Xencor Inc (XNCR) 2020 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by, and welcome to the Second Quarter 2020 Xencor Conference Call. (Operator Instructions)

Now I would like to turn the call to your speaker today, Charles Liles, Head of Investor Relations.

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. Today on our call, Bassil Dahiyat, President and Chief Executive Officer, will provide updates regarding COVID-19 and our partnerships; Allen Yang, Chief Medical Officer, will review recently presented clinical data; John Desjarlais, Chief Scientific Officer, will provide updates from preclinical development; and John Kuch, Chief Financial Officer, will review 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 future financial and operating results. Future market conditions, the plans and objectives of management for future operations, the company's partnering efforts, capital requirements, future product offerings, research and development programs and the impacts of the COVID-19 pandemic on these topics. 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, let me pass the call over to Bassil.

Thanks, Charles, and good afternoon, everyone.

Xencor's approach to creating antibody and cytokine therapeutics is centered around our XmAb protein engineering platform. By making small changes to an antibody's structure, specifically in its Fc domain, we can improve its natural functions and performance and create new mechanisms of therapeutic action. The plug-and-play nature of our suite of XmAb Fc domains allows us to engineer nearly any antibody to have improved activity, longer half-life or bispecific structure. This flexibility and portability enables us to take multiple shots on goal simultaneously in the clinic and generate proof-of-concept data to guide which programs will independently advance, which will partner and which will terminate.

We're focusing our R&D on the expansion and use of our XmAb bispecific platform to create antibodies that bind 2 or more different targets simultaneously and also to engineer cytokines with structures optimized for particular therapeutic use. Now we're currently running 6 Phase I clinical studies evaluating such XmAb bispecific antibodies.

Now before I update on some of our partnerships, we want to provide a brief update on the impact of the COVID-19 pandemic on our operation. The pandemic did not significantly disrupt patient enrollment to Xencor's 6 ongoing clinical trials during the second quarter. However, our study initiations for vibecotamab, as we've previously disclosed, have been delayed as many clinical sites have delayed the trial start-up process.

We had modestly slowed enrollment in the CD3 bispecific antibody studies attributable to COVID-19 and no effect on our studies for the 3 tumor microenvironment activator molecules. Now as is still the case today as it was 3 months ago, unfortunately, the situation is very fluid and we'll continue to update it as soon as appropriate.

Now within the company, we've implemented a number of measures to protect the health and safety of our employees and of our community. These include some laboratory operation adjustments, symptom self-assessment guidelines and weekly SARS-CoV-2 virus testing at our facility. We are maintaining a requirement for all non-laboratory employees to work remotely.

Okay. Now on to partnerships. A core part of our business is to complement our internal portfolio of -- internal development portfolio with partnering. These partnerships generate payments from the licensing of XmAb technologies, the clinical advancing of XmAb candidates as well as royalties from sales of approved products. There were no COVID-19 impacts here during the second quarter as we continue to earn revenues from partners like Alexion and Gilead, but we will continue to monitor potential impacts, of course.

Partnerships like these really highlight the plug-and-play nature of the suite of XmAb Fc domains we've created. With the small changes to the Fc structure that we've engineered, we can for nearly any antibody improve the activity, half-life or readily create bispecific structures. We have 11 ongoing partnerships for XmAb technology, which have resulted now in 2 marketed products, 7 clinical stage candidates and more in the earlier stages of development. The most significant recent development among our partners occurred just this past Friday. With the early FDA approval of MorphoSys' tafasitamab, which they licensed from us in 2010, when it was known as XmAb 5574. It's an antibody that we created and put our XmAb cytotoxic Fc domain onto. We also initiated its clinical development, running the Phase I trial. It's trade name is now Monjuvi. It's a CD19-directed cytolytic antibody indicated in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffused large B-cell lymphoma, not otherwise specified, including DLBCL arising from low-grade lymphoma and who are not eligible for autologous stem cell transplant. This approval is the first for second-line treatment of DLBCL from the FDA.

Now we couldn't be happier here at Xencor as this approval expands the options for patients with this difficult-to-treat blood cancer. Monjuvi will be co-commercialized in the U.S. by MorphoSys and Incyte, and the European marketing authorization application for tafasitamab is currently under review by the EMA.

Now from time to time, we enter into research collaborations that include the creation of novel XmAb bispecific antibodies to be advanced by partners. Amgen's a prime example. AMG 509 is Amgen's STEAP1 x CD3 XmAb 2+1 bispecific antibody. Now that was developed under our collaboration with them. They're developing AMG 509 for patients with prostate cancer and Ewing sarcoma, and a Phase I study is currently recruiting for patients with advanced prostate cancer.

Now the first bispecific antibody that Amgen developed under this collaboration is AMG 424, a CD38 x CD3 bispecific antibody that they evaluated in a Phase I study in patients with multiple myeloma. Amgen terminated the program in the second quarter and indicated the program was stopped for adverse events that were likely CD38 target-related. Under the terms of the agreement, the rights to the CD38 program, including AMG 424, revert to Xencor and the company is currently assessing the asset's potential for further development, including treating different patient populations and applying mitigating treatments for the adverse events.

