Xencor Inc (XNCR) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Xencor Incorporated third-quarter 2015 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

I would now like to turn the conference over to Hannah Deresiewicz, Stern Investor Relations. You may begin.

Thank you, operator. Good afternoon. This is Hannah Deresiewicz with Stern Investor Relations and welcome to Xencor's third-quarter 2015 financial results conference call. This afternoon we issued a press release which outlines the topics that we plan to discuss today. The release is available at www.xencor.com.

Today on our call, Bassil Dahiyat, Ph.D., President and Chief Executive Officer, will discuss the Company's business and clinical highlights from the last quarter. John Kuch, Vice President of Finance, will review the financial results and then we will open the call up 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 including clinical trial plans of for XmAb5871, XmAb7195, XmAb14045 and XmAb13676 and its other bispecific product candidates, 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 available 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 section of its most recently filed quarterly report on Form 10-Q.

With that, let me pass the call over to Bassil.

Thank you, Hannah, and good afternoon everyone. We are happy today to report on the advancements made in the recent months for both our internal and partnered XmAb programs which collectively represent the full breadth of our Fc engineering technology suite. We will also be describing the upcoming development milestones we expect for our programs in the coming months.

I'll start today by updating on XmAb5871, it is our first in class monoclonal antibody that targets CD 19 with its variable domain and that uses our proprietary XmAb immune inhibitory Fc domain to target Fc-gamma-RIIB, a receptor that inhibits B cell function. We remain on track to file an IND for an open label single arm multiple dose pilot Phase 2 study of XmAb5871 in the rare autoimmune disorder IgG4 related disease this year and plan to begin patient enrollment in early 2016.

As we described previously, IgG4-RD is a rare fibro-inflammatory autoimmune disorder that affects approximately 10,000 to 40,000 patients in the US and currently has no approved therapies. Corticosteroids are the standard of care. We believe that B cells and IgG4-positive plasma blast may play an important role in disease process and that B cell inhibition has significant potential as treatment modality.

Now the planned pilot trial of 5871 in IgG4-RD is designed to assess control disease activity with every other week intravenous administration. We plan to enroll approximately 15 subjects for up to 24 weeks and will utilize the recently developed IgG4-RD responder index to measure treatment activity. We are also collaborating with its developers to complete a large international validation study of the responder index. We expect to report preliminary data from the pilot trial by the end of 2016.

We also plan in 2016 to initiate clinical development in an additional autoimmune disease indication for XmAb5871 where we believe we can clearly assess 5871 clinical activity and have the potential for meeting significant unmet need.

Finally, the busy slate of activities includes a bioequivalence trial with a subcutaneous formulation during 2016.

I will now turn to our second internal clinical program, XmAB7195 which is our antibody that targets IgE with its variable domain and uses an identical XmAb immune inhibitor Fc domain as 5871. Now this results in three distinct mechanisms of action for reducing IgE levels. In particular, rapid clearance of IgE via Fc-gamma-RIIB binding on liver sinusoidal endothelial cells.

We believe that XmAb7195 has the potential to provide a first-in-class mechanism for reducing IgE that will address the full spectrum of severe asthmatics including the hardest to treat population with high IgE levels.

We look forward to reporting complete IgE reduction and safety data from our ongoing Phase 1a trial in asthma in the first half of 2016. The trial includes the addition of cohorts of healthy volunteers treated with a split dose of XmAb7195 consisting of a small priming dose followed by a second ascending after one week. This new part of the trial will allow us to examine reduction of IgE and safety data after a second IV administration.

And as we announced at our analyst day in June, we are also planning to initiate a Phase 1 trial with the subcutaneous formulation of 7195 in 2016.

I will turn now to our XmAb bispecific oncology pipeline. Now the core of our bispecific programs is a novel XmAb Fc domain that is a scaffold for two or potentially more different antigen binding domains creating a single molecule that combines two targets simultaneously. By using this Fc domain as the basis for our bispecific structure, we have developed a flexible approach that lets us rapidly create candidates by combining any two binding domains while potentially maintaining full-length antibody properties such as favorable in vivo half-life and simple manufacturing.

