Q3 2019 Earnings Call

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Operator: Good afternoon, and welcome to the Xencor 3rd Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for questions. Please be advised that this call is being recorded at the company's request. At this time, I would like to pass the call to Charles Liles, Associate Director and Head of Corporate Communications and Investor Relations at Xencor. Please proceed.

Good afternoon, and welcome to the Xencor third quarter 2019 financial results Conference call.

This time, all participants will listen only mode.

Charles Liles: Thank you, operator, and good afternoon. This is the Xencor third quarter 2019 financial results conference call. Earlier this afternoon, 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, Basil Dahiyat, President and Chief Executive Officer, will provide a business overview and review our pipeline and licensing partnerships. And John Kuch, Senior Vice President of Finance and Chief Financial Officer, will review the financial results for the third quarter and first nine months of 2019. Then we will open up the call to your questions. Before we begin, I would like to remind you that, during the course of this conference call, Xencor Management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management for future operations, the company's partnering efforts, capital requirements, future product offerings, and research and development programs.

Following the formal remarks, well open the call for questions. Please be advised for this call is being recorded at the comedies request at this time I like to pass the call to Charles Laos, Associate director and head of corporate Communications and Investor Relations and core. Please proceed.

Thank you operator, and good afternoon walkers and of course third quarter 2019 financial results Conference call.

Earlier. This afternoon, we issued a press release, which outlines the topics we plan to discuss today. The press releases available at Www Dot Xencor Dot com.

Today on our call battled out yet president and Chief Executive Officer provide a business overview and review our pipeline and licensing partnerships and John Cushe Senior Vice President Finance and Chief Financial Officer will review the financial results from third quarter and first nine months of 2019.

Then we will open up the called for your questions.

Before we begin I would like to remind you that during the course at 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 the management for future operations, the company's partnering efforts capital requirements future product offerings in research and development programs.

These forward looking statements are not historical facts.

Charles Liles: These forward-looking statements are not historical facts but rather are based on our current expectations and beliefs and are based upon 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 sections of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q.

Based on our current expectations and beliefs center based upon information currently available to us.

Outcome of the events describing these forward looking statements are subject to known and unknown risks uncertainties and other factors that cause actual results to differ materially from their results anticipated by these forward looking statements, including but not limited to those factors contained in the risk factor section of our most recently filed annual report on Form 10-K , and quarterly reports on Form 10-Q with that let me.

Charles Liles: With that said, let me pass the call over to Basil.

Pass the call over to battle, Thanks, and thanks, everyone for joining this afternoon.

Bassil I. Dahiyat: Thanks, and thanks everyone for joining us this afternoon. The core of Xencor's approach to creating antibody and cytokine therapeutics is our XMAB engineering platform. By making small changes to an antibody 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 the suite of XMAB FCU domains we've created allows us to engineer nearly any antibody to have improved potency, longer half-life, or bispecific structure. This flexibility and portability enable us to take multiple shots at goals simultaneously and generate proof-of-concept data to guide which programs we will independently advance, or partner with, or terminate.

The curves inquiries approach to creating antibody inside it couldn't care predix as our exit Mab engineering platform by making small changes to an antibody structure specifically in its FC domain, we can predict natural functions and performance and create new mechanisms of therapeutic action.

I can play nature of the suite of action that a few domains. We've created allows us to engineer nearly any antibody to have improved potency longer half life or by specific structure.

This flexibility and portability enable enable us to take multiple shots on goal simultaneously genereight proof of concept data to guide, which programs will independently advance or partner or terminate.

Bassil I. Dahiyat: Now, in the past few years, we've focused our R&D efforts on the expansion and use of our bi-specific XMAP platform to create new drug candidates that bind two or more different targets simultaneously. Since 2016, we have initiated six phase one clinical studies evaluating XMAB bispecific antibodies. Our plug-and-play approach to engineering enables the rapid design and simplified development of antibodies and other protein structures like cytokines. Biospecifics are a very rapidly emerging area of therapeutic development, particularly in oncology, and in order to stay at the forefront of innovation in this space, we use our engineered heterodimeric FC domain as a robust scaffold to rapidly develop new candidates that we group into three different classes. T-Cell Engager Biospecifics, Tumor Microenvironment Activator Biospecifics, and Cytokine.

Now in the past few years, we focused our R&D efforts on the expansion and use of our bi specific X snap platform to create new drug candidates that my two or more different targets simultaneously.

Since 2016, we've initiated six phase one clinical studies evaluating X men by specific antibodies.

Plug and play approached engineering enables rapid design and simplified development of antibodies and other approaching structures like cytokine.

Well I specifics are very rapidly emerging area of therapeutic development, particularly in oncology in order to stay at the forefront of innovation in the space, we use our engineered heterodyne Merrick FC domain as a robust scaffold to rapidly develop new candidates that we group into three different classes.

He cell engager by specifics tumor microenvironment activator bi specifics and cytokine.

The first and most advanced classes. The T cell Engager class. These are tumor targeted by specific antibodies that contain both the tumor antigen binding domain undecided toxic T cell binding domain, specifically, a cdthree binding domain, they activate T cells or the side of the tumor in order to Potently kill malignant cells.

Bassil I. Dahiyat: The first and most advanced class is the T-cell engager class. These are tumor-targeted bispecific antibodies that contain both the tumor-antigen binding domain and a cytotoxic T-cell binding domain, specifically a CD3 binding domain. They activate T-cells at the site of the tumor in order to potently kill malignant cells.

It's not one for all four or five is RCD 123 by Cdthree Bispecific antibody is being developed that's being built in collaboration with our partner Novartis is there an open label phase one dose escalation study to assess safety tolerability and preliminary anti tumor activity in patients with relapsed or refractory acute myeloid leukemia as well as other CD.

Bassil I. Dahiyat: XNAB-14045 is our CD123xCD3 bispecific antibody that's being developed in collaboration with our partner Novartis. It's an open-label phase 1 dose escalation study to assess safety, tolerability, and preliminary anti-tumor activity in patients with relapsed or refractory acute myeloid leukemia, as well as other CD123-expressing hematologic malignancies. In the second quarter, we restarted the study under an amended protocol that included more prescriptive guidance on the monitoring and management of cytokine release syndrome following the lifting of a partial clinical hold.

23, expressing haematological malignancies.

Second quarter, we started the study under the amended protocol, which included more prescriptive guidance on the monitoring and management of cytokine release syndrome following to lifting of the partial clinical hold.

Bassil I. Dahiyat: We continue dose escalation in this study and are planning to initiate additional clinical studies evaluating XMAP 14045 in 2020. Our next program is XMAT 13676, a CD20 by CD3 bispecific antibody. It's also in Phase I, but for patients with advanced B-cell malignancies like non-Hodgkin lymphoma and chronic lymphocytic, We expect to present data from this study at the ASH annual meeting in December, where we plan to show initial safety and clinical activity. That's during the dose escalation phase.

We continue dose escalation in the study and are planning to initiate additional clinical studies evaluating NEXMET fortino 45 in 2020.

Our next program is X that 13, 676, cdtwenty by Cdthree Bispecific antibody. It's also in phase one but for patients with advanced B cell malignancies, like non hodgkin lymphoma, and chronic lymphocytic leukemia.

We will we expect to present data from this study at the Ash annual meeting in December where we plan to show initial safety and clinical activity.

Ah that's during dose escalation coworkers now X men 18, 87 is our third T cell engaging a C by specific it targets STR two or some aggrastat receptor to an antigen highly expressed on some solid tumors. In early 2018, we started dosing patients in a phase one dose escalation study to sell.

Bassil I. Dahiyat: Now, XMAP 18.087 is our third T cell engaging CD3 bispelling antibody. It targets SSTR2, or somatostatin receptor 2, an antigen highly expressed on some solid tumors. In early 2018, we started dosing patients in a phase one dose escalation study to assess its safety, tolerability, and preliminary anti-tumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors.

