Xencor Inc (XNCR) 2023 Q1 法說會逐字稿

Good afternoon, and thank you for standing by. Welcome to Xencor's First Quarter 2023 Conference. (Operator Instructions) Please be advised that this call is going to be recorded at the company's request.

Now I would like to turn the call over to your speaker today, Charles Liles, from the Head of Corporate Communications and Investor Relations. Go ahead, Charles.

Thank you, and good afternoon. Earlier today, we issued a press release, which outlines the topics we plan to discuss today. It's available at www.xencor.com. Providing abbreviated comments on the call is Bassil Dahiyat, President and Chief Executive Officer. Afterwards, we will open up the call for your questions, and we will be joined by Allen Yang, Chief Medical Officer; John Desjarlais, Chief Scientific Officer; John Kuch, Chief Financial Officer; as well as Nancy Valente, Chief Development Officer.

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, 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, but 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.

Thanks, Charles, and good afternoon, everyone. At Xencor, we use our ramp modular approach in engineering tools to create a broad internal development portfolio of antibodies and engineered cytokines in oncology and autoimmune disease. And we target novel biologies with our candidate designs, including CD28 costim bispecifics, more tumor-selective CD3 bispecifics and potency reduced cytokines. This broad portfolio lets us take multiple simultaneous shop from go in the clinic and use the proof-of-concept data from our early-stage studies to guide which programs we advance, which we terminate in which we partner, so that we use our resources on programs with the greatest potential for success and the agreement our portfolio for the next wave of XmAb bispecifics and engineered cytokines.

We continue to enroll patients in Phase I and II trials across our wholly owned portfolio of 4 and 1 autoimmune XmAb candidates. Last month at AACR, we presented on our preclinical portfolio of XmAb CD28 costimulatory bispecific antibodies, which are focused on our -- which are the focus of our research now and our very exciting new area in immuno-oncology. XmAb CD28 bispecifics are designed to activate T cells only in the presence of tumor antigen and thereby drive Signal 2 activation to amplify and sustain T cell antitumor cytotoxicity. Our poster highlighted our platform's rapid candidate generation and the broad opportunity for CD28, using data from 5 CD28 bispecific antibodies targeting a variety of solid tumor targets, like CEA, Trop-2 and STEAP1.

We've initiated preclinical development of a second internal CD28 program with a plan to file the IND next year. Recall that our lead clinical CD28 program, XmAb808, targets B7-H3 and is in Phase I. Our next data presentation will be later this quarter when we expect to present data from our regulatory T cell targeting cytokine XmAb564 at the (inaudible) Congress of Rheumatology in Milan. We plan to present updated biomarker data from the single ascending dose study that we initially presented in November 2022.

And for my last comment, I'd like to welcome a new member of the leadership team at Xencor. Last month, we announced the appointment of Nancy Valente, our Chief Development Officer. She'll be responsible for all of Xencor's clinical activities and will join our CSO, John Desjarlais, and me and the scientific leadership of the company. We're delighted to welcome Nancy to our team and look forward to benefiting from her deep expertise in developing drugs like GAZYVA, POLIVY, VENCLEXTA and HEMLIBRA. She was in a unique position to see our development programs, technology and people up close to the last 8 months as a member of our Board of Directors from which she's resigned and chose to commit to work full time here. Welcome aboard, Nancy.

Now with that, we'll open the call to your questions. Operator?

(Operator Instructions) The first question comes from Mara Goldstein from Mizuho.

This is Supawat on for Mara. I have a question on XmAb564. Congrats on getting the slot at EULAR. Just curious, I know there will be additional biomarker data, but what's more you can guide in terms of what we should pay attention to? And then on XmAb564, I'm just curious if competitors data sets and development, you're including Nektar's REZPEG and Amgen's compound. Give your positive on this mechanism and why atopic dermatitis and psoriasis are selected as an indication for the mAb study?

