Xencor, Inc. (NASDAQ:XNCR) Q4 2022 Earnings Call Transcript

Xencor, Inc. (NASDAQ:XNCR) Q4 2022 Earnings Call Transcript February 23, 2023

Operator: Good afternoon, thank you for standing by. And welcome to the Xencor’s Fourth Quarter and Year End 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, that there will be a question-and-answer session. Please be advised that this call is being recorded at the company’s request. Now, I’d like to turn the call to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations. Sir, please go ahead.

Charles Liles: Thank you, and good afternoon. Earlier today, we issued a press release, which outlines the topics we plan to discuss today. The press release is available at www.xencor.com. With me on the call are Bassil Dahiyat, President and Chief Executive Officer; Allen Yang, Chief Medical Officer; John Desjarlais, Chief Scientific Officer; and John Kuch, Chief Financial Officer. After we make a few comments, we will then open up the call to your questions. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company’s future financial and operating results, future market conditions, the plans and objectives of management, future operations, the company’s partnering efforts, capital requirements, future product offerings and research and development programs.

These forward-looking statements are not historical facts, rather are based on our current expectations and beliefs and are based on information currently available to us. The outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, those factors contained in the Risk Factors section of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q. With that, I’ll pass the call over to Bassil.

Bassil Dahiyat: Thanks Charles, and good afternoon, everyone. We’ve used our array of modular approach and engineering tools to create our internal development portfolio and oncology and autoimmune disease. And we use the breadth of this portfolio to take multiple simultaneous shots on goal in the clinic. Our intent is to use proof-of-concept data from our early stage studies to guide which programs we advance, which we terminate, and which we partner so that we can use our resources on those programs with the greatest potential for success and make room in our portfolio for the next wave of XmAb bispecifics and engineered cytokines. In addition, we use revenues from our partnership portfolio to support our development. There’s a few pipeline highlights from 2022.

For vudalimab, we continued our Phase 2 study in metastatic castration resistant prostate cancer, in combination with standard chemotherapy or PARP inhibitor, and we initiated a monotherapy Phase 2 and MCRPC and in gynecologic tumors, which are just some of the tumor types for PD-1 and CTLA-4 bispecifics have potential. And in November we reported an encouraging single ascending dose data for XmAb564, a regulatory T cell targeted IL-2 for autoimmune disease, particularly the strong durability of Tregs expansion. As a consequence, we’ve started the multiple ascending dose study in atopic dermatitis and psoriasis patients to explore extended dosing regimens. We hope to have the psoriasis arms of the study finished by early 2024. And we started Phase 1 studies for two novel T-cell engaging bispecifics.

The first was XmAb819, which targets CD3 and ENPP3, an antigen and renal cell carcinoma that was built with our — that was — and we built the molecule with our 2+1 format for improved tumor selectivity. We believe 819 offers a new mechanism against the barely explored targets a high unmet need in second and later line RCC. The second T-cell engager to start clinical studies was XmAb808, our first CD28 targeting bispecific. It co-stimulates T-cells was bound to the tumor target B7-H3, a widely expressed solid tumor antigens. Exciting early data for CD28 bispecific has increased our already high enthusiasm to develop this new class of immunotherapies. And we’re continually building the next wave of drug candidates with our engineering tools and try to tackle newer hard to address biology with them.

Two such programs are advancing this year led by the expected Phase 1 initiation for a third reduced potency cytokine XmAb662 an engineered IL-12 and followed by IND filing for XmAb541, a 2+1 CD3 bispecific targeting CLDN6 for ovarian cancer. So the well balanced portfolio of late and early stage programs in development that we can potentially advance to approval and ultimately the market if the data supports it. Our development pipeline gets strong support from our broad line portfolio, not just from the revenues it generates, but also from the resources of our co-development partners, those programs that we have partnered. Now the last of my remarks is that we are in the midst of completing our laboratory and office relocation to Pasadena where our new facility can accommodate our expanded R&D efforts and will help keep us at the cutting edge of protein engineering.

With that, I’ll turn the call over to Allen Yang, our Chief Medical Officer who will review recent updates from a few of our ongoing clinical studies for wholly owned programs.

Allen Yang: Thanks Bassil. Vudalimab is our most advanced dual checkpoint inhibitor. We’ve designed the class of bispecific to buying T-cells that express both targets, in this case, PD-1 and CTLA-4 with the intent to limit the exposure of the molecule, to control and improve tolerability, and yet still hit the cells that are going to be the most active against tumor. Two ongoing Phase 2 studies are looking for clinical signals that would prompt us to invest in registrational studies. At the SITC meeting in November, we reported the first data coming from our first Phase 2 study in combination with chemotherapy in patients with late line metastatic castrate resistant prostate cancer, a very high unmet need population. Given the changing treatment landscape in prostate cancer, we designed the study to address several groups of prostate cancer patients including aggressive variant, PARP actionable, PARP inhibitor relapse and MSI and a biomarker negative group.