Now the plug-and-play nature of our XmAb technologies enables additional partners like Alexion and Vir to advance their programs, needing very little resources directly from us. Our strategy is to selectively license access to our XmAb technologies for creating and developing antibodies with improved properties. Alexion's ULTOMIRIS, a C5 complement inhibitor uses Xtend technology for longer half-life. The program continues to receive marketing authorizations worldwide, the last of which was the European approval for adult and children with atypical hemolytic uremic syndrome, this June. In addition to evaluating ULTOMIRIS in a broad late stage development program, Alexion is currently conducting a randomized controlled Phase III study in hospitalized patients with advanced COVID-19.

Our partnership with Vir Biotech shows the broad applicability of our technology in areas such as viral infectious disease. Vir has non-exclusive access to our Xtend Fc technology to extend the half-life of VIR-7831 and VIR-7832, both novel antibodies that they're investigating as potential treatments for patients with COVID-19. They plan to submit an IND for VIR-7831 and commence a Phase II/III clinical trial program in August, and they plan to initiate a study evaluating VIR-7832 later this year.

I'll now turn it over to John Desjarlais, who will provide an update on some of our preclinical programs and our new discovery and development collaboration with Atreca. John?

Yes. Thanks, Bassil.

Yes, and Xencor's XmAb bispecific Fc domains were specifically created to enable the rapid design and simplified development of bispecific antibodies to combine 2 or more different targets. First-in-class that we have developed were CD3 bispecific antibodies that contain 1 anti-tumor binding domain and 1 CD3 binding domain. Engagement of CD3 on T cells promotes recruitment and activation of T cells against the tumor cells. The activator receptor on T cells doesn't have to be limited to CD3, though. For example, we are also investigating bispecific antibodies that target CD28, a key co-stimulatory receptor on T cells. Importantly, we designed these CD28 engagers to activate only when bound to tumor cells, with the goal of avoiding the superagonism that led to the disastrous clinical experience of other companies targeting CD28 nearly 15 years ago.

More near term, however, we have developed a mixed valency format, our XmAb 2+1 bispecific antibody with 2 domains that bind a tumor target and a single domain that binds CD3. These antibodies may preferentially kill tumor cells with high target expression and may potentially avoid low-expressing normal cells, taking advantage of a property called avidity. We believe these properties will be particularly important for many solid tumor targets.

We presented preclinical data from 3 internally developed 2+1 bispecifics at the second session of the AACR meeting in late June. Preclinical models show strong selective tumor killing from 2+1 programs that target PSMA mesothelin and ENPP3, the last of which is an underexplored tumor antigen overexpressed on renal cell carcinomas. These targets, although they tend to be strongly expressed on prostate cancer, ovarian cancer and kidney cancer, respectively, can also have some normal tissue expression, suggesting there are good applications for this new format.

The ENPP3 program, XmAb30819, is the most advanced of these. Preclinical data indicate that XmAb30819 binds preferentially to tumor cells compared to normal cells and effectively recruits T cells to kill tumor cells selectively. It demonstrates strong reversal tumor growth in tumor xenograft models, and it was well tolerated with expected pharmacodynamics in an antibody-like half-life in nonhuman primates. We are planning to file an IND for XmAb30819 in 2021.

Finally, last month, we formalized a collaboration with Atreca to research, develop and commercialize CD3 engaging bispecific antibodies to novel targets. Atreca's unique discovery platform complements our protein engineering capabilities by providing novel tumor-selective antibodies and targets to couple with our CD3 bispecific platform. Up to 2 joint programs will be mutually selected for further development and commercialization with each partner sharing costs and profits equally. Each company will lead one of the joint programs. The agreement also allows for each partner to pursue up to 2 programs independently. This collaboration offers both Xencor and Atreca with several opportunities to advance novel first-in-class CD3 bispecific antibodies for the potential treatment of patients with cancer.

With that, Allen Yang will review our clinical portfolio. Allen?

Thanks, John.

In May, we provided initial dose escalation data from our ongoing Phase I study evaluating XmAb20717 in patients with advanced solid tumors. XmAb20717 is a dual PD-1, CTLA-4 checkpoint-inhibiting bispecific antibody. We have tuned the antibodies affinities for PD-1 and CTLA-4 for selective engagement of T cells expressing both targets, which distinguishes it from combination therapy and most bispecific checkpoint inhibitors.

T cells that have multiple checkpoint expression are typically found more in the tumor microenvironment than in the periphery. All of our tumor microenvironment activators, as we call them, seek to more effectively reactivate these tumor-reactive T cells than existing therapies. This design is meant to drive improved tolerability at higher doses compared to the dosing of separate anti-CTLA-4 and anti PD-1 antibodies, for example, which has delivered better responses at the cost of tolerability.

In our first 6 dose escalation cohorts, we observed that XmAb20717 to be generally well tolerated in heavily pretreated patients. Consistent with our hypothesis of inhibiting both PD-1 and CTLA-4, we observed robust dose-dependent increases in biomarkers of T cell activation and pharmacodynamic activity consistent with blockade of both receptors. It was also encouraging to observe cases of clinical activity as we moved into the higher doses cohorts, which we detailed in the press release in May. Based on these data, we opened expansion cohorts in several tumor types at 10 milligrams per kilogram as well as additional dose escalation cohorts starting at 15 milligrams per kilogram as we did not reach the maximum tolerated dose. Expansion cohorts for patients with melanoma and advanced non-small cell lung cancer are fully enrolled. We look forward to sharing continued progress from the 20717 program as well as our other tumor microenvironment targeting bispecific antibody programs in Phase I studies.

