Q4 2019 Earnings Call
Allen S. Yang: First, XMAB 14045 is our CD123 CD3 bispecific antibody that's being developed in collaboration with our partner Novartis. It's in an open-label phase one dose escalation study to assess its safety, tolerability, and preliminary anti-tumor activity in patients with relapse or refractory AML, as well as other CD123-expressing hematologic malignancies. In the second quarter of 2019, we resumed enrollment in the study following the lifting of a partial clinical hold. We continued dose escalation in this study and are planning to initiate additional clinical studies evaluating XMAB 14.045 this year, pending alignment with our partner, Novartis. Our second hematology program, XMAP 13676, has received a non-proprietary name, Plamodimab.
Allen S. Yang: It's a CD20, CD3 bispecific antibody and is being evaluated in a phase one study for patients with advanced B-cell malignancies like non-Hodgkin's lymphoma and chronic lymphocytic. We presented initial safety data and clinical activity from early-dose escalation cohorts at the ASH Annual Meeting this past December. These results indicated that in early dosing cohorts, plomodemab was generally well tolerated, with safety events being mild to moderate in severity, and it demonstrated encouraging clinical activity. The safety analysis included 53 patients treated with plomodemab. The most common treatment emergent adverse events are consistent with other bi-specifics being used in patients with heme malignancy and were pyrexia, CRS, or cytokine release syndrome, and anemia. 18 patients with diffuse large B-cell lymphoma who received doses of 80 to 170 micrograms per kilogram were included in the analysis to describe clinical activity. Those doses are about 6 to 12 milligrams flat dose as adjusted for patient body weight. The objective response rate was 39%, and the complete response rate was 28%. Responses were apparently dose-dependent. Additional complete responses were observed in patients with follicular lymphoma, Waldenstern's macroglobulinemia, and Richter transformation of chronic lymphocytic leukemia.
Allen S. Yang: Dose escalation and optimization of the dosing schedule, including a priming dose and step-up regimen, are ongoing. We plan to initiate additional clinical studies with Plumalauta MAP and should be able to provide more detail on those clinical development plans later this year. Note that initial clinical results for both hematology programs as presented in ASH 2018 for XMAP 2014-045 and ASH 2019 for Plymodomab are available on our corporate website Xencor.com under investors under events and presentations. XMAB 18087 is our third CD3 T-cell engager, which targets somatostatin receptor 2, or SSTR2, an antigen highly expressed on some solid tumors.
Allen S. Yang: In early 2018, we started dosing patients in a Phase I dose escalation study to assess its safety, tolerability, and preliminary antitumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors, and we expect to present initial data from this study later this year. Moving on from our CD3 bispecifics, last year we started dosing the first patients in our second and third clinical trials evaluating our tumor micro These are phase 1 dose escalation studies for XMAB 22841 and XMAB 23104.
Allen S. Yang: Along with the first program, a phase one study of XMAP2717, we are focused on enrolling patients with several advanced solid tumor types into these studies. Using the avidity hypothesis Basil discussed earlier, our hope with these programs is to be able to drive stronger anti-tumor responses with improved tolerability for patients. This year, we anticipate presenting initial dose escalation and biomarker data from the first of these, XMAP2717, a PD-1 CTLA-4 bispecific antibody. We'll end the review of our internal portfolio with our Cytokine programs, our first Cytokine program and lead in our collaboration with Genentech, which was announced in February of last year as XMAP 24306. It's an IL-15, IL-15 receptor alpha complex fused with our bispecific SC domain that targets the expansion and activation of T-cells and NK-cells.
Allen S. Yang: XMAT 24306 is intended for the development of a wide range of combination agents, and importantly, we can perform our own clinical trials with both our pipeline assets and non-genentech 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. Genentech's IND application is open, and we would anticipate a first-in-human study to start dosing patients very soon. Finally, our second-side candidate, XMAP27564, is an IL-2FC fusion protein that we are planning to develop for patients with autoimmune disease.
Allen S. Yang: Similar to the IL-15 program, or XMAP-27564, we reduce the potency of IL-2 and incorporate or extend technology in order for the candidate to have more drug-like properties. We are currently conducting preclinical activities and anticipate initiating a Phase 1 study in healthy volunteers in 2021. With that, I'll hand it back to Basil.
Bassil I. Dahiyat: Thanks, Allen. We'll now switch to reviewing some updates from our partnerships, which continue to provide revenue in the form of up-front payments, milestones, and royalties that help fund the development of our own internal pipeline candidates. The plug-and-play nature of our X-MAP technologies enables us to license access to these platforms with partners needing very limited resources and effort from us.
Bassil I. Dahiyat: We won't review each program, but we have 10 ongoing partnerships for XMAP technology that have resulted in one market for a product, seven clinical stage candidates, and more in earlier stages of development. The most advanced of these is Ultamiris, a complement inhibitor with improved half-life using our Xtend technology. Dr. Jalexion launched last year and has seen significant progress in conversions of patients from Soliris, their first generation inhibitor. Ultimirus is the first antibody to incorporate an XNAP technology to be marked. Ultimiris has now received multiple global marketing authorizations in the U.S., Japan, and Europe for the treatment of adult patients with PNH, and in the U.S. for A-HUS.
Bassil I. Dahiyat: We're receiving royalties on net sales and all indications and geographies worldwide. New among our technology licenses, last month, we entered into a tech license agreement with Gilead, who will access our Xtend, Xtended Half-Life, and Cytotoxic FC technologies for developing and commercializing GS9722, their first-in-class, broadly neutralizing anti-HIV antibody in Phase I clinical development, as well as up This is the second license for antiviral antibodies using our Xtend technology. We've also entered licensing agreements with exclusive worldwide development and commercialization rights for our own pipeline candidates. Morphosis, in 2010, licensed from us Kapha-Citimab, which was previously known as Mor-208 and as XMAP-5574 before that.