We designed each arm to receive vudalimab and in combination with a standard therapy if warranted. For chemotherapy eligible subjects we originally designed the study to use taxane platinum doublet. Based on a previously reported study that showed a high response rate in order to maximize potential efficacy. In the first patients we saw multiple PSA 50 drops in three of eight patients, and one of these eight patients had a durable partial response. We also saw toxicity related to the intensive chemotherapy combination but without a consistent type of AE among all the patients. However, we modified the chemotherapy dosing regimens keeping vudalimab dosing as planned, and we’re rolling again into the chemotherapy combination cohorts of the study.

The second Phase 2 study is evaluating vudalimab monotherapy and additional high risk populations of prostate cancer as we continue to search for defined sub population that we could advance quickly towards registration. This study is also enrolling patients with gynecological tumors, where we also saw good activity. And finally, this study introduces a flat dosing and more convenient schedule. Now as we continue to enroll these patients, we see a lot of opportunity for the program, as emerging data across the class provides us signs for broad utility across additional solid tumor types. Now, secondly, XmAb808 represents the new class of bispecific antibody, targeting the CD28 pathway, and Xencor is among the first companies to enter the clinic with a molecule in this space.

Clinical data beginning to emerge have indicated dramatically enhanced activity of a checkpoint inhibitor in prostate cancer, where previously, checkpoint inhibitors have had limited activity. So we’re seeing the case that a targeted CD28 bispecific in this case, PSMA, markedly increased the activity of a checkpoint inhibitor and serves as an important validation for the class. We find the data encouraging enough to accelerate our own progress I’m targeting B7-H3, an antigen heavily expressed in multiple tumor types including prostate cancer, renal cancer, lung cancer and many others. As B7-H3 is also expressed at low levels on some healthy tissues, we’ve incorporated our 2+1 bispecific technology into XmAb808 to potentially increase the therapeutic window and we’re moving mAb rapidly with XmAb808.

The first patient in our Phase 1 dose escalation study was dosed last year and following initial doses of XmAb808 we add pembrolizumab as combination therapy. We believe we are well positioned in the CD28 bispecific space, especially as there becomes increasing recognition that this class holds a lot of opportunity and is really starting to heat up not only with our XmAb808 but as our research teams advance more CD28 programs through preclinical development, we hope to share more in the coming months. With that, I’ll now hand over the call to John Desjarlais, our Chief Scientific Officer to review two programs we plan to bring forward in the clinical development this year — into clinical development this year, our IL-12 cytokine XmAb662 and CLDN6 x CD3 bispecific XmAb541.

John Desjarlais: Thanks, Allen. So the key to all of our cytokine programs including XmAb662 is that we reduced the potency dialing down the receptor binding affinity to smooth out the activity profile observed in mild type cytokines, which are natively very high and administered systemically can generate a lot of immune toxicities and get cleared quickly. Now, IL-12 was a different kind of cytokine compared to IL-15 and IL-2. Instead of expanding T-cells and NK cells, IL-2 promotes high levels of nephron gamma secretion, which increases the cytotoxicity of T-cells and NK cells and makes tumor antigens more visible to the immune system. So XmAb662 is a reduced potency IL-12 engineered with XmAb bispecific Fc domain enhanced with our Xtend technology to further duration of action.

And in pre-clinical testing this reduced potency Fc fusion compared to — or native IL-12 Fc fusion demonstrated an improved pharmacokinetic profile of therapeutic window with pretty exposure, a more gradual dose response, and more sustained infer gamma response. Our IND application was recently submitted and allowed by the FDA, and we look forward to initiating a Phase 1 study in patients with advanced solid tumors. Finally, XmAb541 is a CLDN6 by CD3 bispecific antibody built with our XmAb 2+1 format for improved tumor selectivity. And we are developing the molecule for patients with ovarian cancer. We are wrapping up IND enabling studies — we plan to submit an IND later this year. Now, a quick refresher on the XmAb 2+1 format, where we build a bispecific or multi-specific using two tumor binding arms and one T-Cell binding arm.

This is the approach we used to address frequent observation with tumor targets. It’s also expressed our normal tissue. The therapy is intended to address solid tumors off-target effects that can lead to-high toxicity. But having two antigen binding domains, we continue the affinity for tumor antigen and bias the molecules to cells that have a lot of the antigen expressed over normal cells that have lower antigen expression, where it’s just harder to step. We believe XmAb 2+1 could be generally applicable to bispecific antibodies against solid tumor targets, and hope it opens the doors to bringing more CD3 cytotoxic and CD28 co-stimulators into develop. Now with that, I’d like to hand the call over to John Kuch, our CFO to review our financial results.