Any other questions? That was about 4.

That's all.

Great. Let's get started. So the kind of biomarker data that we're going to present is really an elaboration in more detail on the phenotype of the T cells that the regulatory T cells in particular, that were amplified in our single ascending dose study that we presented in November. So really characterizing how those look in more detail. I think we delivered to the punch line in November, remarkably durable with sustained T reg increases out to 21 days. And we're excited by the opportunity to try to extend the dosing interval beyond what sort of the class has gotten to, which is every 2 weeks. So we're really quite enthusiastic so about the mechanism. I think the data from the competitor that you mentioned has to be put in the context of their less than ideal selectivity for CD25.

And John, do you have anything to add to that?

No. I mean just based on our in vitro comparisons looking at various molecules and what's been available in various posters, we like our selectivity profile better. We are a little bit more surgically engineered to preferential binding the CD25-positive T regs, and very carefully potency reduced to maximize the pharmacokinetic and pharmacodynamic effects.

So we're still quite enthusiastic about the potential of the mechanism of action. I think it's really about making sure you've engineered what you think is the right molecule to attack that MoA. Now you asked about our indication selection in our Phase Ib multiple ascending dose study that we also started treating patients in November of last year. We picked atopic dermatitis and psoriasis, and there's 2 goals of that study. One is to rapidly determine a good dose and schedule with multi dose. And we wanted to pick indications that we could rapidly enroll that we could also directly view clinical outcome quite easily. So these skin autoimmune diseases allow you to do that, look at actual clinical response, correlate that to T regs and your safety profile. We think, in particular, for atopic dermatitis, there remains a strong opportunity for good agents that can have long dosing intervals and good safety.

The next question comes from the line of Edward Tenthoff from Piper Sandler.

So I apologize if I missed this, but what if anything are you guys going to be showing at ASCO when should we get the next vudali update?

Yes, we're not presenting any new data at ASCO this year. As you recall, our tempo of presentation has usually fallen towards the late in year conferences, and we'll guide on that specifics on that as we get a little further on into the year and closer to whatever data updates we're going to do. We're not guiding full year data. We're really doing a little closer like we did just now for XmAb564.

The next question comes from the line of Brian Cheng from JPMorgan.

Maybe just one question on 564, your IL2-Fc. So you previously mentioned that psoriasis is a great starting point for you to get some proof of concept. As we look forward to some data, early data in psoriasis, in early next year, I'm just wondering how do you think about the market opportunity for this molecule given that this may not be the ultimate market for you to move forward with 564? And any guidance on -- just from an analyst standpoint, how should we think about the TAM here for 564?

Sorry, how should we think about the what for 564? I missed that word?

The total addressable market for 564?

Got it. TAM, sorry. So I think we made a point of adding atopic dermatitis into the Phase Ib mix, and we will be dosing patients in cohorts there as we step up a little bit in dose because we do think AD has still a significant unmet need, both for just the breadth of the number of severe patients as well as the need for longer-acting agents. We know that there's a lot of excitement about lebrikizumab coming on with a monthly, which is better than dupilumab, which is every 2 weeks and is really bound by the target mediated clearance there. So we think there's -- we try to be thoughtful about adding things that can both have proof of concept as well as a meaningful potential for differentiation into our Phase Ib.

But remember that this goes to your total addressable market, there's a wide range of indications that you can potentially reach with a broad autoimmune drug. We know that some of our competitors are developing also with colitis. There's development going on in other kinds of diseases like type 1 diabetes, like in just a wide range. So as for total addressable market, I think you could be sort of incredibly broad right now or you could wait to see how we define it further as we pick additional indications as we come out of this Phase I later, say, in 2024.

Our next question comes from the line of David Nierengarten from Wedbush Securities.

I just had a quick one on the CLDN6 x CD3, just with the way the ovarian cancer market is evolving kind of where you would see it slot in potentially? I know it's early stages, but I was curious on that.