Now we have selected two tumor targeted T cell engaging antibodies to advance in the clinical testing in 2016. These bispecific antibodies bind to and activate T cells for highly potent and targeted killing of malignant cells by binding CD3 on one side of the bispecific molecule. And their XmAb Fc domains confer long circulating half-life, stability and ease of manufacture.

The first of these candidates is XmAb14045. It targets CD123 on acute myeloid leukemia cells and of course CD3. It showed sustained and potent depletion of target cells in primate studies from well-tolerated single IV doses. We expect to initiate a clinical trial in the first half of 2016 with 14045.

The second one is XmAb13676. It targets CD20 on malignant B cells and CD3. We expect to begin a clinical trial for B cell malignancies in the second half of 2016 for XmAb13676.

We also intend to start clinical trials for additional bispecific candidates in 2017. Our pipeline development approach enables this expansion of our pipeline because it exploits the simplicity and flexibility of our bispecific XmAb Fc domain to plug and play antigen binding agents together.

Now this plug-and-play simplicity enables our recently announced bispecific collaboration with Amgen. In September we entered a research and license agreement with Amgen to develop and commercialize five bispecific molecules based on their antibodies and also including our preclinical T cell engager program directed at CD38 and CD3 for multiple myeloma.

The Amgen programs consist of predetermined targets and include T cell engagements for oncology and bispecific antibodies for inflammatory diseases. Now under this agreement, we have received a $45 million upfront payment and are eligible to receive up to $1.7 billion in clinical regulatory and sales milestones in addition to royalties on sales.

Now Amgen will be fully responsible for preclinical and clinical development and commercialization worldwide while Xencor is going to be providing molecular engineering of the candidates. This division of tasks allows us to maintain a sharp focus on the development of our own internal programs. We believe that the promise of long half-life and ease of development can greatly facilitate Amgen's efforts to make their own bispecific drugs.

In particular, we are very happy to be working with the company that has launched the first bispecific immuno-oncology antibody in the US which we believe further validates potential to the XmAb bispecific platform.

In other partnering news also in September, our partner CSL Limited through its licensee, Janssen, initiated a Phase 2 clinical trial of CSL362 which is now called JNJ56022473. It uses our XmAb cytotoxic Fc domain as a potential treatment for patients with AML. Now this trial initiated -- triggered a milestone payment to Xencor and is the third drug candidate using our XmAb technology to enter Phase 2 clinical trials.

Now what this I will turn over the call to John Kuch.

Thank you, Bassil. In this afternoon's press release we reported cash equivalents and marketable securities totaling $197.6 million as of September 30, 2015 compared to $54.7 million as of December 31, 2014. The increase reflects net proceeds of $115 million received from completion of Xencor's follow-on financing in the first quarter and net proceeds from partners and collaborators during the first three quarters of 2015 including an upfront payment of $45 million received from Amgen in the third quarter.

Revenues for the third quarter of 2015 were $3.5 million compared to $0.8 million in the same period of 2014. Revenues for the nine-month period ended September 30, 2015, were $6 million compared to $3.9 million for the same period in 2014.

Revenues in the three- and nine-month period ended September 30, 2015, were earned primarily from the Company's Novo Nordisk and Alexion collaborations and also reflect a milestone payment we received from our CSL collaboration compared to revenue for the same periods in 2014 which was primarily earned from our 2010 Amgen collaboration which was terminated in the fourth quarter of 2014.

Research and development expenditures for the third quarter 2015 were $10.6 million compared to $5 million for the same period in 2014. R&D expenses for the nine-month period ended September 30, 2015 were $23.3 million compared to $13.5 million for the same period in 2014. The increase in R&D spending in the three and nine months ended September 30, 2015 over the same periods in 2014 is primary due to increase spending on the Company's bispecific technology and development pipeline including its initial bispecific oncology candidates, XmAb14045 and XmAb13676.