John?

John Kuch: Thank you, John. Xencor’s broad portfolio of partnerships, collaborations and licenses, continue to generate strong cash-flow to support our operations. In 2022, we received $198.7 million in royalties and milestone payments, which helped fund our investments in our portfolio bispecific and cytokine drug candidates. Total proceeds received in 2022 offset a substantial amount of our operating expenses and we ended up 2022 with cash, cash equivalents, receivables and marketable debt securities of $613.5 million compared to $664.1 million at the end of 2021. Based on current operating plans, we expect to have cash to fund research and development programs and operations through the end of 2025. And we currently estimate we will end 2023 with between $425 million and $475 million cash, cash equivalents, receivables and marketable debt securities.

I refer to you to our press release this afternoon, our 2022 Form 10-K filing for further information about our recent financial results. With that, we’d now like to open up the call for questions. Operator?

Q&A Session

Operator: Our first question will come from Mara Goldstein of Mizuho. Your line is open.

Mara Goldstein: Great, thanks for taking the question. You know, I want to ask a question on 564 and the program there and I’m really trying to understand, I guess maybe when in looking at atopic dermatitis and psoriasis, what you think the benchmarks for success are going to be in terms of being able to advance that product forward?

Bassil Dahiyat: Yes, thanks, Mara. For us right now, there’s, two goals from this phase, Phase 1b multiple ascending dose study that we’re doing first and foremost, is establish a dosing regimen that we can move forward with. And that means someone that’s safe, and one that gives us good coverage of the target or rather good biomarker movement of the Tregs for the duration of our dosing interval. So that’s, that’s step one. And I think those two indications are great indications for that, because you can see looking at skin, how the disease readouts doing in parallel with your biomarkers. So that’s goal one, I think, would the second goal addresses your question as what’s the benchmarks for success? I would say in both of those indications, they’re – generally high I will say that the thing we’re going to be keying off of, is looking at how, how adorable and how long of an effect we can have with the agent.

Does this have new biology by attacking Tregs that you can extend response timing and even beyond, beyond dosing duration that was seen with some competitor programs glimmers of it and how long of a dosing interval can we get? Can we build a best in class dosing interval extending beyond every two weeks that a lot of the competing programs seem to have settled into so I think those are the questions that we want to address with this early study. And then I think after that there’s good benchmarks for and for easy scores.

Mara Goldstein: Okay, and if I can just ask on vudalimab, the discussion around reengaging the trial now that you’ve finished modifying the protocol, can you talk a little bit about just the enrollment characteristics for that program?

Bassil Dahiyat: You mean, how well it’s rolling?

Mara Goldstein: Yes and what those dynamics have been? Yes – what that those dynamics like what you can expect going forward? Do you think you’ll go back to sort of baseline where you were?

Bassil Dahiyat: I don’t know. Allen, do you want to comment on that?

Allen Yang: Yes, so just to be clear, Mara, we have two Phase 2s, we have a monotherapy Phase 2, which explores a sort of new flat dosing and schedule, and that we’ve clinically defined sort of an aggressive type of prostate cancer. And then we have the first Phase 2, which actually molecularly defines different subgroups of prostate cancer. This data is available, but we have an aggressive variant subtype. We have a PARP – sort of a PARP actionable subtype, a PARP inhibitor, sort of relapsed refractory group, microsatellite, unstable group and then finally, everybody else. And I guess what you’re asking is how they’re enrolling. Now that we’ve, we know, we had to pause to just the chemotherapy groups. And that was, three of the groups, but the other groups continue to enroll. And now we’ve opened up the other arms with chemotherapy, and we’ve modified the chemotherapy for two of those groups.

Mara Goldstein: All right, thanks so much.

Allen Yang: Yes.

Operator: Thank you. One moment please for our next question. Our next question will come from Edward Tenthoff of Piper Sandler. Your line is open.

Edward Tenthoff: Great, thank you very much. Appreciate you taken the questions. So I wanted to get a sense. Again, to the extent you can share, sort of how the profile the CD28 is differing, from CD3, and as you sort of, advanced down the pipeline, how do you see, prioritizing one mechanism versus the other are their places where one may make more sense?

Bassil Dahiyat: There’s, multiple facets to that one, John, why don’t you take the point about, you know, refreshing on the differential biology, CD28, CD3 and what we can do with that? And, you know, maybe I’ll jump in on the second one?

John Desjarlais: Yes sure. Yes, thanks for the question, Ted. So the way we think about the CD3s versus CD28 is with the CD3 is it’s basically a more of an artificial immunity, or you’re just taking advantage of any, any T-cell around, engaging it through CD3 and recruiting it to attack the tumor cells with the CD28, because it’s just providing signal to that’s equally intriguing biology, because now you’d that signal to have to build off an endogenous signal one, which comes from neoantigen, T cell reckoning mission by the T-cells. And of course, when you’re applying the CD28, in order to fully open up that Signal 1, you’re generally going to be combining with PD-1 checkpoint blockade. So and then that sort of third arm or that is, we also see, really interesting opportunity for combining the CD3s with the CD28.