That's a tough one. I think it's a market in flux, but still, even with the agents that are coming on, even the response rates are still not that dramatic and people relapse fairly quickly, we think with a distinct target that you would be aiming to be the first time the patients see anything hitting this target. I think you're going to start with the later line in the clinic, but try to move forward pretty aggressively. There's nothing that slammed the door certainly. And I think that a cytotoxic agent like this could have a lot of potential. And I know that there's a competitive landscape with ADCs with other CD3s, but I still think there's a wide -- a big unmet need.

Yes. I'll add with a completely different mechanism of action in some of those other molecules. I don't think there's any emerging resistance against those therapies will really read too much on the CD3.

Could you remind me, at least, maybe not all of us on the phone, but is there a differential or a requirement or a likely requirement for testing of expression here? Or is it broadly expressed, I just can't remember off the top of my head.

Yes, we think it's definitely going to be prudent to very closely monitor for -- on this discussion. There's definitely some heterogeneity.

The next question comes from the line of Dane Leone of Raymond James.

Can you just give us an update on where you see the CTLA-4 bispecific program getting to?

Sorry, Dane, you were choppy. Where we do see the CTLA-4, did you say CTLA-4 PD-1?

Yes, CTLA-4 or PD-1 bispecific this year in terms of the global updates and progress?

As we said earlier, we're not guiding specifically on data timing until we get a little closer to events. We've traditionally updated on that program late in the year, but we're not saying anything definitive yet. We are enrolling well in our -- both of our Phase IIs, our combination chemo, Phase II as well as our monotherapy Phase II, the first being in prostate only, the second in prostate as well as gyn tumors. So we'll update -- we'll give guidance on data timing a little bit later.

The next question comes from the line of Kaveri Pohlman from BTIG.

So for IL-12, how do you think about this field given that there have been some disappointments in this space? Can you tell us about your approach and how it could be different from others? And my second question is regarding vudalimab. If you could provide more color on your trial amendment for chemo combinations for CRPC? And you're enrolling 20 patients per cohort for different subtypes. Can you tell us what you would like to see from these cohorts to move forward?

So maybe for the IL-12 question, John, if you want to address our differentiation there.

Yes. Well, first of all, I mean, in terms of disappointments, all we have is something about assets being moved around. We actually don't have any of the data from that study yet. So it's really hard to interpret what that means. But our molecule is very different. It was specifically designed. Following off of what we learned from our IL-15 and IL-2 programs that was designed to have reduced potency to the tune of around 100 fold reduced potency. And what we've seen in our preclinical studies, very similar to what we've seen in the human studies for the IL-15 and IL-2 programs is that poster reduction actually gives you a dramatic improvement in pharmacokinetics. It seems to also impact tolerability, and we hope it will positively impact therapeutic index.

We definitely saw evidence in the nonhuman primates that we have a much more gradual dose response of the pharmacodynamic activity with IL-12 than, for instance, compared to a wild-type IL12-Fc. So we think we'll have a lot more flexibility in Phase I to really zero in on the best dose that gives you the highest therapeutic index.

And I'll note there's a lot of noise around other programs that weren't actually engineered cytokines being injected systemically things that are very complex like oncolytic viruses and localized delivery programs. I just don't think those are relevant comparatives. I don't think those teach you anything. Now on to your vudalimab, question number 2, about the -- more on the trial amendment to the chemo as well as what we think the bar for success is roughly.

Maybe Allen, if you want to touch on that?

Yes, sure. So I'd just remind people on the 717-04 study, the design. Remember, we had several groups in there. We had an aggressive variant group, we had a PARP naive homologous recombination deficient group, homologous recombination deficient PARP-treated group, MSI-High Group and then a biomarker-negative group. So it's really dependent on the group. Now several of the groups have chemotherapy. And so depending on the chemotherapy regimen, you'd expect a response rate of about 40% to 50%. So for most regimens, you would want to see numbers above that. However, some regimens like the aggressive variant or the PARP experience group, the bar will be much lower.