XmAb2314 targets PD-1 and the co-stimulatory receptor, ICOS, and XmAb22841, which targets the checkpoint CTLA-4 and LAG-3, the latter which has begun dosing patients in combination with pembrolizumab.

Moving on to our clinical stage T cell engagers. These are tumor-targeted bispecific antibodies that contain both the tumor antigen binding domain and the cytotoxic T cell binding domain, specifically CD3 binding domain. These CD3 bispecifics activate T cells at the site of the tumor in order to potentially kill malignant cells. We continue to dose patients in our Phase I studies of vibecotamab, which targets CD123 and acute myeloid leukemia and plamotamab which targets CD20 in B-cell malignancies. And as we have previously disclosed, we plan to initiate additional clinical programs, subject to impacts from the COVID-19 pandemic, likely next year.

We also continue to dose patients in the Phase I study of tidutamab, which targets the somatostatin receptor 2, and we expect that we will present initial data from these ongoing -- this ongoing study in patients with neuroendocrine tumors in the second half of this year.

Finally, we're developing a suite of cytokines, which are immune signaling protein that are built on the XmAb bispecific Fc domain and incorporate the Xtend technology. Using our Fc domain and tuning the potencies enabled cytokines with improved drug like properties, such as slower receptor mediated clearance and longer half-life and potentially superior tolerability. Our first cytokine program and lead in our collaboration with Genentech is XmAb24306, which they call RG6323. It's an IL-15/IL-15 receptor alpha complex fused with our bispecific Fc domain. It targets the expansion and activation of T cells and natural killer cells.

Genentech is currently enrolling patients in a Phase I study evaluating XmAb24306 and quickly moving in combination with atezolizumab their anti-PD-L1 antibody. We plan to explore a number of our own combination studies pending completion of the initial dose escalation study. We also look forward to keeping you informed about all our clinical programs as they progress.

Now I'll hand the call over to John Kuch who will review the second quarter and first 6 months financial results. John?

Thank you, Allen.

Xencor continues to maintain its strong financial position, which enables us to support our portfolio of clinical research stage bispecific antibody and cytokine drug programs. Our diversified portfolio of partnerships and collaborations continue to provide us with upfront payments, milestones and royalties, important sources of nondiluted capital. With the FDA approval of MorphoSys Monjuvi last Friday, we will receive a $25 million milestone payment which we will recognize as revenue in the third quarter. As a reminder, we are also eligible to receive royalties on worldwide net sales in the high single to low double-digit percent range and additional development, regulatory and sales milestone payments.

At June 30, 2020, our cash, cash equivalents, marketable and equity securities totaled $587.4 million compared to $601.3 million at December 31, 2019. The decrease reflects cash used to fund operating activities in the first 6 months of 2020, offset by upfront payments, milestone payments and royalties from our partnership and licensing arrangements.

For the second quarter of 2020, revenues were $13.1 million compared to $19.5 million for the same period in 2019. These revenues include royalty revenue from Alexion and licensing revenue from Gilead compared to the same period in 2019 where revenues primarily reflect research collaboration revenue from Genentech and Astellas and milestone revenue from Alexion.

For the first 6 months of 2020, revenues were $45.5 million compared to $131.4 million for the same period in 2019. Our revenues in 2020 include royalty revenue from Alexion, milestone revenue from MorphoSys and licensing revenue from our Gilead and Aimmune collaborations compared to licensing and collaboration revenue earned from Genentech and Astellas in 2019.

Research and development expenditures for the second quarter of 2020 were $43.5 million compared to $33.3 million for the same period in 2019. After the first 6 months in 2020, they were $77.4 million compared to $61.5 million for the same period in 2019. The increases in R&D is primarily due to increased spending on our plamotamab and XmAb20717 clinical programs as well as our preclinical IL-2 cytokine program, XmAb27564 and our preclinical ENPP3 x CD3 2+1 bispecific antibody program, XmAb30819, both of which we have advanced into IND-enabling activities. We note that there was lower spending in 2020 on our XmAb24306 and obexelimab programs.

General and administrative expenses for the second quarter of 2020 were $7.2 million compared to $5.8 million in the same period in 2019. For the first 6 months in 2020, G&A expenses were $14.4 million compared $11.3 million for the same period in 2019. Additional spending here is primarily due to increased staffing and spending on professional fees.

The net loss for the second quarter of 2020 was $35 million or $0.61 on a fully diluted per share basis compared to a net loss of $16 million or $0.28 on a fully diluted per share basis for the same period in 2019. The higher net loss reported in 2020 is primarily due to lower partnership and collaboration revenue and higher R&D expenses in 2020.

For the first 6 months in 2020, net loss was $43.1 million or $0.76 on a fully diluted per share basis compared to net income of $64 million or $1.10 on a fully diluted per share basis for the same period in 2019.