Safety, Tolerability and preliminary anti tumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors. We expect expect presented initial data from that study in the first half 2020.

The next group of our bi specific antibodies as our tumor microenvironment activators, rather than directly bridging is how to toxic T cell to a tumor cell RTL me activator seek to more effectively reactivate tumor reactive T cells and existing therapies do.

Bassil I. Dahiyat: Now the next group of our biospecific antibodies is our tumor microenvironment active antibody. Rather than directly bridging a cytotoxic T-cell to a tumor cell, our TME activators seek to more effectively reactivate tumor-reactive T-cells than existing therapy. Our antibodies simultaneously engage multiple T-cell targets, such as checkpoints or agonists, and a key feature of their design is to choose individual binding affinities for each T-cell target to be suboptimal for binding to T-cells with only one of the two targets on its surface but to have high binding when both targets are present. This zipping up when multiple handholds for the antibody are present is called avidity. Our approach reduces the need for multiple antibodies typically used in combination therapy and also allows for more selective targeting of T-cells that have multiple checkpoint expressions. These are typically found more often in the tumor microenvironment than in the periphery.

Our antibody simultaneously engage multiple T cell targets, such as checkpoints are agonists and a key feature of their design is to choose individual binding affinity for each T cell target to be sub optimal for binding T cells with only one of the two targets on its surface, but to have high binding when both targets are present this zipping up one more.

I will hand holds for the antibody your present is called at the.

Our approach reduces the need for multiple antibodies typically used in combination therapy and also allows for more selective targeting of T cells that have multiple checkpoint expression.

These are typically found more often in the tumor microenvironment into periphery.

Now earlier this year, we started dosing the first patients in our second third tier me clinical trials phase one dose escalation study is that snaps two to eight for one to three window for.

Bassil I. Dahiyat: Now, earlier this year, we started dosing the first patients in our second and third TME clinical trials, phase 1 dose escalation studies of XMAPs 22841 and 23104. Along with the ongoing Phase I study of XMAP-20717, we're focused on enrolling patients with several advanced solid tumor types in these studies. Our hope is to be able to drive stronger anti-tumor responses with improved tolerability for patients. We anticipate initial dose escalation and biomarker data for the first of these programs, XMAP-20717, or PD-1 by CTLA-4 by-specific, in the first half of 2020. Finally, we're developing a suite of cytokine immune signaling proteins that we've built on top of our XMAP bi-specific FC domain and that also incorporate our Xtend technology in the FC domain. Using this FC domain and tuning the potencies of these cytokines enables more druggable molecules to be made with potentially superior tolerability, slower receptor-mediated clearance, and prolonged health. Our first FiniteCon program and the lead in our collaboration with Genentech is XMAP 24306.

Along with the ongoing phase one study of X Matt to 0717, we're focused on enrolling patients with several advanced solid tumor types and these studies.

Our hope is to be able to drive stronger into tumor responses with improved tolerability for patients.

We anticipate a dish initial dose escalation of biomarker data for the first of these programs X snap to your a settlement seven our PD one by sea Chile for by specific in the first half 2020.

Finally, we're developing a suite of cytokine you mean sing cytokine. These are immune signaling proteins that we've built on top of our ex not by specific FC domain and then also incorporate our act extend technology in the FC domain.

Using this FC domain in tuning the potent sees it decided kinds enables more druggable molecule to be made with potentially severe superior tolerability slow receptor mediated clearance and prolong half life.

Our first cytokine program and the lead in our collaboration with Genentech is X men to for three or six.

Bassil I. Dahiyat: It's an IL-15 fused with its receptor alpha subunit, and both of those fused to our bispecific FC domain. As noted, it contains both the cytokine and its receptor domain in order to expand and activate T cells and N-natural killers. XNAB 24306 is intended for development with a wide range of combination agents, and importantly, we can perform our own clinical trials with both our own pipeline assets and non-genetic agents within this collaboration, subject to some conditions. We look forward to planning a number of these combination studies pending completion of the Initial Dose Escalation Study. Currently, we're supporting Genentech's IND application, which is expected before the end of this year. We anticipate a first in-human study dosing patients in multiple oncology indications early next year. We'll now switch to reviewing some updates from our licensing partnerships, which continue to provide revenue that helps fund the development of our own internal pipeline. Most of these partnerships require very limited resources and effort from us.

It's an ideal 15 fused with its receptor alpha seven unit and both of those fuse on our bi specific FC domain. As noted it contains both cytokine and its receptor demand in order to expand and activate T T cells and natural killer cells.

Xmab two for three or six is intended for development with a wide wide range of combination agents and importantly, we can performer own clinical trials with both our own pipeline assets in non genetic agents within this collaboration subject to some conditions.

We look forward to planning a number of these combinations studies pending completion of the initial dose escalation study currently we're supporting genetics I'd application, which is expected for the ended this year, we anticipate a first in human study dosing patients in multiple oncology indications early next year.

Well now switch to reviewing some updates from our licensing partnerships, which continue to provide revenue that helps fund development of our own internal pipeline candidates. Most of these partnerships require very limited resources and effort from US we're not going review each program, but we have eight ongoing partnerships Rex snap technology, which have resulted in one marketed product for clinical stage candidates.

Bassil I. Dahiyat: We're not going to review each program, but we have eight ongoing partnerships for XMAP technology that have resulted in one market for a product, four clinical stage candidates, and two candidates that have open INDs and are pending Phase I initiation. In 2013, we licensed Xtend FC technology to Alexion, which was used in creating Ultimira. They're complement inhibitors with an improved half-life, which allows for less frequent dosing regimens compared with Celeris.

Two candidates have opened on Sundays and pending phase one initiation.

In 2013, we licensed extend FC technology to Lesean, which was used in creating ultra mirror.

They're complement inhibitor when approved half life, which allows for less frequent dosing regimens compared with Solaris.

Bassil I. Dahiyat: It's the first antibody to incorporate an XMAP technology to be marketed, and we're very excited about that. Ultimaerys has now received multiple global marketing authorizations in the U.S., Japan, and Europe for the treatment of adults with PNH. And last month, it received approval from the FDA for the treatment of patients with atypical hemolytic uremic syndrome, or AHA.

The first antibody to incorporate an ex now technology to be market and we're very excited by that.

Ultimately this has now received multiple global marketing authorization, U.S., Japan, and Europe , the treatment of adults with Peanuts and last month ultimately received approval from the FDA for the treatment of patients with atypical hemolytic uremic syndrome or eight.

We are receiving a 1.5% royalties on net sales and all indications and geographies worldwide.

Bassil I. Dahiyat: We're receiving a 1.5% royalty on net sales of all indications in Geography's World. Another partner, Morphosis, licensed Taffa-Citimab from us, which was previously known as Mor-208 and before that as X-Mab-5575. It's an anti-CD19 antibody that we designed and initially developed, incorporating our cytotoxic FC domain for high ADCC function. Morphosis reaffirmed on their update call last week that they intend to complete a BLA submission by the end of this year. If approved, we would receive royalties in the high, single-digit to low double-digit percentage range, as well as additional milestones. Between 2015 and 2016, we entered into research collaborations with Amgen and Novartis that, among other terms, included the creation of novel XMAB bispecific antibodies that would be advanced by these partners.

Another partner Morphosis license from US tacit AMAP, which was previously known as more chew away and before that is X now 5574.

Anti Cdnineteen antibody that we designed and initially developed incorporating our cytotoxic FC domain for high ADCC function.

Hostess reaffirmed on their update call last week, they intend to complete a BLA submission by the end of this year.

If approved we receive royalties in the high single to low double digit percentage range as well as additional milestone payments.

Between 2015 in 2016, we entered into research collaborations with Amgen in Novartis that among other terms of them included the creation of novel novel ex now by specific antibodies that would be advanced by these partners.

