with any Third Party to complete thecontracted work upon failure of the Insolvent Party to comply with its applicable obligations.12.7 HSR Filing; Termination Upon HSR Denial. If Incyte or MacroGenics determines that an HSR Filing is necessary, it shall sonotify the other Party, and each Party shall, within [**] of the Execution Date (or such later time as may be agreed to in writing by theParties), file with the U.S. Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice, and/or withequivalent foreign authorities, any HSR Filing required of it under the HSR Act in the reasonable opinion of either Party with respectto the transactions contemplated hereby. Each Party will use reasonable efforts to do, or cause to be done, all things necessary, properand advisable to, as promptly as practicable, take all actions necessary to make the filings required of such Party or its Affiliates underthe HSR Act. The Parties shall cooperate with one another to the extent necessary in the preparation of any such HSR Filing. EachParty shall be responsible for its own costs, expenses, and filing fees associated with any HSR Filing; provided, however, that [**]shall be solely responsible for any [**] (other than [**] that may be incurred as a result of [**] on the part of [**]) required to be [**]in connection with [**]. If the Parties make an HSR Filing hereunder, then this Agreement shall terminate (a) at the election of eitherParty, immediately upon notice to the other Party, if the U.S. Federal Trade Commission or the U.S. Department of Justice, or anequivalent authority in the European Union, seeks a preliminary injunction under the Antitrust Laws against Incyte and MacroGenicsto enjoin the transactions contemplated by this Agreement; or (b) at the election of either Party, immediately upon notice to the otherParty, in the event that the HSR Clearance Date shall not have occurred on or prior to [**] after the effective date of the HSR Filing. Inthe event of such termination, this Agreement shall be of no further force and effect.12.8 Effects of Termination. All of the following effects of termination are in addition to the other rights and remedies that may beavailable to either of the Parties under this Agreement and shall not be construed to limit any such rights or remedies. In the event oftermination of this Agreement (other than in connection with Section 12.7 and except as otherwise noted below), the followingprovisions of this Section 12.8 shall apply from and after the effective date of termination:(a)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, without limiting the effect thatsuch termination shall have on any provisions of this Agreement, other than those provisions that thisAgreement expressly provides shall survive such termination, all rights and licenses granted herein to Incyteshall107[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDterminate, all such previously licensed rights shall revert to MacroGenics, and Incyte shall cease any and allDevelopment, Manufacturing, and Commercialization activities with respect to the Licensed Compound and LicensedProducts (to the extent such activities were being performed using such rights and licenses) as soon as is reasonablypracticable under Applicable Law.(b)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6 (in which events all paymentobligations hereunder shall survive), all payment obligations hereunder shall terminate, other than those thatare accrued and unpaid as of the effective date of such termination and royalties that become due underSection 8.3 with respect to Net Sales of the Licensed Compound and all Licensed Products made followingthe effective date of termination to the extent permitted under Section 12.8(f).(c)The Parties will enter into good-faith discussions with respect to any transition or conveyance of assets, rights, access tomaterials, or processes that are not otherwise transitioned pursuant to this Section 12.8 but may be necessaryfor the Parties’ future development and commercialization activities with respect to the Licensed Compoundand Licensed Products.(d)Solely in the event of a Qualifying Termination, Incyte hereby grants to MacroGenics, effective as of the effective date ofsuch termination, a non-exclusive, transferable, fully paid-up, royalty-free, sublicenseable license in the Fieldin the Territory, under the Incyte Technology that Covers the Exploitation of, or is incorporated into, theLicensed Compound or any Licensed Product at the time of termination, solely to Exploit the LicensedCompound or Monotherapy Regimen; provided, however, that MacroGenics shall reimburse Incyte for anyamounts paid by Incyte to any Third Party in connection with MacroGenics’ exercise of its right to obtainsuch license (it being understood that MacroGenics shall have the right to decline to accept such license as tosome or all of the rights in this subsection (d) if MacroGenics does not wish to assume the related Third Partyobligation); provided further, that MacroGenics shall have the right, on a license-by-license basis, toterminate its license with respect to any Incyte Technology licensed under such Third Party license at anytime subject to any limitations on termination rights and any notice and ongoing payment obligations underthe applicable Third Party license. Notwithstanding the foregoing, any rights, licenses, or sublicenses grantedby Incyte under the Incyte Technology under this subsection (d) shall continue only to the extent and onlyfor so long as Incyte continues to have the contractual right under the applicable Third Party license (the“Upstream License”) to extend such rights, licenses, or sublicenses to MacroGenics. Any assignee ofIncyte’s rights under the applicable Upstream License will be required to take such assignment subject to therights of MacroGenics under this subsection (d).(e)Wind-down.108[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(i)The JSC shall coordinate the wind-down of the Parties’ activities under this Agreement.(ii)Solely in the event of a Qualifying Termination: (A) Incyte, as soon as reasonably practicable after the effectivedate of such termination, upon MacroGenics’ written request, shall provide to MacroGenics, as applicable andto the extent permitted under any applicable Third Party contract, any material Information, including copies ofall Clinical Study data and results, arising out of the performance by or on behalf of Incyte of activities underthis Agreement and Controlled by Incyte to the extent solely relating to the Licensed Compound and anyLicensed Products, including control of, and all Information relating to, the Global Safety Database; and (B)Incyte will reasonably cooperate with MacroGenics to provide a transfer of such material Information.(iii)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, beginning on the datethat notice of any termination of this Agreement is given by the terminating Party, (A) Incyte shall have nofurther right or obligation to commence or provide funding for any Clinical Study of the Licensed Compound,whether or not such Clinical Study had been Initiated on or before such date of notice of termination of thisAgreement, except that: (x) if [**]; and (y) if [**] following the effective date of such termination or [**],whichever is earlier; and (B) if [**] as described in (y) above, [**] (except to the extent otherwise providedabove, [**]).(iv)Solely in the event of a Qualifying Termination, at MacroGenics’ request, but without expanding the provisionsof Section 12.8(d) with respect to any Upstream License, Incyte shall use reasonable efforts to (x) assign toMacroGenics any and all Third Party agreements to which Incyte or any of its Affiliates are a party that relateexclusively to any Development, Commercialization or Manufacturing activities conducted in connection withthe Licensed Compound or any Licensed Products prior to such termination (including agreements relating tothe sourcing and Manufacture of the Licensed Compound or any Licensed Products or, to the extent the FirstCommercial Sale of the Licensed Compound or any Licensed Product has occurred, for sale, promotion,distribution, or use of such Licensed Compound or Licensed Product), or (y) if such assignment is not permittedunder the relevant Third Party agreement: (1) grant to MacroGenics other rights to provide to MacroGenics thebenefit of such non-assignable agreement, at MacroGenics’ expense, to the extent permitted under the terms ofsuch non-assignable agreement; or (2) to the extent such grant is not permitted under the terms of such non-assignable agreement, discuss with MacroGenics in good faith an alternative solution to enable MacroGenics toreceive, at MacroGenics’ expense, the benefit of the terms of such non-assignable agreement.109[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(v)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, in the event theLicensed Compound or Licensed Product are Manufactured by Incyte or its Affiliate or an Approved CMO,then, upon the written request of MacroGenics, Incyte shall supply MacroGenics with such LicensedCompound and Licensed Products and/or materials at a commercially reasonable price, until Incyte (or itsAffiliate or Approved CMO) elects to cease Manufacturing of the Licensed Compound and Licensed Products,in which case: (x) Incyte will provide [**] prior notice to MacroGenics of the election to cease suchManufacture, and (y) if necessary and at MacroGenics’ cost and expense, Incyte will provide reasonableamounts of technical assistance reasonably necessary to assist MacroGenics in the start-up of Manufacturing ofsuch the Licensed Compound and Licensed Products and/or materials, and/or obtaining Regulatory Approval ofthe Licensed Compound and Licensed Products.