And that’s one of the reasons we chose B7-H3 as our sort of flagship CD28 program, because it’s expressed in so many different histologies. It could be sort of a one size fits all combination partner for our CD3s or other people’s CD3s.

Edward Tenthoff: Great, that’s very helpful. Thank you. I got about

Bassil Dahiyat: So go ahead Ted. Did you get all your answers? You need me to address your other point?

Edward Tenthoff: No, please. I was saying go ahead that’s thanks.

Bassil Dahiyat: Yes, so regarding how we view the different MOAs in thinking about them in different indications, some of it depends on target availability. Is there an opportunity to improve response for targets that have been tried that have promising biology but didn’t work out? I think that’s a case where the combination of a CD28 with a checkpoint inhibitor could be very attractive. I think we’ve seen that from competitive programs and prostate cancer with that early glimmer of data. And then philosophically on, targets that you can you have a good nice differential of expression healthy to normal tissue, hearing it with that that direct attack of a CD3 could make sense more, right? So that’s generally how we think about it as we explore, the initial biology of the CD28 over the next year or two.

Edward Tenthoff: Great, thanks, guys excited for more data this year.

Bassil Dahiyat: Thank you.

Operator: Thank you. And one moment please for our next question. Our next question will come from Dane Leone of Raymond James. Your line is open.

Dane Leone: Hi congrats on all the progress. And thank you for taking our questions. I just wanted to get your take on maybe some of the earlier programs that you have emerging now. And firstly, maybe we’d like to hear your updated thoughts on the IL-12 approach? There seems like there’s been maybe a few more discontinuation from pure programs, curious your thoughts on how you’re differentiating to create a therapeutic index, essentially, out of a difficult cytokine. And then maybe on targeting with B7-H3 versus and maybe another emergent approach of using B7-H4 would be interesting as well? Thank you.

Bassil Dahiyat: So on the IL-12, I think it comes down to our reduced potency design is something that has given us significantly improved tolerability profiles versus wild type level activity, cytokines for IL-15 and IL-2 programs. So I think that’s what we’re banking on. Maybe John, if you want to touch briefly on the preclinical profile and non-human primate data we have for XmAb662 and how that we believe differentiates it?

John Desjarlais: Yes, yes in fact, thanks for the question Dane. So we, we actually compare to wild type IL12-Fc fusion to our XmAb662, which, again, is around 100, full potency reduced, and recall. But the problem with these cytokines is when they signal they actually get cleared through the receptors. And so, when we look at monkeys at a wild type IL-2-Fc, we dose it, you know, as high as we can in terms of tolerability, and it’s gone and about, one or two days. In contrast, that’s XmAb662, because of its potency reduction, actually has a it looks incredibly like an antibody, it’s got to have less than 14 to 20 days in the monkeys, that’s likely to extend out even further. So that’s one aspect. Bassil also mentioned that when you have the potency reduce version, you have much greater tolerability.

And then the thing in the monkey studies that kind of inspired me the most is when we put in the wild type L-12. At a range of, a 30 fold differential dose range. And every one of those doses, dose levels gave the same exact initial peak of interferon gamma response, irrespective of the dose. The only thing that changed when you dose more was because you get a little more exposure, you broaden out that peak in terms of time. In contrast with 662, we actually saw a really nice gradual increase in the dose response as we up the dose. And I think that is going to give us a lot more flexibility there to really zero in on the optimal dose and therefore therapeutic index.

Bassil Dahiyat: And regarding B7-H3 versus B7-H4 I think we’ll focus on what we find attractive about B7-H3, it’s expressed in multiple tumor types, it has a good differential across multiple tissues for tumor versus normal tissue, it’s absent or very, undetectable expression, I should say, in certain problematic tissues like the central nervous system, brain and nerves that I think that makes it very attractive, the B7-H4 is a target I’m starting to see pop up and I think there’s very little data or come in on it.

Dane Leone: Do you view B7-H3 in a different light when using a closed in approach like CD28 versus the past few times I’ve used ADCs?

Bassil Dahiyat: I think it could be very, very different in immunotherapy approach versus delivering a direct – actually delivering a cytotoxic could be profoundly different. And so, I don’t know how much read through a we get, other than that you have clearly enough of that target around tumors that an ADC can provide an activity beyond that, there’s such different mechanisms that I don’t know anything we can glean.

Dane Leone: Excellent, thank you.

Operator: Thank you. One moment for our next question. Our next question will come from Etzer Darout of BMO Capital Markets. Your line is open.