Recently I'd applications were allowed by the FDA for an undisclosed novartis ex not by specific antibody and for Amgen's AMG Fivenine a steep one by Cdthree bispecific antibody that uses our xmab two plus one format.

Bassil I. Dahiyat: Recently, IND applications were allowed by the FDA for an undisclosed Novartis XMAB bispecific antibody and for Amgen's AMG509, a steep 1 by CD3 bispecific antibody that uses our XMAB 2 plus 1 format. That format uses the same heterodimeric XNABFC demand as all of our other candidates. But it has two tumor-targeting domains and one CD3-targeting domain. This format allows higher selectivity for tumor antigen expression.

That format uses the same heterodyne Merrick ex now that see demand is all of our other candidates.

But it has to tumor targeting domains and one cdthree targeting to meet this form analyze allows higher selectivity for tumor antigen expressing cells.

Bassil I. Dahiyat: In total, we recognized milestone revenue of $15 million from these collaborations in the third quarter. Finally, we have continued to expand our senior management. This past quarter, we announced the appointment of Celia Eckert as General Counsel and Corporate Secretary. Celia has spent more than 20 years as a corporate attorney in both law firms and in-house... She'll be instrumental in building a strong legal infrastructure, which is absolutely required as Xencor grows and matures as an organization and advances our portfolio programs through the later stages of clinical development. We're thrilled to have Celia on the team. Now, with that, I'll turn the call over to John Kuch to review our third quarter 2019 financial results. Thank you, Beth.

In total we recognize milestone revenue of $15 million from these collaborations in the third quarter.

Finally, we have continued to expand our senior management team.

This past quarter, we announced the appointment of Sealy Eckert as general Counsel in corporate Secretary Sealy has spent more than 20 years as a corporate attorney in both law firms and in house rules.

She will be instrumental in building a strong legal infrastructure, which is absolutely required to banquet grows and matures as an organization and advances our portfolio programs. Good later stages, a clinical development, we're thrilled to have really on the team.

Now with that I'll turn the call over to John Cushe to review, our third quarter 2019 financials.

Thank you Basle.

Third quarter Suncor is financial position benefited from milestones that were earned from several of our partnerships and collaborations. The company continues to operate from a strong financial position to allow us to continue to advance our pipeline of five civic inside of 10 candidates as well as our early research programs.

John J. Kuch: In this afternoon's press release, we reported cash, cash equivalents, and marketable securities totaling $620.5 million as of September 30, 2019, compared to $530.5 million as of December 31, 2018. The increase reflects upfront payments and milestones received in 2019 from Genentech, Astellas, and Alexian, offset by cash used to fund operating activities in the first nine months of 2020.

This afternoon's press release reported cash cash equivalents in a marketable securities totaling 620.5 million as of September 32019, compared to 530.5 million at December 30, Onest 2018.

The increase reflects upfront payments and milestones received in 2019 from Genentech Astelit analytics in offset by cash used to fund the operating activities in the first nine months its warning 19.

John J. Kuch: The total revenue for the third quarter ended September 30, 2019 was $21.8 million, which was primarily milestone revenue recognized from our Novartis, Alexian, and Amgen collaborations. Total revenue for the nine months ended September 30, 2019 was $153.2 million and included revenue earned from our Genentech and Astellas collaborations as well as milestone revenue recognized from Novartis, Alexion, and Amgen. Total revenue for the three and nine months ended September 30, 2018 was $29 million and included collaboration revenue earned from our Novartis partners and milestone revenue earned from Alexa.

Total revenue for third quarter ended Septemberthirty 2019 was 21.8 million, which was primarily milestone revenue recognized from our novartis election, and Amgen collaboration.

Total revenue for nine months ended Septemberthirty 2019 was 153.2 million and includes revenue earned from our Genentech missiles collaborations in the milestone revenue recognized from Novartis election and Amgen.

Total revenue for three and nine months ended Septemberthirty 2018 was 29 million and includes collaboration revenue earned from our no fighters and milestone revenue earned from Alexia.

Research and development expenses for third quarter, 2019, or 29.8 million compared to 21 million for the same period 2018.

John J. Kuch: Research and development expenses for the third quarter 2019 were $29.8 million, compared to $21 million for the same period in 2018. Total R&D expenses for the nine months ended September 30, 2019 were $91.3 million, compared to $70.4 million for the same period in 2018. Increased R&D spending for the three nine-months ended September 30, 2019 over the same periods in 2018 reflects increased stock-based compensation expense and additional spending on the company's CD3 bi-specific antibody and cytokine development candidates and technology. General administrative expenses for the 3rd quarter of 2019 were $6.3 million compared to $7.4 million for the same period in 2018. The decreased G&A spending for the 3rd quarter of 2019 over 2018 amounts reflect decreased spending on personnel. Total G&A expenses for the nine months ended September 30, 2019 were $17.5 million compared to $17 million for the same period in 2018. The increased spending for the nine months ended September 30, 2019 reflects additional spending on intellectual property, including patents and licenses, and Expenses Related Professional Services.

Total R&D expenses for nine months ended September 32019 were 91.3 million compared to 70.4 million for the same period 2018.

Increased R&D spending for the three nine months ended September 32019 over the same periods in 2018.

Flex increased stock based compensation expense and additional spending on the companys.

Cdthree by civic antibody and cytokine development candidates and technologies.

General administrative expenses for third quarter, 2019 were 6.3 million compared to 7.4 million for same period in 2018, the decrease Genie spending for third quarter 2019 over 2018 miles.

Reflect decreased spending on personnel expenses total Genie expenses for nine months ended Septemberthirty 2019 were 17.5 million compared to 17 million for the same period in 2018.

He's spending for nine months ended Septemberthirty 2019 reflects additional spending at intellectual property, including patents and licenses and expenses related professional services.

Noncash stock based compensation expense for the nine month since September 32019 was 24.7 million.

John J. Kuch: Non-cash, stock-based compensation expense for the nine-month end of September 30, 2019 was $24.7 million, compared to $15.5 million for the same period in 2018. The net loss for the third quarter ended September 30, 2019 was $10.2 million, or $0.18 on a fully delivered per share basis, compared to a net income of $3.2 million, or $0.05 on a fully delivered per share basis for the same period in 2018. The net loss report for the three months ended September 30, 2019 over the net income report for the same period in 2018 is primarily due to lower collaboration revenue earned and higher R&D expenses. For the nine months ended September 30, 2019, that revenue was $52.8 million, or $0.92 on a fully diluted per share basis, compared to a net loss of $52.2 million, or $0.98 on a fully diluted per share basis for the same period in 2018.

To 15.5 million for the same period in 2018.

The net loss for third quarter ended Septemberthirty 2019 was 10.2 million or 18 cents on a fully diluted per share basis.

The net income of 3.2 million or five cents on a fully diluted per share basis for the same period in 2018.

Net loss report for three months ended September 32019 over the net income report for the same period 2018.

Primarily due to lower collaboration revenue earned and higher R&D expenses.

For nine months ended September 32019, net income was 52.8 million or nine two cents on a fully diluted per share basis compared to a net loss of 52.2 million or 98 cents on a fully diluted per share basis for the same period in 2018.

The net encumbered pool for nine months and the September through 2019 over than that last report for the same period. In 2018 is primarily due to revenue recognized from the genentech in the cells collaborations muscle revenue earned from the Novartis and Amgen collaboration.

John J. Kuch: The net income report for the nine months ended September 3, 2019 over the net loss report for the same period in 2018 is primarily due to revenue recognized from the Genentech and Astellas collaborations and milestone revenue earned from the Novartis and Amgen collaborations. The total number of shares outstanding was $56.7 million as of September 3, 2019 compared to $56.2 million as of September 3, 2018. Based on current operating plans, projected spending, and expected proceeds from our partnerships and collaborations, we expect to have cash to fund research and development programs and operations beyond 2024 and to end 2019 with between $590 million and $625 million in cash equivalents and marketable securities. With that, we would now like to open up the call to your questions. Operator?