(f)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, at MacroGenics’ request, Incyteshall transfer to MacroGenics, and [**], any Licensed Compound or Licensed Product held by Incyte that hasnot been sold or used by Incyte within [**] following such termination, [**], with respect to such LicensedCompound and Licensed Products.(g)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, Incyte shall (i) transfer toMacroGenics any and all Regulatory Documentation and safety data Controlled by Incyte on the effectivedate of termination, to the extent such information relates solely to any Licensed Compound, MonotherapyRegimen, Licensed Products and, if applicable pursuant to Sections 5.8(a) or 5.8(c), MacroGenicsCombination Regimens, (ii) transfer to MacroGenics any and all other related Know-How Controlled byIncyte on the effective date of termination, to the extent such Know-How relates solely to any LicensedCompound, Monotherapy Regimen or Licensed Products and (iii) upon MacroGenics’ request, provide aRight of Reference to any Regulatory Documentation Controlled by Incyte on the effective date oftermination, to the extent such Regulatory Documentation is necessary for MacroGenics or its licensees toDevelop and/or Commercialize the Licensed Compound and, if applicable pursuant to Sections 5.8(a) or5.8(c), MacroGenics Combination Regimens, and has not already been transferred to MacroGenicshereunder. MacroGenics shall [**] and [**] in order to complete the activities pursuant to this subsection (g),within [**] after [**] of any [**].(h)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, Incyte shall return to MacroGenicsall Licensed Know-How, including Transferred Documentation and Regulatory Documentation, previouslyprovided to Incyte by or on behalf of MacroGenics.(i)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6 (in which case Incyte’s rights withrespect to preparation, filing, prosecution,110[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDmaintenance and enforcement activities under Article 9 with respect to Licensed Patents shall survive termination),MacroGenics shall have the right to assume all preparation, filing, prosecution, maintenance and enforcement activitiesunder Article 9 with respect to Licensed Patents as to which Incyte has assumed the right and authority to prepare, file,prosecute, maintain or enforce; provided that MacroGenics shall notify Incyte in writing at least [**] prior to theeffective date of termination of this Agreement of those Licensed Patents for which MacroGenics wishes to assumesuch activities. During the period between delivery of such notice by MacroGenics and the effective date oftermination, the Parties will discuss the list of Licensed Patents for which MacroGenics wishes to assume suchactivities, and following such discussion Incyte shall be free to continue, abandon or terminate without liability allpreparation, filing, prosecution, maintenance and enforcement activities under Article 9 with respect to Licensed Patents(or the applicable activities) that are not included in such notice. Incyte will cooperate with MacroGenics and, ifrequested by MacroGenics, provide MacroGenics with reasonable assistance at MacroGenics’ cost and expense, withthe preparation, filing, prosecution, maintenance, and enforcement activities with respect to such Licensed Patents. Inthe event MacroGenics assumes any enforcement activities being conducted by Incyte prior to termination of thisAgreement, then any amount received by MacroGenics in connection with a settlement, by award of a court, orpursuant to another dispute resolution with respect to such assumed activities shall first be used to reimburse the Partiesfor their respective costs incurred in connection with such action (whether before or after the effective date oftermination), and any remaining amount shall be (i) allocated [**] to MacroGenics and [**] to Incyte to the extent theamount relates to infringing activity that occurred prior to the effective date of termination and (ii) retained [**] byMacroGenics to the extent the amount relates to infringing activity that occurred after the effective date of termination.(j)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, for each Collaborator Contract thatcomplies with the requirements of Section 3.2(b), Incyte shall assign such Collaborator Contract toMacroGenics, and MacroGenics shall assume such Collaborator Contract from Incyte; provided thatMacroGenics shall not be obligated to participate in any cost-sharing arrangement in which Incyte had beenparticipating under such Collaborator Contract; provided, however, that (i) in no event shall MacroGenics’obligations with respect to such Collaborator Contract be any greater than MacroGenics’ obligations underthis Agreement or its rights with respect to such Collaborator Contract be any less than MacroGenics’ rightsunder this Agreement (it being understood that MacroGenics shall not be required to supply any LicensedCompound Bulk Drug Substance or Licensed Compound Drug Product beyond the planned capacity of theMacroGenics Manufacturing Facilities allocated to such products, as applicable, prior to such termination); (ii)MacroGenics shall have no obligation to assume any Collaborator Contract if doing so would putMacroGenics in breach of such contract; and (iii) Incyte hereby agrees to defend, indemnify and holdharmless the MacroGenics Indemnitees from and against any and all Losses to which any MacroGenics111[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDIndemnitee may become subject as a direct result of any Claim by any Third Party (including any Collaborator) to theextent such Losses result from Incyte’s breach of its obligations under the applicable Collaborator Contract prior to thedate of assignment of such Collaborator Contract pursuant to this Section 12.8(j).(k)Other than in the event of termination by Incyte pursuant to Section 12.3 or Section 12.6, for each Development Agreemententered into between Incyte and a licensee or Third Party subcontractor of Incyte pursuant to Section 4.5, atMacroGenics’ option, Incyte will assign such Development Agreement to MacroGenics; provided thatMacroGenics shall notify Incyte in writing at least [**] prior to the effective date of termination of thisAgreement of those Development Agreement(s) which MacroGenics wishes to assume, and Incyte shall befree to terminate without liability any Development Agreement that is not included in such notice.12.9 Effect of Termination for MacroGenics Breach or Bankruptcy. All of the following effects of termination are in addition tothe other rights and remedies that may be available to either of the Parties under this Agreement and shall not be construed to limit anysuch rights or remedies. In the event of termination of this Agreement by Incyte pursuant to Section 12.3 or Section 12.6, the followingprovisions of this Section 12.9 shall apply from and after the effective date of termination:(a)The rights and licenses granted herein to MacroGenics pursuant to Section 3.4(b) or Section 5.4(a) or retained byMacroGenics, in each case, related to the Exploitation of the MacroGenics Pipeline Assets and the right toconduct or have conducted the MacroGenics Combination Studies shall continue in full force and effect, inaccordance with and subject to the terms and conditions of this Agreement (including for clarity, the retainedrights by MacroGenics in Section 3.3 and as applicable, the licenses in Section 3.4(b)); provided, however,that: (i) any such rights, licenses, or sublicenses granted by Incyte shall continue only to the extent and onlyfor so long as Incyte continues to have the contractual right under the applicable Upstream License to extendsuch rights, licenses, or sublicenses to MacroGenics; and (ii) if MacroGenics’ breach of its obligations underthis Agreement constitutes a breach under an Upstream License, then MacroGenics shall not receive anyrights under this Section 12.9(a) with respect to any rights, licenses, or sublicenses that are subject to suchUpstream License. Any assignee of Incyte’s rights under the applicable Upstream License will be required totake such assignment subject to the rights of MacroGenics under this Section 12.9(a). MacroGenics shallreimburse Incyte for any amounts paid by Incyte to any Third Party in connection with MacroGenics’exercise of such licenses (it being understood that MacroGenics shall have the right to decline such license asto some or all of the rights in this subsection (a) upon written notice to Incyte if MacroGenics does not wishto assume the related Third Party obligation); provided further, that MacroGenics shall have the right, on alicense-by-license basis, to terminate its license pursuant to this subsection (a) under such Third Party licenseat any time upon written notice to Incyte, subject to any112[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDlimitations on termination rights and any notice and ongoing payment obligations under the applicable Third Partylicense.