Xencor Inc (XNCR) 2014 Q1 法說會逐字稿

Good afternoon and welcome to the Xencor first-quarter 2014 conference call. (Operator Instructions). Please be advised that the call is being recorded at the Company's request.

At this time I would like to turn the call over to Deanne Tockey of Stern Investor Relations. Please proceed.

Thank you, operator. Good afternoon. This is Deanne Tockey with Stern Investor Relations and welcome to Xencor's first-quarter 2014 conference call. This afternoon we issued our financial results and business review press release which is available at www.Xencor.com.

Today on our call, Bassil Dahiyat, PhD, President and CEO, will discuss the Company's business and clinical highlights from the quarter. John Kuch, Vice President of Finance, will review the financial results and then we will open up the call for 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 research and development, future financial and operating results, future market conditions, the plans and objectives of management for future operations and the Company's future product offerings.

These forward-looking statements are not historical facts but rather are based on Xencor's current expectations and beliefs and are based on information currently unavailable to us. The outcome of the events described in these forward-looking statements is 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 sections of its most recently filed quarterly reports on Form 10-Q.

With that let me pass the call over to Bassil.

Thanks, Deanne. Good afternoon, everyone, and thanks for joining us today on our first-quarter earnings call.

So far in 2014 we have continued to make progress with our clinical development programs and we have worked very hard to maximize the potential of our antibody engineering platform we call the XmAb platform. Following our recent announcement that Merck initiated clinical testing for one of the programs that has licensed our technology which I will go into more detail about in a little bit, we now have six clinical programs ongoing internally with partners that use our proprietary XmAb platform. So we are always very excited to announce the continued growth of our pipeline.

The XmAb antibody engineering technology enables us to make small changes to the structure of monoclonal antibodies to create new mechanisms of therapeutic action and to enhance antibody functions. We are currently developing internally two product candidates that use the XmAb technology, XmAb7195 and XmAb5871 for which Amgen has an option to acquire an exclusive worldwide license after a Phase 2b proof of concept.

XmAb7195 we are developing for asthma and allergic disease. We remain on track to initiate a Phase 1a single ascending dose clinical trial for asthma in the second quarter with preliminary data anticipated by the end of 2014. XmAb7195 works by binding IGE and simultaneously through its Fc domain engaging the Fc gamma R2b pathway. The specific Fc domain we use is the XmAb immune inhibitor Fc domain and by doing so, we rapidly clear IGE from the circulation.

This trial will be conducted in healthy volunteers and will include in addition parallel cohorts in allergic subjects with very high IGE levels and is designed to study safety pharmacokinetics in humans as well as validate XmAb7195's ability to suppress both free and total IGE. If the trial is successful, in 2015 we will start a Phase 1b multiple ascending dose clinical trial in healthy volunteers in addition to the parallel cohorts in patients with mild to moderate asthma to study again safety, pharmacokinetics and IGE reduction.

There is a tremendous unmet need for the treatment of severe asthma patients where a significant portion of patients are poorly controlled on existing inhaler therapies and on oral corticosteroids. The current lead therapy for this segment is Xolair. A significant fraction of patients however that are treated with Xolair do not reach target IGE reductions or they have such high IGE levels to begin with that Xolair is contraindicated because of the high likelihood of lack of affect.

We believe XmAb7195 has the potential to be a product with first-in-class mechanism of action for reducing IGE that will let us address the full spectrum of severe asthmatics including those that are hardest to treat because of their very high IGE levels.

Our next internally developed program is XmAb5871, that is our most advanced antibody containing our XmAb immune inhibitor Fc domain which has the potential to treat autoimmune diseases. The current clinical development focus is in rheumatoid arthritis and lupus. We expect topline data from the ongoing Phase 2a clinical trial in patients with moderate to severe rheumatoid arthritis in the second half of 2014.