Etzer Darout: Great, thanks for taking the questions. First one is a few things going on in prostate just wanted to know if you had any updates on AMG 509, the STEAP1 – 2+1 any updates here from Amgen on the development and for XmAb808. Just wondered, for that program, the start of the sort of combo trial with pembrolizumab is that’s just kind of based on literature, examples and or sort of preclinical data on the synergies or if that’s something where you’re seeing something in the clinic that sort of prompted the combination with pembro? Thank you.

Bassil Dahiyat: Great, regarding Amgen, AMG 509 program, which is licensed, they licensed all the tools and technologies from us to build it. The only information we can share is what they publicly announced, I think they did it as their earnings last month, and it’s that they expect to have initial data presentation in the second half of this year, and that they’re pursuing quite broad Phase 1 program looking at both combinations monotherapy. They’ve got a subcutaneous formulation, and in addition to their IV, so they’re putting a lot of resource behind. That’s all we can share publicly. But we’re certainly encouraged by the effort, and by the initial data we saw a year ago. For 808, I think that there is a very strong theoretical reason in fact, the fundamental basis for why you want to use a CD28 bispecific for combining it with either a checkpoint inhibitor, or say a CD3 bispecific.

Because that completes the circle of getting the CD28 to give you that potent signal to activation and, and maintenance of activation, while the other side Signal 1 initiates that T-cell movement. And so pembro is based on very strong theoretical data for that combo for why you want to combine a checkpoint inhibitor with a CD28 for that CD28 to put the checkpoint inhibitor over the hump, when it’s in a nominally cold tumor.

Allen Yang: And Bassil, I’ll just to put a finer point on that. There’s some pretty strong literature that the dominant mechanism of action of PD-1 that checkpoint itself is to directly inhibit CD28 signaling. And most people also think it inhibits the Signal 1. And so, the idea is that the B7-H3, CD28 by itself is going to be hindered unless you could also block PD-1 at the same time.

Etzer Darout: Great, thank you.

Operator: Thank you. One moment please for our next question. And our next question will come from David Dai of SMBC. Your line is open.

David Dai: Great thanks, for taking my questions and congrats on the progress. So I have two questions first it’s just on vudalimab, we have seen some competitors showing PD-1 and CTLA-4 as if – that’s if anybody who has some pretty intriguing data in the metastatic prostate cancer at ASCO, GI, could we become compare and contrast to your vudalimab drug profile versus the competitor PD-1s CTLA-4 antibodies?

Bassil Dahiyat: Sure, so I guess, for starters, I guess we’ll say there’s a lot of movement in the PD-1, CTLA-4 class that’s starting to happen, also based on very early studies. And we’re very encouraged by how that is reflecting on now the potential for these dual checkpoints as we start to sort out how to use them. I’ll start off by saying that the relevant comparison is the monotherapy data from our Phase 1 expansion cohorts that we presented a while back compared to what was presented at ASCO GU. So it’s that monotherapy, monotherapy comparison. So I don’t know. Allen, did you want to touch on that?

Allen Yang: Yes, sure, Bassil I’ll be happy to. I mean, I think the data at ASCO GU sort of validates the class in prostate cancer. And, you know, it’s difficult to compare the data between our data and there’s, you know, what we reported as a PSA response rate of about 20% in the heavily pretreated U.S. population, U.S. only population where the median number of therapies was five. The other data that was reported at ASCO GU reported a response rate, a PSA response rate in the high 20%, but a less pretreated population where the median number of treatments was only two. So again, I think it’s interesting data it supports the idea of doing these PD-1s, CTLA-4s in prostate cancer. And we already believe that, and that’s why we started 2 Phase 2 programs and are moving aggressively to try to figure out a registration pathway.

David Dai: Got it, that’s really helpful. And just another question on the plamotamab I know you’re currently developing a subcu version of the drug. Could you maybe talk a little bit more about the status of the subcu formulation? And when should we expect to see data from that program?

Bassil Dahiyat: So we initiated, clinical studies that is dose patients with the subcu formulation last quarter, and that is a dose escalation base study so we can figure out the subcu regimen priming dose and step-up doses. We, of course, have all the information we have from the IV that we think is going to greatly accelerate that process relative to what we had learned from the IV. And of course, we’re doing this in collaboration with our partner, Janssen. So that’s going forward as part of the whole package of our B-cell collaboration with Janssen, which also incorporates our CD28 bispecifics where we just this quarter, announced that we have achieved the candidate selection milestones. So we’ve deliberate deferred the B-cell targeted CD28 that ultimately, when it gets to the clinic would be combined with pembro — sorry, with – plamotamab.

So that’s the sort of general context. We’ll guide on data as we go forward with the caveat that, of course, Janssen has to be party to wanting to disclose data.

David Dai: Got it, thank you so much.