(b)All payment obligations hereunder shall survive, including those payment obligations that are accrued and unpaid as of theeffective date of such termination; provided that Incyte may pursue remedies under Section 12.10 and,pending resolution of any claim for remedies under Section 12.10, Incyte may pay to a reputable Third Partyescrow agent selected by Incyte and pursuant to a three-party agreement among Incyte, MacroGenics and theescrow agent up to [**] of any royalties or milestones otherwise owed to MacroGenics hereunder (but in noevent more than the amount reasonably being asserted by Incyte pursuant to Section 12.10 as damagesarising from the applicable breach or bankruptcy), and such escrow agent shall hold all such paymentspending resolution of the dispute hereunder; provided that, following resolution of the claim, the escrowagent will be instructed to allocate the payments between the Parties as follows: %3. first, the escrow agentwill pay to Incyte the amount of damages, costs and other amounts that MacroGenics is required (or agrees)to pay to Incyte in connection with the applicable claim pursuant to Section 12.10, together with Incyte’scosts and expenses in connection with bringing such claim, and %3. any remaining amount will be paid toMacroGenics. The foregoing shall not be construed to limit Incyte’s ability to recover any amount assertedagainst MacroGenics under Section 12.10 [**] under this subsection (b).(c)All licenses granted to Incyte shall continue in full force and effect, in accordance with and subject to the terms andconditions of this Agreement.(d)At Incyte’s option, in accordance with a commercially reasonable transition plan established by the JMC with the goal ofallowing the Parties to continue to conduct their businesses following termination as contemplated under thisSection 12.9, Incyte shall have the right, upon written notice to MacroGenics, to assume the Manufacture ofone hundred percent (100%) of the global requirements of the Licensed Compound Bulk Drug Substanceand Licensed Compound Drug Product (other than quantities that MacroGenics may manufacture for its ownuse in MacroGenics Combination Studies thereafter), following which MacroGenics shall not have the rightto supply any Licensed Compound Bulk Drug Substance and Licensed Compound Drug Product unlessexpressly authorized by Incyte in writing. Until such time that Incyte so notifies MacroGenics that it isprepared to Manufacture all such global requirements, MacroGenics shall Manufacture and supply to Incyteup to [**] ([**]%) of MacroGenics’ then-committed supply of Incyte’s global requirements of the LicensedCompound Bulk Drug Substance and/or Licensed Compound Drug Product, in accordance with theprovisions of Section 7.2 and Section 7.3.(e)Incyte may at its sole discretion, in accordance with a commercially reasonable transition plan established by the JDC orJMC, as applicable, with the goal of allowing the Parties to continue to conduct their businesses followingtermination as113[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDcontemplated under this Section 12.9, commence the Study Transition, IND Transition, Manufacturing TechnologyTransfer, and/or Information Transfer upon written notice to MacroGenics, if and to the extent the same have not beencommenced as of the effective date of termination, as to which transitions Incyte may specify shortened timeframes tothe extent compliance therewith by MacroGenics is reasonably practicable, and the obligations of MacroGenics inconnection with the Study Transition, IND Transition, Manufacturing Technology Transfer, and/or InformationTransfer shall continue until their completion in accordance with the terms and conditions of this Agreement.(f)Incyte (or its Collaborators, as applicable) shall have the sole right and responsibility to conduct any and all Clinical StudiesInitiated by Incyte or its sublicensees or Collaborators prior to the effective date of such termination, but shallhave no obligations in connection with any Clinical Studies being conducted by MacroGenics as of theeffective date of such termination.For clarity, any termination pursuant to this Section 12.9 shall not affect MacroGenics’ rights with respect to maintaining continuedaccess to the Global Safety Database.12.10 Remedies. Except as otherwise explicitly set forth in this Agreement, termination or expiration of this Agreement shall notrelieve the Parties of any liability or obligation which accrued hereunder prior to the effective date of such termination or expiration,nor prejudice either Party’s right to obtain performance of any obligation. Each Party shall be free, pursuant to Article 13, to seek,without restriction as to the number of times it may seek, damages, costs and remedies that may be available to it under ApplicableLaw or in equity and shall be entitled to offset the amount of any damages and costs obtained against the other Party in a finaldetermination under Article 13, against any amounts otherwise due to such other Party under this Agreement.12.11 Survival. In the event of termination or expiration of this Agreement, in addition to the provisions of this Agreement thatcontinue in effect in accordance with their terms, the following provisions of this Agreement shall survive: Article 1 (Definitions) (asapplicable), Article 11 (Confidentiality), Article 12 (Term and Termination), Article 13 (Dispute Resolution), Article 14(Indemnification) (solely as to activities arising during the Term or as to any activities conducted in the course of a Party’s exercise of alicense surviving the Term), Article 15 (Miscellaneous); Sections 3.3 (Retained Rights), 3.5 (No Implied Licenses), 7.4 (Records;Audit Rights), 7.7 (Compliance with Law), 8.9 (Currency), 8.11 (Taxes), 8.12 (Audit), 8.13 (Manner of Payment), 9.1 (Inventorship;Ownership and Disclosure of Inventions) and 10.4 (No Other Representations of Warranties), and any other provisions of thisAgreement that are necessary to interpret or effectuate the intent of the foregoing provisions. For clarity, the indemnity in Section14.1(d) shall survive beyond the duration of the Term only with respect to any Losses arising from activities that occurred during theTerm, irrespective of whether Incyte is continuing to extend [**] or [**] to MacroGenics at the time such Loss arises.ARTICLE 13DISPUTE RESOLUTION114[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED13.1 Dispute Resolution Mechanism. The Parties agree that the procedures set forth in this Article 13 sets forth certain binding andnon-binding mechanisms for resolving any dispute, controversy or claim between the Parties that may arise from time to time pursuantto this Agreement relating to either Party’s rights or obligations hereunder (each, a “Dispute”, and collectively, the “Disputes”) that isnot resolved through good faith negotiation between the Parties. For the avoidance of doubt, this Article 13 shall not apply to anydecision with respect to which a Party has final decision-making authority hereunder. The Parties shall first attempt in good faith toresolve any Dispute, including Disputes that may involve the parent company, subsidiaries or other Affiliates of any Party orsublicensees (including Collaborators) of a Party, in accordance with Section 13.2.13.2 Resolution by Executive Officers. In the event of any Dispute regarding the construction or interpretation of this Agreement orthe rights, duties or liabilities of either Party hereunder, the Parties shall first attempt in good faith to resolve such Dispute bynegotiation and consultation between themselves. In the event that such Dispute is not resolved on such basis within [**] (unlessotherwise agreed by the Parties), either Party may, by written notice to the other Party, refer the Dispute to the Executive Officers forattempted resolution by good faith negotiation within [**] after such notice is received (unless otherwise agreed by the Parties). EachParty may, in its discretion, seek resolution of any and all Disputes that are not resolved under this Article 13 in any court of competentjurisdiction.13.3 Provisional Remedies. In addition, each Party has the right to seek from the appropriate court provisional remedies such asattachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter ofthe Dispute.ARTICLE 14INDEMNIFICATION14.1 Indemnification by Incyte. Incyte hereby agrees to defend, indemnify and hold harmless MacroGenics and its Affiliates, andeach of their respective directors, officers, employees, agents and representatives (each, a “MacroGenics Indemnitee”) from andagainst any and all claims, suits, actions, demands, liabilities, expenses and/or losses, including reasonable legal expenses andattorneys’ fees (collectively, the “Losses”), to which any MacroGenics Indemnitee may become subject as a direct result of any claim,demand, action or other proceeding by any Third Party (each, a “Claim”), to the extent such Losses result from: (a) the Exploitation ofany Compound or Product by Incyte or its Affiliate or Third Party sublicensee (including any Collaborator); (b) the breach by Incyte ofany warranty, representation, covenant