Our next question comes from the line of Charles Zhu of Guggenheim.

This is Edward on for Charles. Just a question on 564, please. So how strong is the mechanistic link between sort of inducing T reg levels as you've shown pretty clearly to actually having sort of a beneficial effect on the disease?

There's 2 sets of data that read on that. One fairly recent coming from actually one of our competitors, the REZPEG program that Lilly presented last year, showing clear and convincing activity at reducing psoriasis as well as atopic dermatitis signs of symptoms and in particular, a really profound durability post end of treatment. I'd say the other line of evidence comes from really the last 1.5 decades of work with low-dose IL-2, wild-type IL-2, which sort of mimics a CD25 selective molecule because of the high expression density and selectivity for T regs for very low doses of modest selectivity. And there's efficacy that's been shown in prior intractable auto muses in like ulcerative colitis like type 1 diabetes like RA, like lupus, like, I mean, lots of other indications. So those are the 2 threads of evidence.

Yes. And I'll add, just going back to real basics, remember there's that disease IPEX, where patients have a defect of the FOXP3 gene, which is critical for producing T regs, and they have an all array of various autoimmune type diseases from having that disease. So from a very basic perspective, T regs are critical for preventing autoimmunity.

Great. And maybe just a follow-up, if I can, on the 104, the PD-1 x ICOS. I think you mentioned in the press release that you were going forward with the colorectal MS stable expansion. Just wondering, are you also considering other potential expansion cohorts and kind of what pushed you to focus on that one at least for now?

Right now, we're focusing on the MSS colorectal cancer, really looking for a larger number of patients than we had in our expansion cohorts to see if we have the kind of activity that would suggest a relevant path forward in MSS CRC. What -- so we don't have other indications right now, we're focusing on the CRC. We'll disclose specifics at a later time, but we saw in our expansion cohorts, things that suggest that MSS might be viable for this agent in particular, in combination with ipilimumab, which is how the study is designed in these additional sets of patients. And so we're eager to enroll it and gather the data and see.

The next question comes from the line of Gregory Renza from RBC Capital Markets.

This is Xin Lu on for Greg. Congrats on the progress. Maybe just on a high level, just with your current cash position, wondering how are you thinking about business development as we have seen M&A heating up in the space? And how would you balance the internal innovation and capital preservation in this cash cost on macro environment?

Yes. We really do try to focus on having a high bar for putting molecules into the clinic because the clinic is where the spend really hits you, right. Our research is incredibly efficient on both cost and people basis, and that's what's been able to drive so many partnerships, so many license agreements over the years. But right now, it's about being stringent about the molecules we put in the clinic and then getting even better, more aggressive and faster about making quick decisions from our early clinical data to either advance quickly or to stop the spend by partnering.

I think you can see from our plamotamab deal a year ago, that program is still progressing, but now that's really in Janssen's hands.

So we try to balance that holding on to commercial rights for molecules of our own, so we can build the value of the company with the spend, and we just want to be as fast and as nimble and as quick about the decisions we make because it is, as you're right, a capital-constrained environment. And partnerships have sustained us over many years, but partnerships acquire another party involved. And so that's unpredictable. So I think it's -- we're being doubly stringent and strict about advancing programs and the design of our studies to be really efficient.

The next question comes from the line of Zhiqiang Shu from Berenberg.

Maybe we'll go to the next question. See if we can circle back with him later.

Yes. Wonderful. The next line to be brought up on stage is going to be Jonathan Chang from SVB Leerink.

This is Matt Cowper on for Jonathan. I suppose just to piggyback on that last question on cash. I noticed that your R&D burn was a little higher this quarter. I was just wondering if that's something we could expect going forward as you sort of launch these early-stage programs? And then second question is just -- I was wondering if you could provide any mechanistic rationale for the development of XmAb306 in multiple myeloma?