Our net loss for the first 6 months of 2020 compared to the net income reported for same period in 2019 is primarily due to revenue recognition from our Genentech collaboration 2019.

Noncash stock-based compensation expense for the first 6 months of 2020 was $14.7 million compared to $15.2 million for the same period in 2019. Total shares outstanding were 57.2 million as of June 30, 2020, compared to 56.5 million as of June 30, 2019.

Based on current operating plans, Xencor expects to have cash to fund research and development programs and operations into 2024. Xencor expects to end 2020 with between $525 million and $575 million in cash, cash equivalents, marketable securities and equity securities.

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

(Operator Instructions)

Our first question is from Ted Tenthoff with Piper Sandler.

So congratulations on the tafasitamab approval. I'm wondering -- give us a sense of what the royalties are and whether there are other future milestones beyond the approval milestone for other indications and things like that.

Sure. Thanks. And I hope you're staying safe, Ted, out with that tropical storm in New York along with all the other new Yorkers.

So the royalties are high single to low double digit, and they're tiered. That's the most detail we're allowed to share at this point. They're worldwide royalty, so you can see they're worldwide sales, regardless of whether the company selling is Incyte or MorphoSys and, of course, Incyte is ex U.S. commercial rights. There are significant milestones for both developments in other indications within oncology as well as non oncology, though there's no development going on for that at the moment that we're aware of. So there's other oncology indication, regulatory -- development regulatory milestones and there are sales milestones.

John, do you want to give a little bit of granularity on the magnitude of those?

Yes. The sales milestones are $50 million, and the other development, regulatory are anywhere in the $50 million, $75 million range.

Yes, depending on which ones we...

Right, depending on the additional indications, yes.

Great. Well, thank you so much, and congrats. It's another good example of the model working.

Thank you so much. We're very excited about the Monjuvi approval.

Our next question comes from Alethia Young with Cantor Fitzgerald.

This is Ellie on for Alethia. I guess the first one is on tidutamab. I know you're going to present some data later this year. So just wondering, can you just talk about what types of data that we might see, like in how many patients? And then can you just frame for us what is the general sort of response rate seen with the standard of care?

And then second, I wanted to ask about this Atreca collaboration. Can you just talk about what drove you guys into doing this deal?

Sure. So for tidutamab, the data that we are going to present later this year is for the neuroendocrine tumor population that's within the Phase I, so just that population, where SSTR2 is a sort of definitive marker. For the type of data, it's going to be our dose escalation data for that trial which is in advanced stage net patients. And that data would be our, of course, our safety data. So this is a -- this was a high-risk potential high-return program because we know that SSTR2, though expressed heavily on the tumors in net, are also expressed on various healthy neuroendocrine issues. And we believe there ought to be a therapeutic window that we could design against and so we're testing that hypothesis now with the CD3 antibody.

So the type of data would be, of course, safety data. So that's going to be an important thing to look at. It's going to be what dose we've gotten up to in this population. And of course, any efficacy data and biomarker data that we get out of the patients. Note that the standard of care in this tumor type typically has around a 10%-ish response rate. So it's a very low response rate because these tumors don't generally regress. These -- they're usually sort of halted in their tracks and their functionality is reduced.

Allen, were there any points that I missed there about this kind of population?

Yes. So commonly it'd be the dose escalation cohorts, and we may have some expansion data at the time of the meeting but, again, not that many patients at this point.

Yes. We're talking maybe a couple of dozen.

Yes.

And then -- now you wanted me to switch to the -- discuss the Atreca collaboration. As for why, I think it's because we have a platform that lets us create antibodies that are really tuned for a particular target in use. We can dial the potencies up or down, we can make it more selective for high-expressing cells and for low-expressing cells, all depending on the nature of the target. And the key ingredient for that kind of approach is, of course, really exciting targets. And we think finding new targets is an important endeavor. We thought working with one of the best companies out there that can find new target antibody pairs made a lot of strategic sense. And so that's the rationale. We want to take this toolkit we've built and apply it against the broadest range of biologies we can get to. And there's technologies out there for finding new targets and antibody pairs against them that we don't have, right? We have to then find the best out there. Were there any technical points on that, that you wanted to add, John? Or does that adequately describe it?

Yes. I mean I would just add that we really admired the Atreca platform, the idea of taking checkpoint-responsive patients and mining their B-cell repertoires for new antibody responses that emerge, presumably as part of the response to the tumor. And then the first thing they do is then check those antibodies to see if they react with other patients' tumors. And putting all that story together just seemed like a perfect fit for what we're trying to do at Xencor and, again, a way to access novel targets.

And our next question comes from Jonathan Chang with SVB Leerink.

First question, what are your latest thoughts on plamotamab development strategy? And when could we see the next data update from that program?

Well, our latest thoughts are that this molecule we have now, we're seeing very promising activity. It's a highly active agent in late-line lymphoma, DLBCL, in particular, the largest population, and it's generally well tolerated. We have a dosing regimen that we're nearly done optimizing. So we have this kind of agent, and it's a very competitive space, and we think that the central value proposition for the class is going to be how you run the clinical development, what other agents you combine it with? And we think there's many agents with orthogonal killing mechanisms of the tumor cells that are a great combo approach. Because as we've seen from Rituxan's history, the real power and breadth of use and movement across all different lines of therapy is because it's been using combination very effectively. And I think the tolerability profile and activity profile we've seen so far with plamotamab support that kind of development effort, of course, with a much higher level of baseline activity than you see with Rituxan.