or agreement made by Incyte in this Agreement or in the Clinical Supply Agreement, theClinical Quality Agreement, the Commercial Supply Agreement, or the Pharmacovigilance Agreement (collectively, the “AncillaryAgreements”); (c) the negligence, illegal conduct or willful misconduct of Incyte or its Affiliate or Third Party sublicensee (includingany Collaborator), or any officer, director, employee, agent or representative thereof in connection with this Agreement or anyAncillary Agreement; or (d) any claims that the Exploitation of the Licensed Compound pursuant to and in accordance with theprovisions of this Agreement infringes the [**] or the [**] (except that, to the extent (i) MacroGenics does not [**] as described inSection 3.2(c) in any instance and (ii) such sublicense to MacroGenics under the [**] would have prevented the occurrence of suchLoss, then Incyte shall be relieved of its obligations115[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDunder this Section 14.1(d) in connection with any resulting claims of infringement); and except, with respect to each of clauses (a)through (d) above, to the extent such Losses arise directly or indirectly from the negligence, gross negligence, illegal conduct or willfulmisconduct of any MacroGenics Indemnitee or the breach by MacroGenics of any warranty, representation, covenant or agreementmade by MacroGenics in this Agreement or any Ancillary Agreement.14.2 Indemnification by MacroGenics. MacroGenics hereby agrees to defend, indemnify and hold harmless Incyte and its Affiliatesand each of their respective directors, officers, employees, agents and representatives (each, an “Incyte Indemnitee”) from and againstany and all Losses to which any Incyte Indemnitee may become subject as a direct result of any Claim to the extent such Losses resultfrom: (a) the breach by MacroGenics of any warranty, representation, covenant or agreement made by MacroGenics in this Agreementor any Ancillary Agreement; (b) the negligence, illegal conduct, or willful misconduct of MacroGenics or its Affiliate or its licensee(other than Incyte or its Affiliate), or any officer, director, employee, agent or representative thereof in connection with this Agreementor any Ancillary Agreement; (c) the Exploitation of any Compound or Product by MacroGenics or its Affiliate or licensees, includingin connection with the Ongoing Clinical Study, MacroGenics Combination Studies or any other activities conducted by MacroGenicsor its Affiliate or licensees in connection with this Agreement or any Ancillary Agreement; except, with respect to each of clauses (a)through (c) above, to the extent such Losses arise directly or indirectly from the negligence, gross negligence, illegal conduct or willfulmisconduct of any Incyte Indemnitee or the breach by Incyte of any warranty, representation, covenant or agreement made by Incyte inthis Agreement or any Ancillary Agreement.14.3 Indemnification Procedures.(a)Notice. Promptly after a MacroGenics Indemnitee or an Incyte Indemnitee (each, an “Indemnitee”) receives notice of apending or threatened Claim, such Indemnitee shall give written notice of the Claim to the Party from whomthe Indemnitee is entitled to receive indemnification pursuant to Sections 14.1 or 14.2, as applicable (the“Indemnifying Party”). However, an Indemnitee’s delay in providing or failure to provide such notice shallnot relieve the Indemnifying Party of its indemnification obligations, except to the extent it can demonstrateprejudice due to the delay or lack of notice.(b)Defense. Upon receipt of notice under this Section 14.3 from the Indemnitee, the Indemnifying Party will have the duty toeither compromise or defend, at its own expense (and by counsel reasonably satisfactory to Indemnitee), suchClaim. The Indemnifying Party will promptly (and in any event not more than [**] after receipt of theIndemnitee’s original notice) notify the Indemnitee in writing that it acknowledges its obligation (whichacknowledgment shall not be deemed or construed as an admission of liability, either under this Article 14 orotherwise) to indemnify the Indemnitee with respect to the Claim pursuant to this Article 14 and of itsintention to compromise or defend such Claim. Once the Indemnifying Party gives such notice to theIndemnitee, the Indemnifying Party is not liable to the Indemnitee for the fees of other counsel or any otherexpenses subsequently incurred by the Indemnitee in connection with such defense, other than theIndemnitee’s116[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDreasonable Third Party expenses related to its cooperation provided pursuant to Section 14.3(c) below. As to all Claimsas to which the Indemnifying Party has assumed control under this Section 14.3(b), the Indemnitee shall have the rightto employ separate counsel and to participate in the defense of a Claim (as reasonably directed by the IndemnifyingParty) at its own expense.(c)Cooperation. The Indemnitee will cooperate fully with the Indemnifying Party and its legal representatives in theinvestigation and defense of any Claim. The Indemnifying Party shall keep the Indemnitee informed on areasonable and timely basis as to the status of such Claim (to the extent the Indemnitee is not participating inthe defense of such Claim) and conduct the defense of such Claim in a prudent manner.(d)Settlement. If an Indemnifying Party assumes the defense of a Claim, no compromise or settlement of such Claim may beeffected by the Indemnifying Party without the Indemnitee’s written consent (such consent not to beunreasonably withheld, delayed or conditioned), unless: (1) there is no finding or admission of any violationof law or any violation of the rights of any Person on the part of the Indemnitee and no effect on any otherclaims that may be made against the Indemnitee; (2) the sole relief provided is monetary damages that arepaid in full by the Indemnifying Party; and (3) the Indemnitee’s rights under this Agreement are notadversely affected. If the Indemnifying Party fails to assume defense of a Claim within a reasonable time, theIndemnitee may settle such Claim on such terms as it deems appropriate with the consent of the IndemnifyingParty (such consent not to be unreasonably withheld, delayed or conditioned), and the Indemnifying Partyshall be obligated to indemnify the Indemnitee for such settlement as provided in this Article 14.14.4 Insurance. Each Party shall, at its own expense, with respect to any Product, procure and maintain during the periodcommencing on the Execution Date through the period of Commercialization and for a period of not less than [**] following thetermination or expiration of this Agreement, insurance policies, including product liability insurance, in amounts not less than [**] perclaim and annual aggregate. All such insurance shall include worldwide coverage and shall include the other Party as an additionalinsured under its respective program(s). Prior to the Initiation of any Clinical Study, the Party responsible for such Clinical Study shallsecure, and maintain in full force and effect, clinical trial insurance as required by Applicable Law in those territories where suchClinical Study shall be conducted. Upon request, each Party shall provide the other Party with a certificate of insurance evidencing thecoverage required under this Section 14.4. Such insurance shall not be construed to create a limit of a Party’s liability with respect to itsindemnification obligations under this Article 14. Each Party shall provide the other Party with prompt written notice of cancellation,non-renewal or material change in such insurance that could materially adversely affect the rights of such other Party hereunder, andshall provide such notice within [**] after any such cancellation, non‑renewal or material change. The Parties acknowledge and agreethat Incyte may meet its obligations under this Section 14.4 through self-insurance.14.5 Limitation of Liability. EXCEPT TO THE EXTENT INCLUDED IN LOSSES RESULTING FROM A THIRD PARTYCLAIM FOR WHICH ONE PARTY IS OBLIGATED TO117[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDINDEMNIFY THE OTHER PARTY (OR AN INDEMNITEE OF SUCH OTHER PARTY) PURSUANT TO THIS ARTICLE14 OR SECTION 12.8(J) AND ANY BREACH OF ARTICLE 11 (CONFIDENTIALITY), IN NO EVENT WILL EITHERPARTY BE LIABLE TO THE OTHER PARTY (OR THE OTHER PARTY’S AFFILIATES OR SUBLICENSEES) INCONNECTION WITH THIS AGREEMENT FOR LOST REVENUE, LOST PROFITS, LOST SAVINGS, LOSS OF USE,DAMAGE TO GOODWILL, OR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE ORINDIRECT DAMAGES UNDER ANY THEORY, INCLUDING CONTRACT, NEGLIGENCE, OR STRICT LIABILITY,EVEN IF THAT PARTY HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.ARTICLE 15MISCELLANEOUS15.1 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to havebeen duly given on the date delivered, if delivered personally, or on the next Business Day after being sent by reputable overnightcourier (with delivery tracking provided, signature required and delivery prepaid), in each case, to the Parties at the followingaddresses, or on the date sent and confirmed by electronic transmission to the telecopier number specified below (or at such otheraddress or telecopier number for a Party as shall be specified by notice given in accordance with this Section 15.1).