The total shares outstanding were 56.7 million as September through 2019, compared to 56.2 million is September 32018.

Based on current operating plans projected spending and expected proceeds from our partnerships and collaborations.

We expect to have cash to fund research and development programs and operations beyond 24 at the end 2019 with between 590 million and 625 million cash cash equivalents and marketable securities.

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

Thank you to ask a question. Please press Star then one on your telephone.

To withdraw your question. Please press the pound key please sanbolic Apollo rocky when a roster.

Thank you. Our first question comes from Alethia Young of Cantor Fitzgerald. Your line is open.

Hey, guys. Thanks for taking my question Congrats on all the progress maybe a couple from me one that was just curious on what kind of a other studies you might be down we are seeing anyone 23, if you've talked about any particular indication.

Operator: Thank you. To ask a question, please press star then 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile a Q&A list. Thank you. Our first question comes from Althea Young of Cancer Fitzgerald. Your line is open.

To just can you remind us the ash like how much data we should expect.

For the Cdthree program and.

Kind of what that trajectory looks like over the.

The rest of 2020 and then as the last question is just kind of high level. It seems like there's a lot of.

Althea Young: Hey guys, thanks for taking my question. Congratulations on all the progress. Maybe a couple for me. One, I was just curious what kind of other studies you might be doing with your CD123 if you've talked about any particular indications. Two, just can you remind us, Ash, like how much data we should expect for the CD3 program and, you know, kind of what that trajectory looks like over the rest of 2020. And then the last question is just kind of high level. Seems like there's a lot of, you know, kind of different readouts on programs in 2020 that are expected here. And I guess, you know, where are you kind of thinking about where there's the most confidence or potential differentiation in programs? Thanks.

Different read out programs in 2020 their expected here and I guess, where you kind of thinking about where there is the most confidence or potential differentiation in program. Thanks.

Alright, so I'll try to start that at the top.

Other studies for Fortune of 45, we are planning on focusing on a continuing to focus on air Mel and I think there is there's a number of slices of that have that treatment.

An algorithm that that had a significant unmet need I think those are.

And of course, relapse and refractory disease, where we did our dose escalation and there is various there's various niches of that but as well there's a there's a place in consolidation where I think a good monoclonal antibody could really play a role that's post.

Bassil I. Dahiyat: All right. So I'll try to start that at the top. Other studies for 14.045, we are planning on focusing on, continuing to focus on AML. And I think there's a number of slices of that treatment algorithm that have a significant unmet need. I think those are in, of course, relapse and refractory disease, where we did our dose escalation, and there's various niches of that. But as well, there's a place in consolidation where I think a good monoclonal antibody could really play a role. That's post-induction to try to increase the number of people that have a deep CR to get them to either ultimately transplant or just maintain it.

Post induction to try to increase the number of people that have a deep CR could get them to either ultimately transplant or just maintain it. So I think those are those are important niches and I think we're going to be able to guide more on that as we and our partner Novartis.

Finalized plans and hopefully be able to announce those in the first half of next year.

Now for the data we plan on presenting at Ash for actually have 13, 676, our CD 20 cdthree by specific.

That's going to be presenting our initial dose escalation data. So it is dose escalation data and I will say, we are continuing to escalate dose.

In that study, but that said, we do expect to be able to show data that looks at efficacy safety and tolerability of the agent as Weve progressed in our dose escalation and we should be able to be able to triangulate how that looks at how we.

Bassil I. Dahiyat: So I think those are important niches, and I think we're going to be able to guide more on that as we and our partner Novartis finalize plans and hopefully be able to announce those in the first half of next year. Now, for the data we plan on presenting at ASH for XMAP 13676, our CD20, CD3 bispecific, that's going to be our initial dose escalation data. So this is dose escalation data, and I will say we are continuing to escalate the doses in that study. But that said, we do expect to be able to show data that looks at efficacy, safety, and tolerability of the agent as we've progressed in our dose escalation. So we should be able to triangulate how that looks and where we hope to get with further dose escalation.

Where we hope to get with further dose escalation.

So we're excited by that data, though its initial dose escalation that again it should be it should provide a look at the activity the molecules wealth.

And on your last question units in his various readout in 2020, I would say that all of the programs are just getting to the cost of really engaging in the the most important studies, which would for delivered true proof of concept and so our strategy is around advancing multiple programs, whether it's our CTO and 23.

Bassil I. Dahiyat: So we're excited by that data, though it's initial dose escalation data, again, it should provide a look at the activity of the molecule as well. And on your last question, you say there are various readouts in 2020, I would say that all of the programs are just getting to the cusp of really engaging in the most important studies which would deliver true proof of concept. And so, you know, our whole strategy is around advancing multiple programs, whether it's our CD123 or our CD20 CD3s, our first solid tumor programs, our 18087, which is our SSTR2 by CD3, or our first checkpoint bi-specific, which is our XMAP20717. All of those, we really need to advance them into the right kinds of studies.

Or a CD 20, CD threes are for solid tumor programs are each annuity seven which is our SSG, our two by Cdthree or our first checkpoint combo by specific which is our action of twos or is that once I mean, all of those we really need to advance them into the right kind of studies. So for the latter to that would be we're still relatively.

Early in dose escalation for each annuity seven that would be beyond that.

Expansion cohorts for our 20 717, we've already built in expansion cohorts in multiple tumor types after dose escalation and we'll of course announced after.

After we get through dose escalation for our Cdtwenty what the next steps are so I'd say, it's really the next steps studies that give us that read in the meantime will continue driving them forward and updating on data as we progress.

Great. Thank you.

Thank you. Our next question comes from Michael Schmidt of Securities. Your line is open.

Bassil I. Dahiyat: So, for the latter two, that would be, you know, we're still relatively early in dose escalation for 18087, but that would be beyond the expansion cohorts. For our 2717, we've already built in expansion cohorts and multiple tumor types after dose escalation. And we'll, of course, announce after we get through dose escalation for our CD20 what the next steps are. So, I think it's really the next step studies that give us that reading. And in the meantime, we'll continue driving them forward and updating on data as we progress.

Great. This is answer I'm filling in for Michael Thanks for taking my question had a couple of.

Quick question really on on first one April eight seven here to what extent do you see allude to Sarah as a competitive benchmark given the radiopharmaceutical that has the additional logistical.

Requirements and just to try to get a sense of what you think the relative importance of the different clinical endpoints are for one eight all eight seven and given characteristics of the diseases.

Hi, initial objective response translation to prolong survival or maybe sort of the reverse.

Bassil I. Dahiyat: Great, thank you. Thank you. Our next question comes from Michael Schmidt, Homeland Security, Yolanda. Good. This is Etzer filling in for Michael.

Could be indicative of the shorter PFS wanted to kind of good.

Some comments from you there thanks.

Right. So I guess you alluded to there is a good benchmark it to very its a very dense treatment landscape because people have this disease neuroendocrine tumor.

Bassil I. Dahiyat: Thanks for taking my question. I had a couple of quick questions, really on first the 18087 here. To what extent do you see Lutathera as a competitive benchmark, given the radiopharmaceutical that, you know, has the additional logistical requirements? And just to try to get a sense of what you think the relative importance of the different clinical endpoints is for 18087. And, you know, given the characteristics of the disease, if, you know, high initial objective response translates into prolonged survival, or maybe sort of the reverse could be indicative of a shorter PFS. Wanted to kind of get some comments from you there. Thanks.

Type for a long time may progress through multiple therapies are all on a subset of stat and analog initially and often forever.