Maybe, John, do you want to talk about the mechanistic rationale 306 in myeloma?

Yes. I mean, there's actually 2 components that it's extraordinarily good as we disclosed, what, about a year ago at expanding natural killer cells. And so the combination with daratumumab -- turns out that daratumumab actually takes out some of the NK cells as it's working. And so it was sort of a natural idea on Genentech's part to try to explore the combination with XmAb306 to expand the NK cells further to sort of mitigate that sort of fracture side effect. Hopefully, it will go beyond that and even further potentially daratumumab.

And then the other combination with the CD3 engagers, cevostamab, that's also just motivated by some of our preclinical work. So recall, natural killer cells are generally more sensitive to IL-15 because they express higher amounts of IL-2 receptor beta. But it turns out, we also were able to see preclinically that when you activate T cells, such as with a T cell engager, you also upregulate IL-2 receptor beta. And so it's really a natural question. We admire the fact that Genentech wants to explore 306 with multiple different kinds of modalities to see where it has the most utility.

And maybe on the cost question, I wouldn't read too much into the quarterly fluctuations of the reported R&D spend. I mean, John, I think can you guide on our cash use this year?

Cash is pretty consistent -- to address your question, it can be lumpy, the early-stage R&D. I mean there's preclinical studies, but it's not going to be consistently increased quarter to the extent that it was over the previous year.

Our next question comes from the line of Boris Peaker from TD Cowen.

This is Nick on for Boris. I just have a quick one on Ultomiris. So you guys mentioned in the press release that AstraZeneca announced the Phase III study initiation. So I was wondering if you guys are expecting potential milestone payments from this Phase III, like whether it comes to the end or whatnot? And then also, will you potentially receive royalties from this additional indication, if it is approved?

We receive royalties on any indication from any country that there's valid patent claims worldwide regardless of the mode of administration, IV subcu. Sorry, what was your first question on their Phase III? I missed that.

Yes, if you would potentially receive any milestone payments on the Phase III?

No, there's no more clinical milestones left. There's only a sales milestone left, which we could get this year, we'll see.

The next question comes from the line of Michael King from EF Hutton.

Most of my asset-specific questions have been answered. I just wonder if John might give us his thoughts on CD28 versus CD3 bispecifics, especially as applies to solid tumors and whether the odds of success in solid tumors are going to be greater with one or the other? Is there no real biology to predict what might succeed and what might not?

Yes. You asked me my favorite question. In fact, I almost anticipated that this morning thinking about it. The easy -- the glib answer is we don't really know yet because there haven't been enough CD3s versus CD28s, and there certainly hasn't been any sort of head-to-head studies against the same tumor antigen. There's a nice validation of CD3s in solid tumors and a couple of different programs, and there's really nice validation, recent validation for CD28 in solid tumors. But really to answer your question, the way I think about how differences might emerge.

So a CD3 engager is basically going to -- it's going to take any T cell that it can find either in the periphery or the vicinity of the tumor, we don't know if those T cells are tumor reactive. They could just be bistandard T cells, and it's going to utilize those. And it takes advantage of having all those T cells around. CD28 really has to build off of an existing Signal 1. And so if you're doing a combination you would say, a checkpoint inhibitor with a CD28, the single one actually comes from the T cell receptor, recognizing neoantigen MHC complexes on the tumor cell. And so I'm guessing, and it's just pure speculation that CD28s would have potential for longer durability of response just because you're actually building up a memory T cell response, you're specifically expanding those tumor-reactive T cells.

Our next question comes from the line of Peter Lawson from Barclays.

This is Jay on for Peter. So just quickly first about vudalimab. So for the second study in the gynecologic tumors and high-risk prostate, could you maybe speak to a little bit whether you're thinking of just pursuing monotherapy? Or is this also going to be ultimately combo therapy? And for 808, the B7-H3 bispecific, could you maybe speak to where you see the highest chances of success in solid tumors and whether that might be prostate based on peer data? And how you might see that fitting into such a competitive space?