(a)If to Incyte:Incyte Corporation 1801 Augustine Cut Off Wilmington, DE 19803 Attention: CEO Fax: [**]with a copy to:Incyte Corporation 1801 Augustine Cut Off Wilmington, DE 19803 Attention: EVP & General Counsel Fax: [**](b)If to MacroGenics:MacroGenics, Inc.9704 Medical Center DriveRockville, MD 20850Attention: CEO Fax: [**] with a copy to:118[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDMacroGenics, Inc. 9704 Medical Center Drive Rockville, MD 20850 Attention: General Counsel Fax: [**]15.2 Governing Law. This Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall begoverned by and construed under the laws of the State of New York, without giving effect to any choice of law principles that wouldrequire the application of the laws of a different state.15.3 Change of Control.(a)Notice. Each Party (or its successor) shall provide notice to the other Party of any Change of Control of the notifyingParty within [**] after the date upon which the Change of Control closes or otherwise becomes effective. For purposesof this Section 15.3(a), a public announcement of the closing or effectiveness of a Change of Control shall be deemednotice to the other Party of such Change of Control.(b)MacroGenics. In the event of a Change of Control of MacroGenics, MacroGenics and the applicable Acquirer shall havethe right to conduct Clinical Studies that evaluate the Combination of the Licensed Compound with anyAcquirer Pipeline Asset or MacroGenics Pipeline Asset (such study, an “Acquirer Combination Study”)only as set forth in the remainder of this Section 15.3(b). For clarity, in addition to the requirements andlimitations of this Section 15.3(b), (x) any Acquirer Combination Study shall be subject to the requirementsand limitations set forth herein with respect to MacroGenics Combination Studies (e.g., the limitations setforth in Section 4.3, and Article 5), (y) MacroGenics shall be responsible for any failure of the Acquirer tocomply with the obligations set forth in this Section 15.3(b); and (z) except where this Agreement specifiesterms and conditions that are specifically applicable to an Acquirer (e.g., Sections 5.5(c), 15.3(b), and15.3(d)), all obligations of MacroGenics under this agreement shall apply to the Acquirer as if the Acquirerwere MacroGenics hereunder.(i)MacroGenics (or the Acquirer, as applicable) shall notify Incyte of each Acquirer Combination Study to beInitiated following the date of the Change of Control and until the earlier of [**] after the Effective Date, or (y)[**], shall provide Incyte with a copy of the protocol synopsis for the conduct of such proposed AcquirerCombination Study and, solely to the extent the components outlined in the protocol synopsis reviewed byIncyte are materially different from the corresponding components in the full protocol, such updated protocolsynopsis, in each case, subject to reasonable redaction with respect to any MacroGenics Pipeline AssetInformation (or commercially sensitive confidential information related to the Acquirer Pipeline Asset, asapplicable). Incyte shall have the right to object to the119[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDconduct of such Acquirer Combination Study if Incyte reasonably believes in its sole determination that:(A)the proposed Acquirer Combination Study poses a [**], following the procedures set forth in Section4.3(b)(i)(3), but substituting “Acquirer Combination Study(ies)” for “MacroGenics CombinationStudy(ies)” and with Incyte (and not MacroGenics) holding the final decision-making authority withrespect thereto pursuant to Section 4.3(b)(i)(3); provided that such veto right under this paragraph (A)shall expire [**] after the Effective Date; or(B)the design or conduct of any such Acquirer Combination Study (x) that does not satisfy the applicabledosage and schedule requirements of Section 4.3(b)(ii) (substituting for such purpose, “AcquirerCombination Study(ies)” for MacroGenics Combination Study(ies) in Section 4.3(b)(ii)), provided thatIncyte (and not MacroGenics) shall have final decision-making authority with respect thereto pursuant toSection 4.3(b)(ii); or (y) for which the Acquirer Pipeline Asset, when combined with or compared to theLicensed Compound, is reasonably expected by Incyte, in its sole determination, to have a materialnegative impact on Incyte’s business (with Incyte’s objection rights under the foregoing clauses (B)(x)and (B)(y) expiring upon achievement of the first Licensed Compound Approval by either the FDA orEMA).(ii)If Incyte so objects under subsection (i), MacroGenics (or the Acquirer, as applicable) shall not Initiate suchAcquirer Combination Study without the prior written consent of Incyte, it being understood that such objectionright shall apply with respect to the Initiation of each Acquirer Combination Study for each applicable PipelineAsset until the expiration of such right as set forth in Sections 15.3(b)(i)(A) and 15.3(b)(i)(B), as applicable.(iii)If the Acquirer or its Affiliates owns or Controls, and has not discontinued the Development andCommercialization of, or divested, upon the consummation of the Change of Control, a clinical-stage orapproved anti-PD-1 or anti-PD-L1 Monoclonal Antibody in the Field (such product, an “Incyte CompetingProduct”), then:(A)Acquirer shall and shall cause its Affiliates, within [**]after such consummation, to: (x) adoptreasonable written procedures to prevent Acquirer’s employees or contractors ([**], and [**], it beingunderstood that such employees are otherwise subject to the applicable confidentiality obligations underthis Agreement) involved in the Development or Commercialization of such Incyte Competing Productfrom [**] or [**] to the Licensed Compound or any Licensed Product, for Development orCommercialization of the120[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDIncyte Competing Product; and (y) if the Incyte Competing Product is undergoing a pivotal ClinicalStudy or has received Regulatory Approval, then require such employees and contractors of Acquirer to[**] and [**] between MacroGenics and Incyte under this Agreement (including Joint Committeemeetings) and [**] to the Licensed Compound or any Licensed Product; and(B)on or before the date that is [**] after the date upon which a Change of Control of MacroGenics closesor otherwise becomes effective, the Parties shall dissolve the JSC and CCC and thereafter Incyte shallperform all activities assigned by this Agreement to the JSC; provided that, the JDC shall remain inplace for the coordination of any MacroGenics Combination Studies, the JMC shall remain in place forthe coordination of Manufacturing activities, and the JIPC shall remain in place for the coordination ofthe prosecution and maintenance of the Licensed Patents.(c)Incyte. Notwithstanding anything to the contrary herein, in the event of a Change of Control of Incyte, if the Acquireror its Affiliates owns or Controls, and has not discontinued the Development and Commercialization of, or divested,upon the consummation of the Change of Control, a clinical-stage or approved anti-PD-1 or anti-PD-L1 MonoclonalAntibody in the Field (such product, a “MacroGenics Competing Product”), the following terms and conditions shallapply:(i)Acquirer shall and shall cause its Affiliates, within [**] after such consummation to adopt the protections, andAcquirer shall have the rights and obligations, set forth in Sections 15.3(b)(iii)(A) and (B) mutatis mutandis; and(ii)Incyte’s right to object to the conduct of an Acquirer Combination Study pursuant to Section 15.3(b)(i)(B)(y) shallimmediately terminate.(d)Acquirer IP. Notwithstanding any provisions of this Agreement to the contrary, in the event of a Change of Control ofeither Party, such Change of Control shall not provide the other Party with any rights or access to theintellectual property or technology of the acquired Party’s Acquirer or successor which was a Third Partyprior to such event.15.4 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior writtenconsent of the other Party, except that a Party may make such an assignment or transfer without the other Party’s consent to (a) anAffiliate or (b) subject to Section 15.3 above, an Acquirer. Any successor or assignee of rights and/or obligations permitted hereundershall, in writing to the other Party, expressly assume performance of such rights and/or obligations. Any permitted assignment shall bebinding on the successors of the assigning Party. Any assignment121[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDor attempted assignment by either Party in violation of the terms of this Section 15.4 shall be null, void and of no legal effect.15.5 Designation of Affiliates. Each Party may discharge any obligation and exercise any right hereunder through delegation of itsobligations or rights to any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligationsunder this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with suchperformance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach bysuch Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’sAffiliate.15.6 Relationship of the Parties. It is expressly agreed that MacroGenics, on the one hand, and Incyte, on the other hand, areindependent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency.Neither MacroGenics nor