General and administrative expenses in the third quarter 2015 were $3.2 million compared to $2.2 million for the same period in 2014. G&A expenses for the nine-month period ended September 30, 2015, were $8.5 million compared to $5.5 million for the same period in 2014. The increased spending in the G&A areas is due to increased staffing in the Company's legal and accounting departments and additional spending in professional fees for legal and business development activities.

Non-cash share-based compensation for the first nine months of 2015 was $3.4 million compared to $1.1 million in the first nine months of 2014.

Net loss for the third quarter of 2015 was $10 million or $0.25 on a fully diluted per share basis compared to a net loss of $6.3 million or $0.20 on a fully diluted per share basis for the same period in 2014.

For the nine months ended September 30, 2015, the net loss was $25.3 million or $0.66 on a fully diluted per share basis compared to a net loss of $15.1 million or $0.48 on a fully diluted per share basis for the same period in 2014.

The increased loss for the three and nine months ended September 30, 2015 over the same periods in 2014 is due to increased spending in both research and development and general and administrative areas and the increase in stock-based compensation charges.

The total shares outstanding as of September 30, 2015 was 40,477,003 which reflect the additional 8,625,000 shares issued in the Company's follow-on financing in the first quarter of 2015. Based on current operating plans, we continue to expect that we have sufficient cash to fund research and development programs and operations through 2019.

With that we would now like to open up the call up for your questions. Operator?

(Operator Instructions). Chris Marai, Oppenheimer.

Hi, guys. This is actually Michelle on for Chris. We were just wondering what your plan is to take 7195 forward in other IgE related diseases beyond allergic asthma?

Great question. So once we initiate development with the subcutaneous formulation which we expect to happen in the middle of 2016, that is really the next step in development because of course the potential of an antibody in allergic disease markets including asthma, really requires subcutaneous delivery. So we have always known that and we are now ready to initiate that development or will be by mid-2016.

That trial, we hope if successful, will position us to initiate 1b/2a studies in different allergic diseases which could include asthma as well as things like food allergy and skin allergies. So we will assess how to do that first set of studies of disease indication at the tail end of that subcutaneous study, which is going to sort of combine bioequivalence with IV, PK safety and of course looking at IgE levels and pharmacodynamics.

Okay, great. And then one question on the bispecifics. We were just wondering how much screening you guys have done of epitopes or bispecific formats to potentially identify I guess the most active for any given target?

Yes, we typically do a good amount of prototyping based on of course the core Fc domain that gives us that very stable scaffold. We do arrange different variable domains around it and we do look at a number of different arrangements. So for example for our CD3 bispecifics, we looked at broad spacings and narrow spacings of the variable domain binding to the tumor target with the CD3 in different arrangements around the Fc and found one that gave us both the right level of activity. We didn't want too much, we think that a lot of the toxicities like cytokine release syndrome involved with T cell engaging therapies like bispecific antibodies or [cartiz], we believe that they have the potential to be modulated while still maintaining antitumor activity if you have the right combination of long duration of action, stability and right level of activities. So we looked at a large number of formats and settled on one where we then can do further tuning using affinities against tumor antigen and CD3.

For different programs we are currently exploring for example with our dual checkpoint inhibitor programs, we have explored and continue to explore different arrangements of the binding domains on the Fc and it is typical that we will spend in our prototyping process which is again very rapid because it is built on this really stable Fc, we will look at both different affinities and formats as we pan through our sort of screening assets our in vitro and in vivo screening assets. It is hard to say for anyone given the program the number will differ from others but it is an integral part of our candidate discovery. We are not a one-size-fits-all format.

Okay, great. Thank you, guys.

(Operator Instructions). I'm showing no further questions. I would now like to turn the call back over to Bassil Dahiyat for any further remarks.

Thank you. In closing we have had a very full slate of development activities and we will continue to have a full slate of development activities for the year ahead as we continue to grow and advance the XmAb pipeline.

In the coming months we expect to initiate new clinical trials with four internally developed candidates, the ongoing XmAb5871, XmAb7195 programs and hopefully new into the clinic XmAb14045 and XmAb13676 bispecific oncology programs. And we will also expect to report data from our ongoing Phase 1a trial of XmAB7195 in the first half of next year.

Thanks again everybody for your time.

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