And then they progressed through a variety of different therapies, whether it's different kinds of chemo and now alluded there the radio conjugate I would say that it's a good benchmark in that it provides us some clarity on what would be needed to seek be seen in this disease, which is consistent with what was what was uses endpoints in the past you really need you really need duration is.

Fs and its overall survival duration that are going to drive it not objective response rate, we submitted a fair and agent that moved the needle on PFS and LS a very modest.

Bassil I. Dahiyat: Right so I guess yeah lutethera is a good benchmark it's a very um it's a very dense treatment landscape because people have this neuroendocrine tumor type for a long time they progress through multiple therapies they're all on a somatostatin analog initially and often forever and then they they progress through a variety of different therapies whether it's different kinds of chemo and now lutethera the radioconjugate. I would say that it's a good benchmark in that it provides us some clarity on what would be needed to see be seen in this disease which is consistent with what was what was used as endpoints in the past you really need you really need duration it's PFS and its overall survival duration that are going to drive it not objective response rate we saw with lutethera an agent that moved the needle on PFS and OS a very modest objective response rate I think in the low teens percent so I think what that that does for earlier phase development to get a read on your asset and how it's doing in nets is that you need to avail yourself of the various tools we have in imaging where we're imaging radioisotope labels not a satin analogs giving people a read on on how a tumor might be responding even if the objective response criteria of resist are are too murky in this tumor type so I think I hope that answers your question I think ultimately I don't really want to speculate on the differences that might emerge if you look at different response rates and how that could play into differing durations from differing mechanisms of cytotoxic action I don't think anybody knows enough to talk about that yet

The response or I think in the low teens percent. So I think what that that does for earlier phase development to get a read on your asset and how it's doing in net.

Is that you need to avail yourself of the various tools we have.

In imaging, where where imaging radio isotope labeled.

Medicine in logs, giving people a read on how a tumor might be responding even if the objective response criteria of resistor, our two murky in this tumor type.

I think I hope that answers. Your question I think ultimately I I don't really want to speculate on the differences that might emerge as you look at different response rates and how that could play into differing durations from deferring mechanisms of of satisfactory action I don't think anybody knows enough to talk about that yet.

Thanks for taking the question.

Thank you. Our next question comes from sanctions Zhou of Bamberger excuse me Bamber capital market. Your line is open.

Hi, good afternoon.

So for your.

Yes.

Theoretically one of the reasons data.

The mechanism of action might be superior to our true is that it doesn't really activate erad. So could you. Please confirm that from preclinical data showed the minimal chubak excavation and the for a combination trials what kind of mechanism action do some most sense combined.

Bassil I. Dahiyat: Thanks for taking the questions. Thank you. Our next question comes from Shanshan Zhu of Barenberger. Excuse me, Barenberger Capital Market, your line is open. Hi, good afternoon.

But you also peeled off by specific and I have a follow up.

Sure. So with aisle 15, just to be clear out 15 does activate T regs and our engineered I'll 15 has some T reg activating activity as well what it doesn't do what I'll 15 doesn't do is buying the receptor CD 25, which is also known as ill to receptor alpha.

Bassil I. Dahiyat: So for your IL-15 and IL-15-alpha bi-specific, theoretically, one of the reasons that IL-15, The mechanism action might be superior to IL-2 is that it doesn't really activate Treg. So could you please confirm that from your preclinical data, it showed minimal Treg activation? And for combination trials, what kind of mechanism of action do you think makes the most sense to be combined with your IL-15, IL-15 alpha bispecific? And I have a follow up. Sure.

That receptor.

He is what makes aisle to bias to more potently activate T regs versus T. Effector cell. So I'll two is naturally a hyper potent T. Reg activator that also activates T effector cells at higher at higher doses aisle 15 has essentially identical activation of T.

Bassil I. Dahiyat: So with IL-15, just to be clear, IL-15 does activate Tregs, and our engineered IL-15 has some Treg activating activity as well. What it doesn't do, what IL-15 doesn't do, is bind the receptor CD25, which is also known as IL-2 receptor alpha. That receptor is what makes IL-2 biased to more potently activate Tregs versus T-effector cells. So IL-2 is naturally a hyperpotent Treg activator that also activates T-effector cells at higher doses. IL-15 has essentially identical activation of Tregs and T-effector cells because, of course, both of those cell types have the IL-2 receptors beta and gamma, and IL-2 and IL-15 signal through these beta-gamma chains essentially at an equivalent presence on both Tregs So IL-15 naturally starts out without a Treg bias, which you want to avoid. But you don't have to go through a lot of effort to avoid that.

Eggs and T effector cells because of course, both of those cell types have the aisle two receptors beta and gamma and aisle to Nile 15 signal through these bad again, a chains, but essentially at equivalent.

Equivalent.

Presence on both T regs and Tia factors. So 15 naturally starts out without a T. Reg bias would you want to avoid you'd have to go through a lot of effort to to avoid that no. Our preclinical data shows very rapid and sustained expansions of T effector cells as well as natural killer cells in non human primates.

And so I think that points to the kind of combination agents you could use being very very but I think we don't want to forget natural killer cell driven agents such as you know your traditional anti tumor antibodies as.

As well as the T cell driven agents like Cdthree bi specifics like.

Checkpoint and agonist therapeutics as well.

Bassil I. Dahiyat: Now, our preclinical data shows very rapid and sustained expansions of T-effector cells as well as natural killer cells in non-human primates. And so I think that points to the kind of combination of agents you could use being very varied. But I think we don't want to forget natural killer cell-driven agents, such as your traditional anti-tumor antibodies, as well as T-cell-driven agents like CD3 biospecifics, like checkpoint and agonist therapeutics, as well. And then there's, you can always keep going on and on in a number of different ways if you see good activity and you're convinced your drug has a good therapeutic index, you can try But I think first we need to establish it in the basics of, you know, the checkpoint space and NK cell-driven therapies.

And then there you can always keep going on and on and a number of if you see good activity in your convention drug as good therapeutic index you can try at all sorts of different things like vaccines, and neoepitopes therapies et cetera, but I think first we need to establish it in.

In the basics of of.

You know the checkpoint space and the NK cell driven therapies.

Great and the for your Q2, one by anybody so I guess selling season, another parameter beyond binding affinity to try and the Crs do you believe you why is the most optimized modalities for cdthree by specific knowledge humor.

I wouldn't say this must optimize modality for solid tumors, it's going to be utterly target dependent.

And I think it's going to depend on the expression level. The target it's differing expression levels in non target healthy tissue were solid tumor associated antigens are very often expressed on non target tissue heme malignancies much more forgiving there.

Bassil I. Dahiyat: Great. And for your 2-to-1 bispecific antibody, so I guess valency is another parameter beyond binding affinity to tune down the CRS. Do you believe 2-to-1 is the most optimized modality? 3-bisphix in solid tumors.

Bassil I. Dahiyat: I wouldn't say that it's the most optimized modality for solid tumors. It's going to be utterly target dependent, and I think it's going to depend on the expression level of the target. Its differing expression levels in non-target healthy tissue where solid tumor associated antigens are very often expressed in non-target tissue. Heme malignancy is much more forgiving there.

I don't know is valence he per se drops down youre.

Your Crs, it's really the potency of the molecule driven by its affinity of binding cdthree as well as antigen that modulators Crs this isn't in our hands as well as other companies valence. He gives us selectivity for higher expressing.

Bassil I. Dahiyat: I don't know if valency per se drops down your CRS. It's really the potency of the molecule driven by its affinity for binding to CD3 as well as antigen that modulates the CRS. This is in our hands as well as other companies. Valency gives you selectivity for higher expression levels on particular cells, which can often let you play with affinity and dial things down and be more selective. And by hitting fewer cells, you can manifest less CRS. So all those factors kind of interplay.

Higher expression levels on particular cell types, which can often let you play with affinity in dial things down and be more selective and by hitting fewer cells. You can manifest less crs. So all those factors kind of interplay I don't think that it's necessarily optimal for solid tumor I do think however that.