We don't want to dismiss the potential of monotherapy approaches, in particular, in niche populations to advance more rapidly, and that certainly can be value-creating and -- moving forward, but I think what we don't want to do is abandon that combination approach. And we should be announcing later this year, the specific trials that we plan to initiate around combinations as well as monotherapy.

And just when could we see data?

Oh, I'm sorry. Yes, sorry, 2 questions. We're not guiding to any data, specific data readouts yet for plamotamab. We're being mindful of potential -- though they haven't impacted us much yet, COVID impacts. And so we'll guide on that a little bit later on, what our next data disclosures would be.

Got it. And just a second question, could you provide any additional color around the AEs observed with AMG 424? And what could potential next steps for the program be?

Right. I think for the moment, we're going to stick to the Amgen public disclosures. They were AEs that were very likely CD38-mediated, certainly, CD38 targeting with both marketed drugs like daratumumab as well as numerous development programs have shown that there is a -- there's pretty characteristic adverse events for targeting CD38 with an antibody, a lot of hematologic adverse events as one would expect. So we're not going specifically into the details of the AMG 424 program, mostly because we've only recently, within the last 2 weeks, gotten all the deep data, and we're still sifting through it.

But I think that there is, as we're initially assessing, potentially a path forward for that molecule and a way to get CD38 targeting with a CD3 killing mechanism advanced. And there's a wide range of tumor types, of course, hematologic tumor types that express CD38, in addition to myeloma, where Amgen has been developing. Okay.

Our next question is from Mara Goldstein with Mizuho.

Just a couple. And the first is on XmAb20717, the PD-1, CTLA-4 bispecific. Can you just talk a little bit about what the -- you would consider the bar for success for that agent, given what we know in the -- broadly speaking, the checkpoint field right now? And I'm also curious as to the XmAb30819 and the perceived advantages of using a bispecific as opposed to some of the development we're already seen with that target via ADC?

Sure. For 20717, I would say the bar for success depends on which of the 2 different indication types or classes that we're pursuing, for example, in our expansion cohorts. There's the post PD-1 treated patients in an indication where there's ample PD-1 use in approved PD-1 agents in those expansion cohorts, and then there's the indications where there's no PD-1 approved and there's not a lot of PD-1 use, but there's a reasonable hypothesis in particular why CTLA-4 engagement as well could boost activity or different there. I think in the post PD-1 patients, generally speaking, anything close to a 20% response rate in patients that have failed PD-1 therapy in, say, a non-small cell lung or in a melanoma would be really great.

Allen, do you want to comment on both anything further on the post PD-1 is sort of PD-1 proven indications and then maybe comment on the no PD-1 approved indications in our...

Yes. So I think, as Bassil said, it's a complicated question, Mara. I mean you have to look at the patients. And so that data, we'll have to look at very closely, and you'll have that -- a chance to look at that when we present that data. But if you think about melanoma, many patients are just treated with PD-1 and some are treated actually with the combination. And depending on what their prior response was, your expectation for what the response would be in that refractory population.

Remember, the Phase 1 is being conducted in the United States. So all the melanoma and non-small cell lung cancer patients have seen checkpoint inhibitors. Now in non-small cell lung cancer, you're probably going to use only a PD-1, but it's usually given in combination with chemotherapy.

Now for patients where there have been checkpoint activity and are naive, you'd expect a higher response rate. But most of the patients in the Phase I have seen prior checkpoint, either pembro or both nivo/ipi or PD-1 CTLA-4 combination. And in terms of percentage, it will probably be low in this refractory population as the base line. But again, there's not a lot of good data. And I think rather than looking at the percentage as an absolute, you probably want to look at individual patients, see what they've gotten before, what their response was, how long it lasted and then see what the response was to this particular agent.

And then there was also the discussion around non PD-1 approved indications as well.

Yes. So I think that depends. There are a limited number of non PD-1 indications where there's activity. It seems like there's a lot of clinical activity, but you would expect it to be higher. And depending on the indication, you would probably seek to see responses maybe up to 30% to 50%.

But of course, that's in PD-1 -- that's in indications where PD-1 therapy is known to work. We're exploring indications where they're not necessarily known to work.

Yes. Yes, that's exactly right, Bassil, where it's known to work, but then there's not been treated because these are U.S. patients because there's no indications for that -- in that. In other words, there's a small clinical study that shows activity, but then there is not an approval in that indication yet. And those patients are rare into the study right now.

Okay. And then for the ENPP3 target?

For the 30 0 -- 30819, why a CD3 bispecific versus an ADC, I think this goes as this 2+1 design and the advantages that it could have. John, do you want to touch on that?

Yes. I mean -- so first of all, one of the reasons we like the target was because of the data that was generated with the drug conjugate, although you've probably already figured out that they had sort of dose-limiting ocular toxicities, the standard class effects with the conjugate. So we thought that was -- made the target look pretty good.