Operator: Thank you. And one moment for our next question. Our next question will come from Charles Zhu of Guggenheim Partners. Your line is open.

Charles Zhu: Hello everyone and thanks for taking the question. I have one question that’s essentially a follow-up to something that Etzer had asked, but regarding XmAb808, encouraging to see that you guys are combining this with pembro, but perhaps given you have other pipeline assets in the clinic that are also going prostate cancer with similar mechanisms such as vudalimab. How are you gauging the potential to, I guess, codevelop with vudalimab as opposed to an external asset? And how should we think about that? Thank you.

Bassil Dahiyat: We think that’s a great idea and a great approach. We absolutely have it in our minds. As we escalate with 808, we want to obviously do that very quickly, and we have to start from relatively low levels because, of course, regulators are cautious with new immunotherapies. So as we escalate, we have, in our minds, how we can quickly flex in with our own pipeline agents such as vudalimab or perhaps even CD3 bispecifics that could overlap with the expression patterns it will hit are going moving forward. For example, XmAb819, or MPP so absolutely, I think the key here is get rolling fast, try to understand data in light of a well-understood standard pembro, where enrollment, frankly, is greatly facilitated by its broad use and jump in once we’ve gotten a little further.

Charles Zhu: Got it great, thanks for taking the question.

Operator: Thank you. And one moment for our next question. Our next question will come from Bill Maughan of Canaccord Genuity. Your line is open.

William Maughan: Hi good afternoon and thanks. So just looking at the cash guidance for this year and thinking through the fact that sotrovumab is still available in some ex U.S. jurisdictions? How much of sotrovumab are you expecting this year in that guidance? And then I’ll have a follow-up.

Bassil Dahiyat: 23.

William Maughan: Yes.

Bassil Dahiyat: 23.0 it’s been coming down since Q1 and they lost their U.S. authorization in Q1. So it’s just been ex U.S. So going forward, anything we get is found money. We have no expectations of future revenue.

William Maughan: Great. And then on your 2+1 T-cell engagers so understanding that the differentiated mechanism allows you to go after something like a CD28. Do you see room to improve on more well-worn targets like CD3 over products that are later in development and kind of come in behind them and steal share with a better version of what’s already kind of making it to market?

Bassil Dahiyat: Absolutely we have all of that kind of consideration in mind. And we watch very carefully any CD3 programs that are advancing into the clinic. I would say it’s still early days in the whole CD3 world. So there’s not a lot of late-phase CD3 work yet outside of the malignancies the CD20 CD3s and BCMA CD3 is dominating. And those don’t strike us as maybe fruitful avenues to use this plan of attack as those are not solid tumors. But absolutely, we look at potential fast follower approaches with the 2+1 carefully. I think the opportunity space is still just emerging, so that’s why we haven’t declared any yet.

William Maughan: Great, thank you.

Operator: Thank you. And one moment for our next question. Our next question will come from Michael King of EF Hutton. Your line is open.

Michael King: Hi thanks guys, can you hear me okay?

Bassil Dahiyat: Yes.

Michael King: Okay. Just so maybe pick up where Dane left off on IL-12. I just wondered, just as far as the cytokine space is concerned, sort of writ large I’m a big fan of the engineered cytokine space. But I just wonder if we know enough either as antagonists or agonists, what the real correlates or the real clues are to clinical success. It’s nice to see gamma interferon levels go up in response to IL-12. But can we know what the meaning of that is. And I think it’s kind of, again, especially important to think about in light of some of the recent developments, both in IL-12 and the IL-2 world. I just saw as is called literally as call started, Nektar indicated that it’s respell the liken had some activity in SLE, but did not achieve a clinically relevant not results. So do we know we’re up about this class to really put them in the clinic without further preclinical exploration? Thanks.

Bassil Dahiyat: There’s no doubt that we don’t have perfect knowledge about what it’s going to take to succeed in cytokine. So I would say that’s the case for pretty much almost any drug. I think with cytokines — we do know that a lot of the approaches that have been tried in the past have been challenged and have not worked. And so I will say that we are taking a specific approach. We are putting a bet down on reduced potency cytokines which inherently because of that reduced potent, gives you longer action and a lower peak punch, which so far with two programs out of 2 is has reduced tolerability issues, but still given this profound biomarker movement. So we think that’s a great start. Does it answer the question fully, do we — are we out of the risk window?

Absolutely not we’re optimistic our IL-12 will share those kinds of properties on the biomarkers and the tolerability, but we’re going to see, right, if our preclinical data plays out in humans, we’ll start seeing that later this year. So we don’t have the answers, but we’ve got a bet that so far is performing as it should. This reduced potency. And we think the opportunity is enormous if we could be among the first to crack that code. So it’s absolutely a bet we think is worth taking. And I think the one thing we can hang our hat on is if you can see the immune markers of activity that certainly ties in better to whether you’re going to have success. We know wild-type two, Proleukin creates all sorts of immune markers to file two activity, most of them toxic, but it also in a small number of patients can cure them.