Many solid tumor antigen share this feature being expressed at deferring densities on healthy tissue, but tend to be bright on tumor tissue thats why they are picked as tumor associated antigens and that feature plays very well to the two plus one format, where you can use a lower affinity on each individual.

Bassil I. Dahiyat: I don't think that it's necessarily optimal for solid tumors. I do think, however, that many solid tumor antigens share this feature of being expressed at differing densities on healthy tissue but tend to be bright on tumor tissue. That's why they're picked as tumor-associated antigens. And that feature plays very well with the 2 plus 1 format, where you can use a lower affinity on each individual arm that binds the tumor antigen, but the two of them together zip up when you have high expression. So optimal, that's going way too far, but highly useful for many solid tumor antigens, I think absolutely. And you're gonna see this kind of format and other higher valency formats used more and more.

Arm that binds the tumor antigen, but the two of them together ZIP up when you have high expression. So optimal that's going way too far but highly useful for many.

Solid tumor antigen typing absolutely that's going if you're going to see this kind of format and other higher availity formats use more and more.

Perfect. Thank you for your time.

Thank you. Our next question comes from Mara Goldstein of Mizuho. Your line is okay, great. Thanks.

On.

Okay.

However, what we should anticipate in terms of number.

The reported data on.

Mara Goldstein: Perfect. Thank you for your time. Thank you. Our next question comes from Mara Goldstein of Mizzou. Great, thanks so much for taking that question. Just a follow-up on XMAB 13676, are you able to just share with us sort of what we should anticipate in terms of the number of patients that you might be reporting data on? And I'm hoping maybe you can provide some color on XMAB 717 just regarding what we should think about or you would think about as a benchmark for success and advancement given how the market for checkpoint and combination therapies is evolving. And then I just had a financial question in that I'm just curious about the comment about decreased spending on personnel expenses and what that relates to.

And.

Maybe you can provide some color.

Our next.

Kevin regarding what we said frankly about are you rethink about as a benchmark for success and advancement given how the market for checkpoint and combination therapy revolver, and then I had a financial question Matt.

I'm just curious about the comment on increased spending on personnel expenses and what that memory care.

Okay, you want to take that would first John .

Yes, there was.

There was a change in senior management over the.

In the in 20 yet.

2080 in 2019 that results in the change in.

Compensation expense for the period is just one.

You know one senior management person.

Bassil I. Dahiyat: Okay, do you want to take that one first, John?

Transition yeah. He retired so that resulted in recognition of a lot of stock based compensation.

John J. Kuch: Yeah, there was a change in senior management over the... 2018 and 2019 that resulted in the change in compensation expense for the period. There's just one. You know, one senior manager.

Okay.

Thanks, sorry, there were questions from me sorry Mara.

Right.

We're certainly not going to able to guide on the number of patients specifically in Thirteensix seven six studies until at the abstract cut off on the abstract gets released and are ultimately when we have our.

John J. Kuch: Yeah, he retired, and so that resulted in recognition for a lot of style.

John J. Kuch: Oh, sorry. There were questions for me. Sorry, Mara.

Bassil I. Dahiyat: No worries. We're certainly not going to be able to guide on the number of patients specifically in 13676 studies until the abstract cutoff, when the abstract gets released, and ultimately when we have our materials presented at the conference itself. We'll, of course, tell you specifically there. But I will say that we are guiding to be able to triangulate on, as we progress through dose escalation—we're not done, but as we progress—to looking at some safety and activity and how they interplay with each other. And given that CD3 bispecifics are generally dosed initially at very low doses in their first in human study because of FDA safety requirements, that's going to involve a number of patients because you're going to have to have had a number of cohorts. Hopefully, that helps because we are getting up to cohorts that we are going to be able to look at activity and safety, right? You're actually starting to see things move.

Our materials presented at the conference itself will of course tell you specifically there I will say that we are guiding to be able to triangulate on as we progressed to dose escalation, we're not done but as we progress to looking at some safety and activity and how they interplay with each other and given that cdthree bi specifics or or gen.

Really dosed initially at very low doses in its first in human study because of FDA safety requirements that Skinner involve a number of patients because you're going after having had a number of cohorts.

So hopefully that helps because we are getting up to cohorts that that we are unable to look at activity in safety right, you're actually starting to see things move the T cells are starting to do stuff.

For for X amount of 20, 717, Thats, our PD one by sea, Chile for by specific that we we engineered so that it favors.

The repression of cells at express both of those checkpoints rather than just one and therefore, we hope focuses more on on the more activated T cells that were in the tumor I'm, what we hope to show there because you're right. It's very crowded space I think from our dose escalation study as we want to show one that we can have a blockade of see Chile for and.

Bassil I. Dahiyat: The T-cells are starting to do stuff. For XMAP2717, that's our PD1-by-CTLA-4-by-specific that we engineered so that it favors de-repression of cells that express both of those checkpoints rather than just one. And therefore, we hope to focus more on the more activated T-cells that were in the tumor. And what we hope to show there, because you're right, it's a very crowded space.

And in combination with PD, one and have the right Biomarkers moves you want to have peripheral T cells move certainly if were able in the initial initial study with relatively small numbers to see tumor T cells, we would like to see that if we're able to access the biopsy samples enough and you'd be able to couple of that kind of activation of the T cells, where the safety.

Bassil I. Dahiyat: And I think from our dose escalation studies, we want to show, first, that we can have a blockade of CTLA-4 in combination with PD1 and have the right biomarkers move. So you want to have peripheral T-cells move. Certainly, if we were able in the initial study with relatively small numbers to see tumor T-cells, we would like to see that if we were able to access the biopsy samples enough. And you'd be able to couple that kind of activation of the T-cells with a safety profile that suggests our selective tuning could offer a broader way of using a PD1 CTLA-4 combination blockade than some of the safety challenges that have occurred with the combination blockade in other studies or with other agents when you're using two different antibodies.

With a safety profile that suggests our selective tuning could offer a broader way of using a PD one, particularly for combination blockade than some of the safety challenges that have occurred with the combination blockade and other studies or with other agents right. When you are using two different antibodies and then of course.

Looking at initial antitumor activity is going to be as well some thing though early on in particular, given that you're going to be treating patients that have a will certainly all experienced.

Anti PD, one therapy, you're going to have to compare yourselves to those kinds of of prior studies in your mind, rather than looking at what happens against naive patients, but I think just from the Biomarkers and safety and some initial activity data, we should able to really get a feel for where the molecule is going to go.

Bassil I. Dahiyat: And then, of course, looking at initial anti-tumor activity is going to be important as well. But early on and, in particular, given that you're going to be treating patients that have almost certainly all experienced anti-PD1 therapy, you're going to have to compare yourself to those kinds of prior studies in your mind rather than look at what happens against naive patients. But I think just from the biomarkers and safety data and some initial activity data, we should be able to really get a feel for where the molecule is going to go.

Okay, all right. Thanks I appreciate it.

Thank you.

I guess to ask a question. Please press Star then one on your touched on telecom.

Our next question Jonathan Chang.

SBB Leerink your line is open.

Hi, guys. This is David Sean for Jonathan Thanks for taking my questions and congratulations on the progress.

Mara Goldstein: Okay. All right. Thank you. I appreciate it. Thank you. Again, to ask a question, please press star then 1 on your touchtone telephone. Our next question comes from Jonathan Chang of SVB Leerink. Your line is open.

Wanted to start with another quick follow up on 30 676 could you just give some context. How you view. This program is differentiated from some of the others see three and CD 20 by specific from the space is there anything you observed so far that might suggest a unique combination approach from what regeneron and Roche have been guiding towards and then second.