As to why CD 3 would be better, there's reasons beyond not having that sort of class, that toxicity. One is that renal cell carcinoma tends to have more T cells than just about any other solid tumor. And so we've got a lot of effector cells to draw from in terms of meeting the activity.

And then second of all, you might imagine -- and other people are talking about this as well, is that once you're engaging CD3 T cells, some of those, you're also helping to promote an endogenous T cell response, right, because you're expanding T cells by activating them. You're mobilizing cytokines and chemokines. And so there's additional dividends to engage in T cells in terms of sort of long-term activity, potentially even developing a memory response against the cancer.

Okay. And I probably -- but if I could just ask a point of clarification on the financial arrangement for Monjuvi. Can you still get payments on those indications that Incyte would undertake on its own?

Yes. It's irrelevant to who the party is.

Our next question comes from Etzer Darout with Guggenheim Securities.

This is Paul on for Etzer. I guess I have a more specific follow-up to the previous question on plamotamab. So in light of the recent Monjuvi approval, have you explored the potential for combining Monjuvi with plamotamab or explored any potential synergies with anti-CD19 in DLBCL in general?

And then a second question, I'm wondering if you could comment on if there has been sort of any increased conversations or interest in your CD20 program from a geo perspective, sort of on the heels of the recent Genmab and AbbVie agreements?

Sure. So I'll take that. So for the idea of combining plamotamab or CD20 x CD3 with an anti-CD19 antibody like Monjuvi, no, certainly, it's an interesting hypothesis. Now we're not commenting specifically on any of our combination studies just yet. We're going to do that a little bit later in the year. But in general, we believe that you want to have different mechanisms of action for killing tumor cells working together. We don't really see the need to further boost -- in this particular context, further boost the T cell function to kill the B cells that plamotamab is doing enough of that. In some indications, with different CD3 antibody, you might want to have, say, a PD-1 inhibitor that boost T cell function.

Now what's complementary with CD20? Well, CD 19 is a different target and you've got different killing mechanisms with, say, an ADCC-driven antibody like Monjuvi. So it's a reasonable hypothesis. We also think that there's a variety of targeted small molecule agents, it could be really interesting hypotheses. But it's an interesting point you raised.

Now regarding CD20 deal conversations, I can't -- we can't really guide on business development activities because we believe that these development activities can never be predicted perfectly because there's always another party involved. I will say that the value of a CD20 x CD3 as a very important part of what's going to happen in B-cell lymphoma and potentially as a backbone therapy that would be part of displacing Rituxan after all these years, I think that's widely appreciated is what I'll say. And we think that we could certainly build a lot of value in our program, which we are very excited by the data, build a lot of value in our program as we continue to advance it on our own and further flesh out the plans, though that's a program where a partnership might play a complementary role, right? And sometimes you do that to expand the scope or scale of development or find good combination partners. But we'll go on that when the time is right, when we actually have a deal to announce.

Our next question comes from Arlinda Lee with Canaccord.

I maybe just wanted to follow up on plamotamab a little bit more. It entered the clinic in 2017. Can you maybe talk about the scope of the data that you plan to present whenever you do provide an update? And then just some housekeeping things. I think you also previously mentioned expectations for filing IND for your IL-2 Fc? Can you talk about maybe where that program stands right now and then as well, ideas on your CD123, CD3 14045, the additional other phase 1 that you're thinking about?

Sure. So maybe the easy one, the short answer, first, file the IND for the IL-2 Fc, that's on track. It looks like it's going to be very early in the new year. So that's moving forward. That's our IL-2 engineered to be selective, to activate regulatory T cells for potentially use in autoimmune diseases. So it's not an oncology program, but a really exciting molecule design.

For plamotamab, the sort of scope of data that we would want to have at our next data release would be really the completion of the Phase 1, the establishment of our dosing regimen and schedule, of course, going forward. And of course, whatever efficacy data continues to flow out of that, that phase I would be what we would to want to show the world. So -- and of course, the plans for what we were going to do with it can come before or along with that data. There's sort of -- you're always working very hard to get everything pulled together for your next stage of clinical trials as you're wrapping up the ones you're working on.

Now for the CD123 additional Phase I, what you were sort of getting at, what ideas would you have on that is what you're saying. So I would say there's different slices of AML. And I think, in particular, we have to look at how the landscape at AML is changing. I think the biggest change there is the emergence of venetoclax as an agent both in frontline in the sort of the elderly, frail population as an induction therapy. And then, of course, it's going to start -- it's being used more and more in the relapse setting, and I think it's going to have a label there soon, probably.

So we want to make sure we're mindful of that. And I think that there's different places where a highly active T cell-engaging antibody that depletes the cells can be used. And using that in the context of whether it's consolidation or whether it's in the right relapse setting is where we're looking. But again, we'll specify more on that later when we can. We are in partnership with Novartis there, and we have to be mindful of disclosure requirements.

Does that answer your question, Arlinda?

Yes.

Thank you.

Our next question comes from Gregory Renza with RBC Capital Markets.

This is (inaudible) for Greg. My first question is a follow-up on to the previous question on AMG 424. How should we think about the potential read-through from the discontinuation to the development of AMG 509?