Incyte shall have the authority to make any statements, representations or commitments of any kind, or totake any action which shall be binding on the other, without the prior written consent of the other Party to do so. All individualsemployed by a Party shall be employees of that Party and not of the other Party and all costs and obligations incurred by reason of suchemployment shall be for the account and expense of such Party.15.7 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent thatsuch performance is prevented by Force Majeure and the nonperforming Party promptly provides notice of such Force Majeurecircumstances to the other Party. Such excuse shall be continued so long as the condition constituting Force Majeure continues and thenonperforming Party takes reasonable efforts to remove the condition. Notwithstanding the foregoing, a Party shall not be excusedfrom making payments owed hereunder because of a Force Majeure affecting such Party. If a Force Majeure persists for more than[**], then the Parties shall discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigatethe delays caused by such Force Majeure. In the event a Party is prevented from performing its obligations under this Agreement dueto Force Majeure for more than [**] according to this Section 15.7, the other Party shall have the right to terminate this Agreementupon [**] notice after the expiration of such period. A termination under this Section 15.7 by either Party shall be treated as atermination under Section 12.3 above and the corresponding provisions for termination under Section 12.3 shall apply except to theextent the affected Party is prevented from performing due to the Force Majeure.15.8 Entire Agreement; Amendments. This Agreement, including the Exhibits and Schedules hereto, and together with theAncillary Agreements, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties,representations, conditions and understandings between the Parties with respect to the subject matter hereof and supersedes, as of theExecution Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matterhereof, including the Prior CDA. There are no covenants, promises, agreements, warranties, representations, conditions orunderstandings, either oral or written, between the Parties other than as are set forth herein and therein. No subsequent alteration,amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced122[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDto writing and signed by an authorized officer of each Party. In the event of any inconsistency between the body of this Agreement andeither any Exhibits to this Agreement or any subsequent agreements ancillary to this Agreement, unless otherwise express stated to thecontrary in such Exhibit or ancillary agreement, the terms contained in this Agreement shall control.15.9 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court ofcompetent jurisdiction from which no appeal can be or is timely taken, the provision shall be considered severed from this Agreementand shall not serve to invalidate any remaining provisions hereof. The Parties shall make good faith efforts to replace any such invalidor unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering thisAgreement may be realized.15.10 English Language. This Agreement shall be written in and executed in, and all other communications under or in connectionwith this Agreement shall be in, the English language. Any translation into any other language shall not be an official version hereof orthereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shallcontrol.15.11 Waiver and Non-Exclusion of Remedies. Any term or condition of this Agreement may be waived at any time by the Partythat is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by oron behalf of the Party waiving such term or condition. The waiver by either Party of any right hereunder or of the failure to perform orof a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such otherParty whether of a similar nature or otherwise. The rights and remedies provided herein are cumulative and do not exclude any otherright or remedy provided by Applicable Law or otherwise available except as expressly set forth herein.15.12 Further Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such furtherassignments, agreements, documents, and instruments and do and cause to be done such further acts and things, including the filing ofsuch assignments, agreements, documents, and instruments, as may be necessary including as the other Party may reasonably requestin connection with this Agreement to carry out more effectively the provisions and purposes hereof.15.13 Headings. The headings of each Article and Section in this Agreement have been inserted for convenience of reference onlyand are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.15.14Standstill.(a)Incyte agrees that neither it nor any of its Affiliates (but excluding any Acquirer of Incyte or any Affiliates of such Acquirerfollowing a Change of Control of Incyte), officers or directors acting at Incyte’s direction, alone or as part ofany 13D Group, shall, directly or indirectly, for a period of twenty-four (24) months from the Execution Date(the “Standstill Period”), without the prior written approval of MacroGenics’ Board of Directors (or anycommittee thereof):123[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTED(i) acquire, offer or propose to acquire or agree to acquire or cause to be acquired ownership(including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Securities and Exchange Act of1934) more than three percent (3%) of the voting securities of MacroGenics, or any rights or options to acquire anysuch ownership (including from a Third Party);(ii) make or participate, directly or indirectly, in any “solicitation” of “proxies” (as such terms are usedin the proxy rules (Regulation 14A) of the Securities and Exchange Commission) to vote, or seek to advise orinfluence any person with respect to the voting of, any voting securities of MacroGenics;(iii) form or join a “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of1934) (“13D Group”) with respect to any voting securities of MacroGenics;(iv) otherwise act, whether alone or in concert with others, to seek to propose to MacroGenics anymerger, business combination, restructuring, recapitalization or similar transaction with respect to or with MacroGenicsor otherwise act, whether alone or in concert with others, to seek to “control” (as such term is defined in Section 1.2),change the management or Board of Directors of MacroGenics, or nominate any person as a director of MacroGenicswho is not nominated by a then incumbent director; or(v) publicly announce its intentions to enter into any discussion, negotiations, arrangements orunderstandings with any Third Party with respect to, any of the foregoing.(b)If at any time during the Standstill Period, Incyte or, to its actual knowledge, any of its officers or directors are approachedby any Third Party concerning Incyte’s participation in a transaction of the type referred to in Sections15.14(a)(i)-(v), Incyte shall, or shall use reasonable efforts to cause such officer or director (as applicable) to,promptly inform such Third Party that Incyte is bound by the provisions of this Section 15.14.(c)The restrictions set forth in Section 15.14(a) shall terminate immediately if: (i) a Person or 13D Group (not including Incyteor its Affiliates) (A) commences or publicly announces its intent to commence a tender or exchange offer forvoting securities of MacroGenics representing more than twenty percent (20%) of the then-outstanding votingpower of the voting securities of MacroGenics or (B) publicly announces a bona fide proposal to enter into atransaction described in, or of a similar nature to those described in, clause (ii)(A) or (ii)(B) below and, priorto the termination, withdrawal or abandonment of such proposal by such Person or 13D Group (as evidencedby a subsequent public announcement or by communication to MacroGenics that is then either publiclyannounced or provided to Incyte), either (x) MacroGenics publicly announces its willingness to consider suchproposal or alternative proposals for a transaction described in, or of a similar nature as those124[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDdescribed in, clause (ii)(A) or (ii)(B) below, (y) the Board of Directors of MacroGenics determines to engage innegotiations with such Person or 13D Group or any other party other than Incyte or its Affiliates with respect to atransaction described in clause (ii)(A) or (ii)(B) below, or (z) such offer or proposal is not publicly rejected orrecommended against by MacroGenics within ten (10) Business Days after such offer or proposal becomes public, or(ii) MacroGenics or its Affiliates initiates a process to consider or enter into a transaction described in clause (A) or (B)below, or enters into a letter of intent or definitive agreement with any Third Party regarding (A) any merger,consolidation, sale, reorganization, recapitalization or other business combination pursuant to which the outstandingshares of MacroGenics would be converted into cash or securities of a Person or a 13D Group not including Incyte orits Affiliates and the stockholders or equity holders of MacroGenics immediately prior to such transaction would own,immediately after consummation of such a transaction, less than a controlling portion of the outstanding votingsecurities of MacroGenics or the entity surviving such transaction; or (B) any transaction or series of transactions thatwould result, directly or indirectly, in the sale or transfer to a Third Party of (1) all or substantially all of MacroGenics’assets; or (2) a majority of MacroGenics’ assets which relate to this Agreement.