Jonathan Chang: Hey guys, this is David Ruchon for Jonathan. Thanks for taking my questions and congratulations on the progress. I wanted to start with another quick follow-up on 13676. Could you just give some context to how you view this program as differentiated from some of the other CD3 and CD20 bi-specifics in the space? Is there anything you've observed so far that might suggest a unique combination approach from what Regeneron and Roche have been guiding towards? And then second, any additional, I know we've talked about expectations for the conference, but any additional color on the abstract in terms of which cohorts might be presented there given the timing of the abstract submission? Thank you.

And any additional I know, we've talked about expectations for the.

Conference, but any additional color on the abstract in terms of whats cohorts.

Be presented there given the timing of the.

Srecs submission. Thank you.

I really can't provide any additional color on the abstract define what we talked about today.

Let's go back to your other questions.

We engineered this molecule and we use non human primate.

Studies to study cytokine release syndrome, we engineered it relative to other candidates we had in our lead series to have.

To have lower cytokine release, and we did that bye bye fiddling with the affinity in particular in this case on the CD 20 arm.

Bassil I. Dahiyat: I really can't provide any additional color on the abstract beyond what we talked about today. To go back to your other questions, you know, we engineered this molecule, and we used non-human primate studies to study cytokine release syndrome. We engineered it relative to other candidates we had in our lead series to have lower cytokine release, and we did that by fiddling with the affinity, in particular in this case on the CD20 arm, lower cytokine release that would allow us to dose larger absolute amounts of the molecule and thereby get longer duration of exposure and longer and deeper depletion of B cells without as profound a cytokine release syndrome as the other members of the lead So that was how it was engineered.

Lower cytokine release that would allow us to dose larger absolute amounts of the molecule and thereby get longer.

Longer duration of exposure and longer and deeper depletion of b cells without the profound.

Without as per founded cytokine release syndrome as the other members of lead story. So that was how it was engineered how that differentiates I can't say exactly because the individual molecules have not been compared head to head I'd say in general we are going.

After having a very potent cytotoxic modality cdthree in a manageable package, but but I think the differences in the clinical data are gonna have to be used trying to assess that in more detail, but our goal was something that could be.

Bassil I. Dahiyat: How that differentiates, I can't say exactly because the individual molecules have not been compared head-to-head. I'd say in general we're going after having a very potent cytotoxic modality, CD3, in a manageable package, but I think the differences in the clinical data are going to have to be used to try to assess that in more detail. But our goal was something that could be a tolerable way to have highly potent CD3 killing and hopefully overcome the wonderful 20-year success story of rituxan with NK cell-mediated killing. You know, for unique combinations, I don't know if I can offer our specific combination strategy yet, but I think there are a number of approaches that I think merit pursuit once we can establish a therapeutic window. And those could be anywhere from combination with other antibodies that maybe target different B cell targets all the way to chemo, right? So there's a whole range of things. We'll be able to guide you on that soon, but not yet.

Tolerable way to have highly potent cdthree, killing and hopefully overcome the you know the wonderful 20 year success story of reduction with NK cell mediated killing.

For unique combinations I don't know if I can offer.

Our specific combination strategy, yet, but I think there are a number of approaches that I think merit.

Pursued once we can establish a therapeutic window.

And those could be anywhere from combination with other antibodies that maybe target different b cell targets to all the way to chemo right. So there's a whole range of things will be able to guide on that soon.

But not yet.

Great. Thanks for the color that's helpful.

Just another one quickly could you comment on the status of the partnership discussions for hydrogen before and what are you looking for in a potential partner in terms of developing this program.

Bassil I. Dahiyat: Great. Thank you for the color. That's helpful. Just another one quickly. Could you comment on the status of the partnership discussions for IGG4 and what are you looking for in a potential partner in terms of developing this program moving forward and potentially beyond the IGG4 indication?

Moving forward and potentially be on the energy for indication.

Yes, so we're still we're still in discussions around partnering and we are still.

Looking for a partner that can advance the molecule across different indications, perhaps not immediately at the start of the collaboration but over time, because auto immune molecules that have these kind of broad immune modulating functions need to be developed broadly in order to have have theyre, both their risk reduced in their maximum.

Bassil I. Dahiyat: Yeah, so we're still in discussions around partnering, and we are still looking for a partner that can advance the molecule across different indications, perhaps not immediately at the start of a collaboration, but over time, because autoimmune molecules that have these kinds of broad immune-modulating functions need to be developed broadly in order to have both their risk reduced and their maximal potential reached. So not just an IgG4-related disease, but there are other autoimmune diseases, of course; we've shown data on lupus. There are other diseases where B-cell inhibition is shown to be very active. So ongoing discussions and a key driver are how broadly a partner can pursue an asset. And you had another question; I'm sorry, you had a...

Potential reach so not just an idea before related disease, but there's other autoimmune diseases of course, we have shown data in in lupus, there's other diseases, where b cell inhibition is shown.

Can be very active.

So ongoing discussions and a key driver is how how broadly a partner can pursue the assets.

And you had another question I'm, sorry, you had a fourth one.

No that was that was that I'm sorry, okay great.

Thank you.

Next question comes from Arlinda Lee of Canaccord Genuity. Your line is open.

Hi, Thanks for taking my questions.

Bassil I. Dahiyat: Um, no that was, uh, that was it. Oh, sorry. Thank you. Okay, great.

I had a couple or John on the collaboration.

With Alexey on our there anymore.

Arlinda Lee: Thank you. Our next question comes from Arlinda Lee of Canaccord Genuity. Your line is open. Hi guys, thanks for taking my questions. I had a couple for John on the collaborations.

Regulatory milestones remaining and then on Morphoses.

Can you can you talk maybe little bit about development milestones.

Or how the development milestones are structured.

Arlinda Lee: With Alexion, are there any more regulatory milestones remaining, and then with Morphosis? Can you talk maybe a little bit about what the development milestones are or how the development milestones are structured? And then lastly, on 13.676. Can you guys talk about if you mentioned there was a dose escalation; do you have any dose expansion data that might be forthcoming? And how early, I'm wondering with the patients that were treated with 13676 and given your CRS signal in 14045, how much of those measures were put into place for the 13676 patients? Thanks.

Lastly on 13 six seven.

Can you talk about if you mentioned there was a dose escalation do you have any does expansion data that might be forthcoming.

And.

How early.

I'm wondering with the patients that were treated with thirteensix have anything.

And given your Sierra.

Signal in four or five how much of those measures were put into place for the thirteensix have anything.

Okay.

Now I'll go first and address the financial questions on Alexia, We've received all the development milestones, we still have $30 million and sales milestones.

John J. Kuch: Okay, I'll go first and address the financial questions. On Alexion, we've received all the development milestones. We still have $30 million in sales milestones they were eligible for. With respect to Morphosis, there are regulatory milestones for submission and approval, which are in the tens of millions of dollars. So those are the ones in the near term.

They were eligible for with respect to Morphoses.

There are regulatory milestones on submission and approval. These are in the tens of millions of dollars.

So those are the.

The ones in the near term.

John J. Kuch: Thank you.

Thank you, Okay and on the 13th 676, we're just going to be presenting ongoing dose escalation data.

Bassil I. Dahiyat: And on the 13676, we're just going to be presenting ongoing dose escalation data at ASH. We expect to have expansion cohorts start after we've completed dose escalation, which we're still in the midst of. So we'll guide on that later on, probably next year. And then as for any kind of crossover from the 14045 protocol for management of CRS 13676, I'll say that just because a clinical protocol is an immensely detailed thing, you don't just port exactly things over. We certainly took learnings from that in how we conducted the clinical trial and how we've managed our ongoing amendments to the 13676 protocol. So there are lessons crossing over, but I wouldn't want to make it sound like it's some kind of one-to-one mapping.

Ash, we expect to have expansion cohorts.

Start after we've completed dose escalation, which where we're still in the midst of so we'll guide on that later on probably next year.