I don't think there is any read-through. The -- as Amgen disclosed, the toxicities were very likely CD38-mediated. If you kill CD38-positive cells, things happen. It -- their conclusion from the review of the data and our -- we agree from our initial review of all the Phase I data is that, that's quite likely what the case was. And so CD38-mediated toxicities do not read through to the AMG 509 program which, of course, is targeting the prostate cancer antigen. There did not appear to be something fundamental about CD3 targeting in general or are constructs or XmAb bispecifics in general at all to be read through from the AMG 424 AE data.

Great. Just one more from me, if I may. Can you talk about how your strategy for obexelimab has evolved and what your latest thinking is around the future of this program?

Right. So though we are not investing in its further development internally, we have been continuing to analyze the data from our lupus Phase II trial which had a very, very robust and really cutting-edge biomarker strategy around it. And we do expect to be disclosing some information around the biomarker work we've done there, which we should be able to talk about in the next couple of months, I believe. And I think that does bear on the strategy for the molecule, though again we are still committing to developing it external to Xencor.

Our next question comes from Tom Shrader with BTIG.

I had a question about the time line of the Atreca deal. I mean, I agree, it's a pretty exciting screen to match with your format. Is this a true discovery deal or is it Atreca's antibodies that they've already discovered and you're just constructing antibodies? Could we see something pretty quick here or is it sort of back to square 1 for this screening approach?

I would say it's really about using the fruits of their screening work that's created antibodies where there's some functionality around them. But of course, they're always updating that and adding new. So though as a discovery program, of course, you're not going to have anything into the clinic in a couple of years. But I think this is about exploiting all the great foundational work they've done while they continue to add to it.

John, do you want to add anything on that?

No, that's about right. I mean they're coming to the table with an existing basket of antibodies. But they're certainly not slowing down their ongoing discovery activity. So there's -- the well could be replenished as we go through the collaboration.

And the benefit we bring is we're able to rapidly make drug candidate quality molecules where you can test how that antibody works in, say, a CD3 bispecific context. And then if it works, you're immediately off to the races in development.

Great. And then I had a quick remedial question on the 2+1 format. Is there any sense of how powerful that is? I mean I know a regular antibody, a tiny fraction actually goes to the target. Is there a sense of how much better this is? Is there's anybody's imaging data that we can look at? And I think we've only had 1 example where the format was compared to a conventional format, isn't that right, the Roche CD20 case, where really all that happened is talks got worse?

Well, I think that molecule still has interesting promise. But remember, of course, I don't know about a direct comparison, but Roche also had a CEA. So colorectal cancer target antigen in that kind of format with a CD3 bispecific. And they saw promising activity in really late-line population.

So direct comparison, John, do you want to touch on where the real power is, whether it's in better avidity or better selectivity?

Yes. I mean just to go through the concept again, the idea is -- particularly in the solid tumor setting where you can't -- you're not like in Hem-Onc, you target B cells and it turns out that people can live better than we ever thought they could without any B cells, right? So you can kill not only the malignant B cells, but the cell of origin as well, and the patient's just fine. The solid tumor setting, that's probably not going to be the case for a lot of these targets, right? Because they're expressed on important organs. And so this is really about just trying to expand the therapeutic index between attacking tumor cells versus, I guess, attacking normal cells.

But to Bassil's point about the CEA, the 2+1 in Roche's hands, they've sort of led the way on this. We've been working on this concept for a while now. There's been some nice preclinical publications on the Genentech group in the context of HER2 that really pretty nicely lay out the concept with a lot of different comparative studies. So we do think there is a lot of promise for this format.

Our next question comes from Peter Lawson with Barclays.

Peter? Are you there?

(technical difficulty)

We're going to move on to the next question from Dane Leone with Raymond James.

All right. I just want to get a sense of the time line that you might understand on seeing data for 24306?

Right. So Genentech is executing the clinical trial for XmAb24306 which is our IL-15 molecule for oncology. They started the Phase I study in Q1 of this year. I think given both where the study is, advancing in dose escalation as well as Genentech, we have to agree with them on a data disclosure. So they have the right to say when as well as we do. So we have to both be in sync on that. I think it's unlikely we'll have any data this year for sure. And as to whether next year, we'll have to confirm with Genentech later in the year. So we really can't give you anything more specific than that, unfortunately.

Can you remind us how the economics of the partnership work?

Sure. Of course, we signed a deal in February of 2019. It is a 55%-45%, where 45% is Xencor worldwide split of the profit and loss. We had $120 million upfront paid, and there is $160 million in clinical stage milestones for the lead program, 24306. And so in addition to splitting all development costs and then splitting the P&L 55-45, Genentech will pay 100% of all what are called launch costs, so pre-approval, commercialization, preparation activities. An important noneconomic part of that deal, and so in addition to having a very large stake in the ultimate value of the asset, we also have a right to run combination studies with 24306 in both internal Xencor pipeline candidates as well as candidates or molecules, drug molecules of third parties, as long as they don't directly compete with molecules in the collaboration, because combination is where an IL-15 is going to be used. It will boost the T cells, boost the NK cells for other therapies' action.