(d)Nothing in this Section 15.14 shall prohibit: (i) Incyte or its Affiliates or its or their Representatives from acquiring oroffering to acquire any securities of MacroGenics in connection with any mutual fund, pension plan oremployee benefit plan managed on behalf of employees or former employees of Incyte or its Affiliates; or (ii)an officer of Incyte from engaging in discussions with an officer of MacroGenics on a confidential, non-public basis regarding any of the transactions contemplated under this Section 15.14 that would notreasonably be expected to require Incyte or MacroGenics to make any public disclosure with respect thereto.15.15 Construction. Whenever this Agreement refers to a number of days without using a term otherwise defined herein, suchnumber refers to calendar days. Except where the context otherwise requires, %3. wherever used, the singular shall include the plural,the plural shall include the singular; %3. the use of any gender shall be applicable to all genders; %3. the terms “including,” “include,”“includes” or “for example” shall not limit the generality of any description preceding such term and, as used herein, shall have thesame meaning as “including, but not limited to,” or “including, without limitation”; %3. the words “herein”, “hereof” and “hereunder”,and words of similar import, refer to this Agreement in its entirety and not to any particular provision hereof; %3. the word “or” hasthe inclusive meaning that is typically associated with the phrase “and/or”; %3. the word “will” means “shall”; %3. if a period of timeis specified and dates from a given day or Business Day, or the day or Business Day of an act or event, it is to be calculated exclusiveof that day or Business Day; %3. “Dollar”, “USD” or “$” means U.S. Dollars; %3. references to a particular Person include suchPerson’s successors and assigns to the extent not prohibited by this Agreement; %3. a capitalized term not defined herein but reflectinga different part of speech than a capitalized term which is defined herein shall be interpreted in a correlative manner; %3. “written”includes communications sent and received by facsimile or electronic mail; %3. any definition of or reference to any agreement,instrument or other document herein shall be construed as referring125[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.CONFIDENTIAL TREATMENT REQUESTEDto such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to anyrestrictions on such amendments, supplements or modifications set forth herein) and %3. references herein to pharmaceutical products,therapies, ingredients, and the like, shall include biologics and biopharmaceutical products, therapies, ingredients, and the like, asapplicable. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strictconstruction shall be applied for or against either Party. Whenever a provision of this Agreement requires an approval or consent by aParty to this Agreement within a specified time period and notification of such approval or consent is not delivered within such timeperiod, then, unless otherwise specified, the Party whose approval or consent is required shall be conclusively deemed to havewithheld its approval or consent. Each Party represents that it has been represented by legal counsel in connection with this Agreementand acknowledges that it has participated in the drafting hereof.15.16 Third Party Beneficiaries. Except with respect to indemnification obligations pursuant to Article 14, for which MacroGenicsIndemnitees and Incyte Indemnitees are third party beneficiaries, no other Persons, other than MacroGenics and Incyte (including theirrespective successors and permitted assigns), shall be entitled to enforce the performance of this Agreement. For the avoidance ofdoubt, Collaborators shall not constitute third party beneficiaries under this Agreement for any purpose whatsoever.15.17 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an originafl,but all of which together shall constitute one and the same instrument. This Agreement may be executed by .pdf or other electronicallytransmitted signatures and such signatures shall be deemed to bind each Party as if they were the original signatures.SIGNATURE PAGE FOLLOWS126[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version ofthis exhibit has been filed separately with the Commission.IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Execution Date.INCYTE CORPORATIONBy: ____________________________Name: ____________________________Title: ____________________________Date: ____________________________MACROGENICS, INC.By: ____________________________Name: ____________________________Title: ____________________________Date: ____________________________SIGNATURE PAGE TO GLOBAL COLLABORATION AND LICENSE AGREEMENT NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT ALicensed PatentsPatents and applications claiming the benefit of U.S. Provisional Application Nos: [**], which cover the composition of matter, or themethod of making or using, the sale or the importation of the Licensed Compound.Exhibit A - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT B-1Incyte Global Development Plan[**][**]CONFIDENTIALExhibit B-1 - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT B-2MacroGenics Global Development Plan[**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**]Exhibit B-2 - 1 NG-6PHJ0AHM 4812-2013-0909v.1[**][**][**][**][**][**][**][**] [**][**][**][**][**][**] [**][**][**][**][**][**][**][**] [**][**][**]Exhibit B-2 - 2 NG-6PHJ0AHM 4812-2013-0909v.1[**][**]Exhibit B-2 - 3 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT CExisting Third Party Licenses[**]Exhibit C - 1 NG-6PHJ0AHM 4812-2013-0909v.1Exhibit D - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT DForm of Press ReleaseFor Immediate ReleaseIncyte and MacroGenics Announce Global Collaboration and Licensing Agreement for Anti-PD-1Monoclonal Antibody MGA012•Incyte gains exclusive, worldwide development and commercialization rights to MGA012 in all indications•MacroGenics to receive an upfront cash payment of $150 million plus potential milestone payments and royalties, andretains right to develop its pipeline assets in combination with MGA012WILMINGTON, DE AND ROCKVILLE, MD – October XX, 2017 – Incyte Corporation (NASDAQ:INCY) and MacroGenics, Inc.(NASDAQ:MGNX) announced today that the companies have entered into an exclusive global collaboration and licenseagreement for MacroGenics’ MGA012, an investigational monoclonal antibody that inhibits programmed cell death protein 1(PD-1). Incyte has obtained exclusive worldwide rights for the development and commercialization of MGA012 in allindications, while MacroGenics retains the right to develop its pipeline assets in combination with MGA012.“Anti-PD-1 therapy is becoming a mainstay of cancer treatment across multiple tumor types, and we believe the addition ofMGA012 to our clinical pipeline is important to fulfilling our long-term development strategy in immuno-oncology. Thiscollaboration with MacroGenics will allow us to rapidly explore the potential clinical benefit of developing MGA012 as amonotherapy and also combining anti-PD-1 therapy with several of our existing portfolio assets,” said Steven Stein, M.D.,Chief Medical Officer of Incyte."We believe Incyte is the ideal partner for MGA012, given its immuno-oncology portfolio and dedication to researching anddeveloping innovative and transformative cancer therapies and we hope that the combined resources of both companies willbe able to significantly expand and accelerate the current development efforts for this promising molecule,” said ScottKoenig, M.D., Ph.D., President and Chief Executive Officer of MacroGenics.Exhibit D - 1 NG-6PHJ0AHM 4812-2013-0909v.1“Furthermore, we look forward to exploring the combination of MGA012 with multiple molecules in our own portfolio,including DART molecules for redirected T-cell killing, antibodies with enhanced effector function and ADCs, potentially toprovide improved patient benefit.”Enrollment in the dose escalation portion of the Phase 1 study of MGA012 has been completed and the molecule is currentlybeing evaluated as monotherapy across four solid tumor types in the dose expansion portion of the study. Data from the doseescalation portion of the Phase 1 study have been accepted for poster presentation at the upcoming Society forImmunotherapy of Cancer (SITC) 32nd Annual Meeting in November 2017.Terms of the CollaborationUpon closing, Incyte will pay MacroGenics an upfront payment of $150 million. Incyte will receive worldwide rights to developand commercialize MGA012 in all indications.Per the terms of the collaboration, MacroGenics will also be eligible to receive up to $420 million in potential developmentand regulatory milestones, and up to $330 million in potential commercial milestones. If MGA012 is approved