As we previously mentioned, Amgen, our partner, has an option to acquire an exclusive worldwide license after Phase 2b proof of concept but in the meantime we are controlling all clinical development.

Next I will mention MOR208, formerly called XmAb5574. This drug candidate is partnered with Morphosys and we are currently conducting a Phase 2 clinical trial in B-cell acute lymphoblastic leukemia or BALL as well as a separate Phase 2 trial in non-Hodgkin's lymphoma or NHL. In addition, there is an investigator sponsored Phase 2 trial in chronic lymphocytic leukemia or CLL in combination with lenalidomide that began in January of 2014.

So this broad development program that Morphosys is pursuing creates a number of opportunities for MOR208 in the rapidly evolving treatment landscape for B-cell malignancies.

Next I would like to highlight our emerging pipeline based on the newest element of our XmAb technology, our new bispecific Fc domains which allow us to create dual antigen targeting molecules. By using an Fc domain which is the core of our XmAb technology as an integral part of the molecule, we can maintain the advantage of natural antibodies in a bispecific antibody and potentially enable us to retain a long circulating half-life, we can potentially use standard antibody manufacturing approaches and modulate potency to reduce toxicities. So we remain on track to advance one of our lead bispecific molecules into development by the middle of this year.

So far we have produced a preclinical candidate that targets CD3 and CD38 simultaneously and confirms potent activity and multi-day half-life in mouse models typical standard antibodies, in multi-day half-life.

Now in March of this year we presented new data featuring this bispecific approach for recruiting cytotoxic T cells against tumor cells at the annual Summit on Practical Emerging Trends in Multiple Myeloma. We have also produced the second preclinical candidate, this one targeting CD3 and CD123 for use in the acute myeloid leukemia.

Finally, I will review our technology licensing program. We have granted a number of technology licenses to pharma and biotech companies to utilize our XmAb technology in their own development programs. These have generated funding for us through upfront payments and additional potential funding through milestone payments and royalties if these programs progress.

In 2013, we granted Merck access to one of our Fc engineering patents for a therapeutic monoclonal antibody and in April of this year, we received a milestone payment triggered by their initiation of a Phase 1 clinical trial in the first quarter. So this was for a biologic candidate that uses our XmAb intellectual property. We will continue to seek licensing and partnering opportunities when it makes sense for our product and development of business strategy.

With that, I will now turn it over to John Kuch for our financial review.

Thank you, Bassil. In this afternoon's press release, we reported cash balances totaling $72.5 million as of March 31, 2014 compared to $78 million as of December 31, 2013. Total revenues for the first quarter were $2.2 million compared to $1.3 million for the same period of 2013.

Our revenues are earned from technology licensing fees and milestone payments from our partners for the license of our drug candidates and the use of our proprietary XmAb antibody engineering technologies.

Total research and development expenses for the quarter were $4.2 million compared to $4.6 million for the same period in 2013. Increases in spending in XmAb7195 program and the bispecific program were offset by lower spending on XmAb5871 program with a net result of $400,000 in lower research and development spending for this quarter compared to the first quarter last year.

We expect our overall research and development expenses to increase in subsequent periods and as we advance our development programs further. In particular, as we decrease the number and size of our clinical trials over time.

General and administration expenses from first quarter ended March 31 were $1.7 million compared to $700,000 for the same period in 2013. The increase primarily reflects increased compensation expenses in professional fees. We expect our general and administration expenses to continue to increase as we incur additional costs associated with being a publicly traded Company.

The net loss for the first quarter ended March 31 was $3.7 million or $0.12 on a fully diluted per share basis compared to a net loss of $4.6 million or $62.78 on a fully diluted per share basis for the same period in 2013. The decrease reflects increased revenue and lower expenses in the first quarter this year compared to the first quarter last year. The decrease in earnings per share announced also reflect the increase in shares outstanding as a result of our IPO in December 2013.