Okay. Makes a ton of sense. Just 1 more question, maybe a macro question for you. As you have a lot of assets in the portfolio in kind of early stage development, do you -- can you kind of -- is there a way to give us a sense of maybe over the next 12 months, how many of those programs you had wanted to nominate into more later stage Phase II testing or how you want to approach later stage development for some of these assets. Just kind of understanding how you internally expect the programs to advance as we head into 2021?

Yes. So over the next 12 months, hopefully, we'll have more data we can talk about publicly around XmAb20717, the PD-1, CTLA-4 inhibitor across both these -- or expansion cohorts of both sort of PD-1 experience solid tumors as well as sort of non PD-1 approved solid tumor indications. And that should help guide us on more specifics of do we go in 1 basket of indications at post PD-1? Do we go in the non post PD-1? Do we go in neither? Do we go in both? Data will have to drive it. So I think we should have more clarity there, how that program is going to have -- is going to be able to proceed. And I think that as we provide the specifics, as our plans are really coming together around plamotamab in the CD20, CD3, that also, we should be able to provide significant clarity there for how we're thinking of later stage. I think in that case, we feel very comfortable that the data we have already strongly supports moving forward, at least in DLBCL. And as we continue the studies and do more work, we hopefully can bring other indications forward in the database. I think those are the ones I think that we should have more clarity on. And the others, we're going to continue to generate further data.

(Operator Instructions) Our next question is from Zhiqiang Shu with Berenberg.

I have a few here. First is on the SSTR2 for neck. Just -- I guess, can you overview what the treatment landscape, in particular related to Lutathera? And do you think the -- your program needs to be -- Lutathera to be competitive or to be approved? And then also on that program, what are the safety signals are you mostly concerning about? And then secondly, on the IL-2 program, I know it's early in the days, but I guess, do you guys have an idea what indications you are potentially pursuing? And then are you looking for a partner for this program?

So I got 4 questions. Let's make sure I can run through -- we can run through them. For SSTR2, Lutathera, how does that play in the competitive context? We have -- we clearly are seeing patients that are non post-Lutathera even though Lutathera is indicated for them. So not everybody gets a radiotherapy, the obvious distribution issues with radioisotopes are clear. The safety signals we will be looking for, looking for ones where we know SSTR2 is expressed. There's -- expressed in gastric tissues, expressed in pancreatic islet cells, expressed in some lung. So we're going to look at all of those.

Now for IL-2, we're not ready to guide on indications. And we are an oncology-focused company. So I think we'll be willing to entertain partnerships earlier for the IL-2, but we are prepared to moving forward to get to meaningful inflections even post biomarker Phase I data.

Okay. And then do you also have IL-2 for oncology in the works, too, or...

No, we do not. Our IL-15 program, we believe, is a better starting point, and we believe we have a very attractive, hopefully, best-in-class product profile for IL-15, which of course, engages IL-2 beta gamma receptors downstream, but completely avoids the CD25 binding that you usually have to work to get rid of for IL-2. So, no.

And our last question comes from Peter Lawson with Barclays.

Just on CD20, CD3, it's a crowded, but really exciting landscape. Just how should we think about your position in there? Is it moving into combos or different indications? Or do you think it's a question of driving up efficacy?

No, I think it's about combinations. I think from the efficacy data we have and that we see with our competitors, like at Roche and Regeneron, I think we have a pretty good feel for where the efficacy falls for this class. And I think there a lot of commonality there. And I think it's going to be about working in the right combinations. And of course, if you see a signal as you explore in your various indications that you get coming into your trial, where a CD20, CD3 might work, we're all discovering what niches these particular mechanisms of action might best suit, we'll of course chase that signal very rapidly.

So I think there's an -- there's certainly potential opportunities around indications or slices whereas we learn things, we can maybe get the jump on competitors. But I think the focus right now is how do you best combine and best position yourself, both in this relapsed/refractory setting and then ultimately, to want to move into earlier line. It's going to be about, I think, that more than anything.

And when do you think we can have kind of a complete picture around that, when you're going to roll out the strategy?

Well, we still expect to be able to give a lot further guidance on our strategy later this year.

Got you. And then just on the CTLA-4 PD-1, when should we see the next data? And is the patient still in CR.

Sure. So for CTLA-4, PD-1, within the next 12 months, we should have at least an initial bolus of data out of our expansion cohorts. Of course, there's 5 cohorts, so can't get all of them done at once. But we should have that initial bolus of data coming out within the next 12 months. And I'll defer the question on the CR patient. Do we have any -- I'll ask Allen, do we have definitive knowledge about that patient anymore, that they've -- now that they've gone so far out past the...

No, the patient has come off of the study for investigator of choice and patient decision. And so we know that they were in CR at the time of coming off study, but we don't have additional data from that operation.

Ladies and gentlemen, this concludes our Q&A session. I would like to turn the call back to Bassil Dahiyat for his final remarks.

Great. Thank you very much, operator, and thank you, everybody, for joining us today. We hope our friends and colleagues on the East Coast and in New York are keeping safe from the tropical storm and that everybody takes care of themselves in the COVID pandemic. Have a great evening, and look forward to updating you in the immediate future. Bye-bye.

And with that, ladies and gentlemen, we thank you for participating in today's conference. You may now disconnect. Have a wonderful day.