So I think that’s all we’ve got. And I think how we position ourselves is really strong. And I will say referencing some of the recent repeg news, I will say that lupus is an area where many successful drugs have had unsuccessful fungal trials, and it’s a challenging development space. Certainly, Vencore has passed has had some experience with tricky conflicted Phase 2 data in lupus. And so, we’ll dig into that more. But it’s a hard read through on a lupus Phase 2 really to anything, I would say.

John Desjarlais: And Bassil, if I can, I’ll just follow-up on that question about the interferon gamma. So – the reason it interferon gamma is so important is it does a couple of things. First and foremost, it can have a direct tumor cidal effect we’re probably more intriguingly is the most famous thing it does. It does two favors things to tumor cells it upregulates Class I MHC. And that’s what the T-cell receptors are looking for to recognize the tumor cells. So that’s a really desirable activity. And then the other famous thing it does is upregulate PD-L1. And that’s exactly why combining an IL-12 with erbrolizumab or other checkpoint never makes a lot of sense.

Michael King: Can I ask you why did you guys choose to develop an IL-2 agonist first as opposed to I think going to autoimmune direction rather than oncology?

Bassil Dahiyat: Well, we think that, that was a great hypothesis, and we already to try Treg boosting for autoimmune and we already have our IL-15, which addresses much the same pathway that we think with a better suited natural precursor molecule for our engineering. So it would have been redundant to do an IL-2 given P306 and the really promising Phase 1 data we’ve seen with it so far.

Michael King: Okay appreciate the answer, thanks guys.

Operator: Thank you. One moment please for our next question. Our next question will come from Brian Cheng of JPMorgan. Your line is open.

Brian Cheng: Hey Bassil, how are you? And thanks for taking my question. Just going back to vudalimab We’re curious if there’s any strategic shift in your way of thinking around the development of vudalimab since Astra is planning to start Phase 3 with their own bispecific later this year? And I have a follow-up?

Bassil Dahiyat: Yes, we’re certainly aware of that data from Astra and think that it’s very promising. We — we know that our molecule XmAb – I got, I was about to call it Xb717 vudalimab shares a very similar design, monomic binding to both targets essentially very limited CTLA-4 binding without – PD-1 binding, so it’s very conditional binding. And so, we think that’s a really interesting comparison set. We’re looking very hard at that. We’re thinking through possible game plans and hope to be able to guide on that really soon. So yes, it’s a very relevant point. And I think the key element there is their willingness to combine with highly active chemo regimens in frontline lung where you really, I think, have to have chemo as part of your backbone given that the comparator is a chemo PD-1 combo.

I think that that’s a really intriguing synergy with our thinking around using aggressive chemo and prostate cancer and some of the experience we gained there. So I want to talk about that later, but it’s something we’re definitely on our radar.

Brian Cheng: Great. And just related to 662, are there any learnings from either interleukin approaches in the past to give you a better sense of what’s the low-hanging fruit here for 662 in terms of the solid tumor type that you think could be most sensitive to the IL-12 approach?

Bassil Dahiyat: John, do you want to tackle that one?

John Desjarlais: Yes. I mean I would build off of my response a second ago about we expect 662 to submit a lot of interferon gamma upregulate Class I MHC. And so probably the low-hanging fruit, as you put it, would be to go after the more immunogenic tumor types like melanoma, places where checkpoint inhibitors already worked. There’s, of course, certain practical synergies with that approach as well. But maybe the slightly higher hanging fruit would be to go after histology that have struggled a little bit shown simple signs, a little bit of evidence of activity with checkpoint inhibitor. But if we can make those tumors more immunogenic with an IL-12 then that’s a whole new opportunity space.

Brian Cheng: Thank you, John. Good luck on the move. Thank you.

Operator: Thank you. And one moment for our next question. Our next question will come from the line of Peter Lawson of Barclays. Your line is open.

Unidentified Analyst: It’s for Peter. Thanks for taking the question. We were hoping to get an update around your ENPP3 program, 819 and how the progress is there and how we should be thinking about timing for initial data and for the recommended Phase 2 dose whether that might be something we see in 2023.

Bassil Dahiyat: We could just barely hear you just from a volume perspective, if you could speak up, we know you’re asking about 819.

Unidentified Analyst: Oh, apologies. Is it better now?

Bassil Dahiyat: Yes, that is.

Unidentified Analyst: Okay. Perfect. We were just hoping to get an update on your 819 program for the ENPP3. And just how progress is going there? And if we could see initial data and maybe recommend a Phase 2 dose in 2023? And then just secondly, how we should be thinking about how this will compare profile cells’ ENPP3 ADC program? Any color there would be great. Thank you.