Based on our current operating plans, we expect to have sufficient cash to fund research and development programs and operations through 2016 and we estimate that our year-end cash and cash equivalents will be approximately $54 million.

Thank you very much. We will now open up the call for your questions. Operator?

(Operator Instructions). Jason Kantor, Credit Suisse.

Good afternoon. This is Jeremiah filling in for Jason. In regards to the Phase 1 study for 7195 that you hope to start soon, how many patients, how many healthy volunteers do you expect to enroll and also how many patients do you hope to enroll that will be high IGE patients?

So there is a design that allows for up to five cohorts of healthy volunteers and three cohorts of high IGE allergic subjects, each of those cohorts would be eight patients randomized six on active and two on placebo. So when you add that up, we would have 64 patients total in the trial, subjects I should say, not patients.

And then when you mentioned that you hope to have data by the end of this year, do you plan on top lining that data and would you have data for all those patients?

It is not clear whether we will have data for all of the patients by the end of the year, that will become more clear as we move through the trial and the specific operational aspects of it. Currently we are committing to having the data and we will be guiding on how we announce it at the appropriate venue.

And then just last question, in terms of your R&D spend throughout the year, how do you expect this to change particularly with the new study?

Well, we have budgeted and planned for the R&D spend that we have guided to or rather the cash balance that we have guided to at the end of the year so we have pretty good confidence in where we are going to end up in terms of cash balance at the end of the year. In general as we move forward in the clinical, this program as we advance our other programs over the next few years, we do expect an increase in R&D spend.

Thank you for taking the questions.

Michael Schmidt, Leerink.

Thanks for taking my question. I am not sure if I missed it. You said you will take one of the two bispecific antibodies into formal development this year. Which one is it?

We haven't guided on that yet.

Okay. And so there are a couple, I think there are three CD38 antibodies in the clinic right now as well as a couple of molecules targeting CD123 in development. Where do you see differentiation from these other drugs that are being developed targeting the same targets?

Yes, where we see differentiation is in the we believe unique combination one can have of both potency and potentially high activity from recruiting cytotoxic T-lymphocytes through CD3 binding to the target cell as well as in this combination (inaudible) as well as by using our Fc domain technology, our XmAb technology, the kind of long action from having long half-life and the kind of tunability from having a flexible scaffold that lets us modulate the kinds of toxicities that can emerge.

So if you look at the CD38s that are out there, our differentiation would come from being able to fit in by having a potentially much more active mechanism and active cytotoxic mechanisms than you get with a standard IgG1 antibody which is what I believe the three current programs in the clinic are.

Certainly we have seen from the limited experience with co-engagement you can see profound activity against tumors and at the same time, we can have that in a molecule that has antibody like properties like half-life and then you look at the CD123s, I think it is a situation where it is again that combination where we think we differentiate of being the only offering that has a long duration of action and half-life of an Fc domain with the recruitment of cytotoxic T-lymphocytes.

Okay. And do you expect any news flow from any of your partnerships or partnered drugs that are being developed?

With the exception of XmAb5871 where we are driving the clinical program and we are guiding for topline data from the RA trial for the end of this year, with the exception of that program we don't have really any kind of element of control. These are technology licenses for the most part or compound licenses with our Morphosys collaboration and it is really up to the partner to provide any guidance or news flow on that so we can't really offer much there.

Okay, thank you.

There are no further questions. I would like to turn it back to Bassil Dahiyat for closing remarks.

Thank you very much. As I mentioned earlier, we are anticipating some exciting milestones through the rest of 2014. We expect preliminary XmAb7195 Phase 1a IGE reduction data and we also expect XmAb5871 Phase 2a rheumatoid arthritis topline data by the end of this year. In addition we plan to initiate development work for our first bispecific program by the middle of this year.

Thanks again very much for your time and we look forward to updating you again very soon.

Ladies and gentlemen, this does conclude today's conference. Thank you for attending. You may now disconnect. Everyone have a great day.