andcommercialized, MacroGenics would be eligible to receive royalties, tiered from 15 percent to 24 percent, on future sales ofMGA012 by Incyte.Under the terms of the collaboration, Incyte will lead global development of MGA012. MacroGenics retains the right todevelop its pipeline assets in combination with MGA012, with Incyte commercializing MGA012 and MacroGenicscommercializing its asset(s), if any such potential combinations are approved.In addition, MacroGenics retains the right to manufacture a portion of both companies’ global clinical and commercial supplyneeds of MGA012. MacroGenics intends to utilize its commercial-scale GMP facility, which is expected to be fully operationalin 2018.The transaction is expected to close in the fourth quarter of 2017, subject to the early termination or expiration of anyapplicable waiting periods under the Hart-Scott Rodino Act and customary closing conditions.About Incyte CorporationIncyte Corporation is a Wilmington, Delaware-based biopharmaceutical company focused on the discovery, development andcommercialization of proprietary therapeutics. For additional information on Incyte, please visit the Company’s website atwww.incyte.com.Follow @Incyte on Twitter at https://twitter.com/Incyte.Exhibit D - 2 NG-6PHJ0AHM 4812-2013-0909v.1About MacroGenics, Inc.MacroGenics is a clinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonalantibody-based therapeutics for the treatment of cancer, as well as autoimmune disorders and infectious diseases.MacroGenics generates its pipeline of product candidates primarily from its proprietary suite of next-generation antibody-based technology platforms. The combination of MacroGenics' technology platforms and protein engineering expertise hasallowed MacroGenics to generate promising product candidates and enter into several strategic collaborations with globalpharmaceutical and biotechnology companies. For more information, please see MacroGenics’ website atwww.macrogenics.com. MacroGenics and the MacroGenics logo are trademarks or registered trademarks of MacroGenics,Inc.Incyte Forward-Looking StatementsExcept for the historical information set forth herein, the matters set forth in this press release contain predictions, estimatesand other forward-looking statements, including without limitation statements regarding: whether the planned transaction willclose within the expected timeframe or ever; whether MGA012 will successfully advance through clinical studies or will everbe approved for use in humans anywhere or will be commercialized anywhere successfully or at all; whether MGA012 will beeffective in the treatment of cancer or other indications; and whether and when any of the milestone payments or royaltiesunder this collaboration will ever be paid by Incyte. These forward-looking statements are subject to risks and uncertaintiesthat may cause actual results to differ materially, including unanticipated developments in and risks related to: obtainingapproval for this planned collaboration; research and development efforts related to the collaboration programs; thepossibility that results of clinical trials may be unsuccessful or insufficient to meet applicable regulatory standards or warrantcontinued development; other market or economic factors; unanticipated delays; each company’s ability to compete againstparties with greater financial or other resources; greater than expected expenses; and such other risks detailed from time totime in each company’s reports filed with the Securities and Exchange Commission, including the Form 10-Q for the quarterended June 30, 2017 filed by each company. Each party disclaims any intent or obligation to update these forward-lookingstatements.MacroGenics’ Cautionary Note on Forward-Looking StatementsAny statements in this press release about future expectations, plans and prospects for MacroGenics, including statementsabout MacroGenics’ strategy, future operations, clinical development of MacroGenics’ therapeutic candidates, milestone oropt-in payments from MacroGenics’ collaborators, MacroGenics’ anticipated milestones and future expectations and plans andprospects for MacroGenics and other statements containing the words "subject to", "believe", "anticipate", "plan", "expect","intend", "estimate", "project", "may", "will", "should", "would", "could", "can", the negatives thereof, variations thereon andsimilar expressions, or by discussions of strategy constitute forward-looking statementsExhibit D - 3 NG-6PHJ0AHM 4812-2013-0909v.1within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.Actual results may differ materially from those indicated by such forward-looking statements as a result of various importantfactors, including: the uncertainties inherent in the initiation and enrollment of future clinical trials, expectations of expandingongoing clinical trials, availability and timing of data from ongoing clinical trials, expectations for regulatory approvals, othermatters that could affect the availability or commercial potential of MacroGenics’ product candidates and other risksdescribed in MacroGenics’ filings with the Securities and Exchange Commission. In addition, the forward-looking statementsincluded in this press release represent MacroGenics’ views only as of the date hereof. MacroGenics anticipates thatsubsequent events and developments will cause MacroGenics’ views to change. However, while MacroGenics may elect toupdate these forward-looking statements at some point in the future, MacroGenics specifically disclaims any obligation to doso, except as may be required by law. These forward-looking statements should not be relied upon as representingMacroGenics’ views as of any date subsequent to the date hereof.# # #Incyte Contacts:InvestorsMichael Booth, DPhil+1 302 498 5914mbooth@incyte.comMediaCatalina Loveman+1 302 498 6171cloveman@incyte.comMacroGenics Contacts:InvestorsJim Karrels1-301-251-5172info@macrogenics.comMediaKaren Sharma1-781-235-3060Exhibit D - 4 NG-6PHJ0AHM 4812-2013-0909v.1ksharma@macbiocom.comExhibit D - 5 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT EOngoing Clinical Study Activities[**] [**][**][**][**][**][**][**][**][**]Exhibit E - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT FShared Prosecution Expense Countries[**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**]Exhibit F - 1 NG-6PHJ0AHM 4812-2013-0909v.1[**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**]Exhibit F - 2 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT G[**]Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Exhibit G - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT H[**]Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Patents and patent applications claiming the benefit of [**].Exhibit H - 1 NG-6PHJ0AHM 4812-2013-0909v.1EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements: 1)Registration Statement (Form S-8 No. 333-192277) pertaining to the 2000 Stock Option Incentive Plan, the 2003 Equity Incentive Plan, and 2013Equity Incentive Plan of MacroGenics, Inc.;2)Registration Statements (Form S-8 No. 333-202470 and Form S-8 No. 333-209812) pertaining to the 2013 Equity Incentive Plan of MacroGenics,Inc.;3)Registration Statement (Form S-8 No. 333-214386) pertaining to the 2016 Employee Stock Purchase Plan of MacroGenics, Inc.4)Registration Statements (Form S-3 No. 333-200092 and Form S-3 ASR No. 333-214385) of MacroGenics, Inc.of our reports dated February 27, 2018, with respect to the consolidated financial statements of MacroGenics, Inc. and the effectiveness of internal controlover financial reporting of MacroGenics, Inc. included in this Annual Report (Form 10-K) of MacroGenics, Inc. for the year ended December 31, 2017./s/ Ernst & Young LLPBaltimore, MarylandFebruary 27, 2018 EXHIBIT 31.1I, Scott Koenig, certify that: 1.I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2017 of MacroGenics, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. /s/ Scott Koenig Scott Koenig, M.D., Ph.D. President and Chief Executive Officer(Principal Executive Officer)Dated: February 27, 2018 EXHIBIT 31.2I, James Karrels, certify that: 1.I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2017 of MacroGenics, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. /s/ James Karrels James Karrels Senior Vice President and Chief Financial Officer(Principal Financial Officer)Dated: February 27, 2018 EXHIBIT 32.1Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)I, Scott Koenig, President and Chief Executive Officer (principal executive officer) of MacroGenics, Inc. (the “Registrant”), certify, to the best of myknowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2017 of the Registrant (the “Report”), that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant./s/ Scott Koenig Name: Scott Koenig, M.D., Ph.D.Date: February 27, 2018EXHIBIT 32.2Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)I, James Karrels, Senior Vice President and Chief Financial Officer (principal financial officer) of MacroGenics, Inc. (the “Registrant”), certify, to the best ofmy knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2017 of the Registrant (the “Report”), that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant./s/ James Karrels Name: James KarrelsDate: February 27, 2018

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