Bassil Dahiyat: So I guess on the update, it’s — we’re about six months in or seven months into the Phase 1 dose escalation. And I think one thing we’ll say is that investigators in real cell carcinoma are very enthusiastic to have the option of CD3 and therefore, are — have been great collaborators and we’ve been accruing patients really well. So I think that’s all we can say about that yet. We don’t have a timing on data guidance. We’ll do that as we’re advancing cohorts and understand better the regimen when we would guide on how we’re seeing those. We’re not giving a timing update on that yet other than saying the accrual has been going really, really well. The profile of a CD3 versus a particular 2+1 CD3 versus an ADC, we hope would have a completely different kind of side effect profile that offers something that physicians don’t have right now compared to salvage chemo, I mean any comments there, Allen, in that particular space.

Allen Yang: Renal cancer has been one of those tumors that are traditionally immunoresponsive. And so we think that the immunotherapy would hopefully have an advantage. But it’s still early days. And as Bassil said, we have high investigator interest. They’re really hungry for this MOA and this disease type. And so we’re very excited. I also will add — we can’t sort of predict what our recommended Phase 2 dose will be and how many cohorts we need to get there. But along with investigator interest, the trial design is fairly novel in terms of how we’re escalating without disclosing our strategy there that allows us to sort of aggressively pursue the recommended Phase 2 dose, both in the priming dose and the actual step-up dosing as well as the final highest dose as well.

Unidentified Analyst: Okay.

Operator: Thank you. One moment for our next question. And our next question will come from Gregory Renza with RBC Capital Markets. Your line is open.

Unidentified Analyst: It’s on for Greg. Congrats on the progress, and thanks for taking my question. Just on the XmAb 2+1 design for 819 and AMG 509 being armed with the knowledge of these compounds, what’s the ultimate effect on the development and future of the 1+1 class, so the future of plamotamab in 968. Thanks so much.

Bassil Dahiyat: I’ll let John handle that and give a thoughtful response. But I will just tell you 1+1 has plenty of roles to play if you know how to pick properly.

John Desjarlais: Yes. I think the easiest way to think about that is 1+1 worked really well for plamotamab because it’s very well established. You can get rid of all your B cells and hopefully, including the lymphoma B cells and that’s an on-target off-tumor toxicity that is — it’s fine to live with that. When you go into the solid tumor setting, you’ve got to be a little more careful. And a lot depends on the target and the selectivity profile of the target, how well is overexpressed and selectively expressed in the tumor versus normal tissue, also would depend to some extent on which of the normal tissue is expressed in because some are a little bit more dangerous to attack than others. So in general, we don’t see a downside to using the 2+1. And so we’ll likely use that for most of our solid tumor targets, but there could be exceptions.

Unidentified Analyst: Great. Thanks so much.

Operator: Thank you. And one moment please for our next question. Our next question will come from the line of Jonathan Chang of SVB Securities. Your line is open.

Unidentified Analyst: Hi, guys. This is for Jonathan Chang. Thanks for taking my questions. I know you said that the PSMA CD28 data we’re validating the class kind of broadly, but — looking at the data, it didn’t have like the cleanest AE profile, particularly with regards to the immune mediated responses. So just kind of wanted to get your thoughts on how you’re thinking about the AE profile for this class sort of in light of what we’ve seen with CD28 monotherapy approaches and then sort of maybe discuss how your approach might mitigate some of these effects. Thanks.

Bassil Dahiyat: Yes. I think that the choice of co-target we believe, is going to be very important. It was interesting that some of the AEs, the most dangerous AEs that we’re seeing are ones that are not typical for a PD-1 inhibitor. Look remember, that study was done combining it with the PD-1 inhibitor cemiplimab and you saw, in particular, central nervous system involvement in a couple of patients, peripheral nerve involvement in a couple of patients, thermal patients. And it’s notable that the target choice, PSMA outside of prostate has among its brightest expression in brain and nerve. So I think there is a quite reasonable hypothesis there that you’re activating immune response against the target and the tissues that have that target.

And in fact, I think the sponsor of the study emphasized that they saw those AEs in patients that responded. Very early data, and it’s hard to make too much of it, but I think the idea that CD28 can greatly activate the immune system in cold tumors has been pretty convincingly demonstrated. Now the question is, can my prudent choice of target, we make a great drug. We’re exploring that, but we’re — we’re excited by the prospect.

Unidentified Analyst: Got it. Makes sense. Thank you so much.

Operator: Thank you. I see no further questions in the queue. I would now like to turn the conference back to Bassil Dahiyat for closing remarks.

Bassil Dahiyat: Thanks, everyone, for joining us today, and we look forward to updating you throughout the year. Have a great evening.

Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.