And then as for any kind of crossover from the fortunate to 45 protocol for management of Crs searching 676, I'll say that just because a clinical protocol that immensely detailed saying.

You don't just port exactly things over we certainly took learnings from that in how we practice the clinical trial and and how we've managed our our ongoing amendments to the third 676 protocol. So there are learnings crossing over but I wouldnt want to make it sound like at some kind of one to one mapping.

Okay. Thank you.

Arlinda Lee: Okay, thank you. Thank you. The next question comes from Dane Leone of RJF. Your line is open.

Thank you next question comes.

De Leon RJ. After your line is open.

Dane Vincent Leone: Sweet. How's it going?

Suite.

How's the gun thanks for taking the questions.

Dane Vincent Leone: Thanks for taking the questions. So, just kind of a high-level question here, you guys have a lot of stuff on the Buy Specific Pipeline merging into 2020. Given you guys are... A protein engineering company, I would still kind of expect to see more stuff percolating in the deeper discovery pipeline. Do you just have something philosophically about how you're thinking between biospecifics and then more forward engineering of monoclonal antibodies at this point?

So just kind of high level question here.

Hi, guys have a loss stuff on the bi specific pipeline.

Merging into 2020.

When you guys are.

A protein engineering company, it's still kind of expect to see more stuff, particularly going into deeper discovery pipeline do you just have something.

Philosophically about how you're thinking between bi specifics and then more forward engineering of monoclonal antibodies at this point.

When you say other engineering, a monoclonal antibodies you mean mana specific antibody engineering right right in terms of that pipeline as you got that you sit down and think about where you want to focus your resources.

Bassil I. Dahiyat: When you say other engineering of monoclonal...

Dane Vincent Leone: Right, right, in terms of the pipeline, um, as you get older, as you...

Bassil I. Dahiyat: Yeah, yeah. We kind of think about them essentially equal in our minds as we look at new programs we want to go after, and whether it's new biology that's emerging that we want to sort of see if we can exploit, or whether it's, you know, initial data that's emerged from other parties with other molecules where we say, wow, we could do better than that with X, Y, or Z engineering. And where we've come to, for the most part, in the last few years, has been all these new tricks and tools we have with our biospecifics have led us in that direction. It's not really kind of a philosophical sort of move just towards biospecifics. It's because of all the new things you can do with science that we're just learning about.

Yes, I mean, we kind of think about them essentially equal in our minds as we look at new programs. We want to go after and whether it's new biology that emerging that we want to sort of ill see if we can exploit or whether its initial data that's emerged from other parties with other molecules. We said, while we could do better than that with X y or Z engineering.

And where we've come to for the most part in the last few years has been all these new tricks and tools, we have with our bi specifics has let us in that direction, it's not really kind of a philosophical sort of moved just towards bi specifics it's come because of all the the new things you can do with the science that were just learning about so.

Bassil I. Dahiyat: So we are open-minded about that. I will say that our next set of molecules we're going to want to advance in the clinic because you're right; we have a very broad and active discovery portfolio. The next of them will very likely be biospecifics and cytokines. And, you know, we're looking at both... Figuring out, making sure that we're using the right valency format and the right affinities for our CD3 bi-specifics, for example, and we hope to have more of those coming forward in the near future, as well as, you know, continuing to look at how cytokines behave and how you can tune that behavior to be more therapeutic-like, as opposed to, you know, that sort of massive initial spike of activity most cytok So it's not a philosophy about going to one modality or another; it's just where can we do the best, most innovative science, and it's just kind of leading us to bi-specific right now.

We are open minded about that I will say that our next our next set of molecules were going to want to advance in the clinic as you're right. We have a very broad an active.

Discovery portfolio. The next of them will very likely be bi specifics and cytokine.

And we're looking at both.

Figuring out making sure that we're using the right for the LNG format of the right affinities for our Cdthree bi specifics for.

For example, and we hope to have more of those coming forward in the near future as well as continuing to look at how cytokines behave and how you can tune that behavior to be more therapeutic like as opposed to you know that sort of massive initial spike of activity. Most cytokines give followed by a fade out. So so it's not a philosophy about.

Going to one modality or other it's just where can we do the best.

Most innovative science and it just kind of leading us to the bi specific right now.

Dane Vincent Leone: Okay, great. And then just one follow-up. I guess that might be a two-parter.

Okay, Great and then just one follow up I guess that might be a two parter.

In terms of setting the table you've talked a bit about 13 676.

Dane Vincent Leone: In terms of setting the table, you've talked a bit about 13-676, that's going to be at Ash. From your perspective, as a clinical scientist, what do you think the street should be kind of looking for in terms of takeaways? Like, where would you set the table in terms of the limits of expectations of what we can understand from the dose escalation cohort, wherever that's kind of landed at current levels? And what insights do you think people could reasonably be comparing to some of the other efforts? And then the second part of that, which I guess is a separate question, is it reasonable to not expect clinical data from 2, 4, 3, 0, 6 in 2020, but translational data? Okay, gotcha.

Thats going to be at Ash.

From your perspective.

Client clinical scientists perspective, what do you think the street should be kind of looking for in terms of takeaways like where would you set the table in terms of limits of expectations of what we can understand from the dose escalation cohort.

Wherever that is kind of landed at current levels.

And what insights do you think people could be reasonably comparing to some of the other efforts and then the second part of that which I guess is a separate question.

Is it reasonable to not expect clinical data from two four 306 in 2020, but.

Translational data.

Okay Gotcha.

Bassil I. Dahiyat: So going to the first one, 13.676, you know, given that we're progressing in dose escalation and we're not where we expect to get and where we believe we're going to get relatively shortly in terms of how high the doses are, we're still moving through the cohorts, we think that we should look at this as an interim look at, when we're looking at, for example, the number of responses we might or might not have, when we're looking at the nature of the adverse event profile we might or might not have, we should think of this as a work in progress, that we have to keep our minds open about where what might happen as we advance further in doses and as we have patients on study for longer. So I think it's that sort of snapshot as you're getting to where you're going to go, rather than this is what we imagine is going to be the final story for our dose escalation. Great, thank you so much.

So going to the first 113 676.

Given that we're progressing and dose escalation or were not where we where we expect to get in where we believe we're going to get relatively shortly in terms of how high the doses are we're still moving through the cohort. We think that we should look at this as the interim look at when we're looking at for example.

The number of responses, we might or might not have when we're looking at the nature of that the adverse event profile, we might about how we should think of this is a work in progress that we have to keep our minds open about what might happen as we as we advance further and doses as we have patients on study.

For longer so I think it's that sort of snapshot as youre getting to where you're going to go we rather than this is what we what we imagine is it's going to be the final story for our dose escalation. So that's the magnitude dose and the biology that we see.

For 24, three or six data in 2020 on that is really going to be something Junin tech and we have to discuss and I don't understand fully how they think about data disclosure for early phase trials, but I would imagine that they would be not interested in releasing biomarker data terribly early on.

It would not suit their their needs and we have to work in conjunction with them. So I would not guide towards 24, three or six data. The I'll 15 compound in 2020 without knowing anything else beyond that I would as a baseline not guide to that.

Great. Thank you so much.

Dane Vincent Leone: Thank you.

Thank you.

Thank you.

I'm showing no further questions at this time I'd like to turn the conference back would have basis, the higher for any closing remarks.

Bassil I. Dahiyat: I'm sure there are no further questions at this time. I'd like to turn the conference back over to Beza Dahiyat for any closing remarks.

Thanks, very much operator, and thank you all for joining US today, we look forward to updating you again as we continue our progress.

Bassil I. Dahiyat: Thanks very much, operator, and thank you all for joining us today. We look forward to updating you again as we continue our progress. Good afternoon.

Good afternoon.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference call.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Unnamed Speaker: transcript Emily Beynon

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