So I think with vudalimab, we expressly ran the Stage II monotherapy because we think there could be potential monotherapy in those gyn indications and in that slice of CRPC. I think Allen can address some of the data we got in expansion cohorts about why we believe that.

Yes. I was just going to add that -- so remember, this is a 717-05 study. So it's our second shot on prostate as a monotherapy. We define the high-risk prostate group clinically as opposed with molecular markers. And then we're looking at gyn signals had an early marker in the expansion. The one thing is that we're looking at cervical endometrial as well as ovarian cancer, which is an unmet need and checkpoint inhibitors have shown activity, and there hasn't been a lot of activity. I will also add one of the neat things about the 05 studies, it studies a better dose and schedule. So we're doing a flat dose and every 3-week schedule post every 2 weeks.

And then the other question was around B7-H3.

Yes, I'll take that, Allen. Yes. So it's a great question about B7-H3 for XmAb808, which solid tumor indications that we're most excited about. Prostate for sure, is right at the top. There's certainly nice validation targeting B7-H3 in prostate cancer. And of course, we've got nice validation of CD285 bispecifics actually working in prostate cancer. Other histologies that we would certainly think about would be small cell lung cancer based on some proof-of-concept data there targeting B7-H3. But B7-H3 is expressed across a lot of solid tumors, and we're going to want to take a look at a lot of them.

The next question comes from the line of Zhiqiang Shu from Berenberg.

I also want to ask a question around -- on your CD28 portfolio. Obviously you present some clinical -- preclinical data at AACR. I wonder your criteria in terms of selecting the other targets for your future molecules and also how you decide to move one or more targets into the clinic?

So the criteria is really based on where we think CD28 could have the biggest impact. We think that's in tumors that have been cold for immune checkpoint therapy. We think the example given by the PSMA CD28 data presented by Regeneron last year suggests that this CD28 pathway could turn on to response to tumors that would be cold. They did that in prostate cancer, albeit in a very small number of patients. And so there is a huge unmet need and a lot of patients that would be ecstatic, if you could turn on tumors that are nominally pretty cold, like small cell lung cancer, like colorectal cancer, like ovarian cancer, like, I mean, the list is longer than the list of tumors that actually respond well to immune checkpoint therapy.

Even the ones with some labeled checkpoint inhibitors are pretty weak, right, like gastroesophageal and gastric, HCC, et cetera. So we're focusing on targets where there is a -- that's a big, big delta possible, right. It looks cold to checkpoints and where you could really maybe change the landscape, but also where you could clearly see a signal early in clinical development, if you start seeing response. So I think that's important because we don't want to be lost in a sort of a swamp of trying deduce whether it's the checkpoint or it's the combination agent, our CD28 driving the activity like you might be if you're enrolling patients in melanoma or RCC, which are pretty warm tumors.

Got it. And just a quick follow-up on the technology side of things. It appears all your CD28 and CD3 bispecifics you are using a 2+ 1 format. So I guess is 2+ 1 your preferred format to go to other targets as well for CD3 and CD28?

Yes, I would say is that 2+ 1 is a tool. It's just one of the tools in our toolkit. Every target is different, right. There is all kinds of considerations like density, how different is the expression on tumor cells versus normal cells. We like the 2+ 1 for the CD3s because it gives us a little bit more, we believe, room for us to design in the therapeutic index to preferentially kill tumor cells versus normal cells. CD28 is sort of little bit different. And so where we think we want or need the 2+ 1, we'll utilize that. But one 1+ 1s are also on the table for the CD28.

Thank you for your questions. I would now like to turn it over to Bassil Dahiyat for closing remarks.

Thanks very much, and thanks, everybody, for joining us this afternoon. We look forward to give you further updates later in the year. Goodbye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.