Bassil I. Dahiyat: It's an anti-CD19 antibody that we designed and initially developed, incorporating our cytotoxic FC domain for high ADCC flow. Morphosis completed its BLA submission to the FDA in late December for treating patients with diffuse large B-cell lymphoma in combination with lenalidomide. We are eligible for additional milestones and royalties on sales in the high single-digit to low double-digit percentage. As we've stated, we have shifted our internal development focus toward our emerging bispecific antibodies and cytokines in oncology and have sought partnerships for our ExMAB 7195 and Obexilimab programs. In February 2020, we granted Amium Therapeutics an exclusive worldwide license to develop and commercialize XMav7195, our anti-IgE monoclonal antibody with enhanced binding to the FcGamma receptor 2B. It's now called AMAB 7195, and it's designed to rapidly eliminate IgE, a key mediator of allergic response, from circulation and prevent IgE production. We evaluated it in allergic asthma and other IgE-mediated disorders and are aiming for intensive development in food allergy, a therapeutic area that is rapidly developing and needs new agents.
Bassil I. Dahiyat: Amune is very experienced in food allergy, has demonstrated clinical success, and has the capability to advance AMAP 7195 with its highly complementary pipeline program. We received an up-front payment of $5 million in cash and $5 million in Amiens BAC, and our eligibles received milestones and royalties that ranged from high single-digit to mid-teen percentage. We've also entered into research collaborations that include the creation of novel XMAB bi-specific antibodies to be developed by partners. Recently, a Phase I study has been initiated for an undisclosed Novartis XMAB bi-specific antibody, and we expect initiation of phase I studies soon for Amgen's AMG509, a STEEP1 by CD3 bi-specific antibody for patients with prostate cancer that uses an XMA With that, I'm going to turn the call over to John Kuch to review our fourth quarter and year-end 2019 financial... Thank you, Basil.
John J. Kuch: During 2019, Xencor continued to strengthen its balance sheet, which enables us to continue supporting the development of our parasitic antibody and cytokine programs and technologies. First, I would like to provide an overview of 2019 financial results and then some thoughts on 2020. Cash, cash equivalents, and marketable securities totaled $601.3 million as of December 31st, 2019, compared to $530.5 million on December 31st, 2018.
John J. Kuch: The 2019 Year in Cash Balance reflects out-of-front payments and milestones from our partners and collaborators of $155 million received net of spending on operations during the year. For the fourth quarter ended December 31st, 2019, revenues were $3.5 million, compared to $11.6 million for the same period in 2020.
John J. Kuch: Fourth quarter 2019 revenues were primarily from Alexan royalties, while revenues for the same period in 2018 were primarily milestone payments received from Alexan. Research and development expenses for the fourth quarter of 2019 were $27.3 million, compared to $27.1 million for the same period in 2018. General administrative expenses for the fourth quarter of 2019 were $6.7 million, compared to $5.5 million in the same period of 2018. The fourth quarter 2019 net loss was $26.9 million, or $0.47 on a fully delivered per share basis, compared to a net loss of $18.2 million, or $0.32 on a fully diluted share basis for the same period of 2018. The higher loss for the fourth quarter 2019 over the loss reported for the same period 2018 is primarily due to lower revenues reported in the fourth quarter 2019.
John J. Kuch: Turning to full-year results, total revenues for the 12-month period ended December 31, 2019 were $156.7 million. This compares with 40.6 million in 2018. Revenues earned in 2019 reflect collaboration and milestone revenue earned from our Genentech, Astellas, Alexion, Amgen, and Novartis partnerships. Compare the milestone revenue earned from selection in 2018. Research and development expenses were $118.6 million in 2019 compared to $97.5 million in 2018. The increase in R&D expenses in 2019 over amounts in current 2018 reflects additional spending on our bispecific and cytokine clinical and early stage candidates in technology. Note that our reported R&D expenses are net of reimbursements from our partners on their cost-sharing arrangements for programs that are being co-developed. Total general administrative expenses were $24.3 million in 2019 compared to $22.5 million in 2018.
John J. Kuch: Additional spending on G&A expenses in 2019 reflects increased facility staffing and spending on intellectual property. For the full year 2019, net income was $26.9 million, or 46 cents on a fully diluted per share basis, compared to a net loss of $70.4 million, or $1.31 on a fully diluted per share basis for 2018. The net income report for 2019 compared to the loss report for 2018 is primarily due to additional collaboration and milestone revenue recognized in excess of additional spending on R&D during 2019. In cash, share-based compensation expense for 2019 was $31.9 million, compared to $20.5 million for 2018.
Operator: The total shares outstanding were $56.9 million as of December 31, 2019. Compare that to $56.3 million as of December 31, 2018. Taking a brief look at 2020, as Basil noted, we started the year with two new collaboration agreements with Gilead and Amun, and these are providing up-front payments and potential future milestones. Considering our projected revenue and current spending plans, we expect to have cash to fund research and development programs and operations into 2024 and to end 2020 with between $500 and $550 million in cash, cash equivalents, and marketable securities. With that, we'd now like to open up the call to your questions. Operator?
Operator: Ladies and gentlemen, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And our first question comes from Alicia Young with Kanner Fitzgerald. Please proceed with your question. Hey guys, thanks for taking my question. Maybe a couple for me.
Bassil I. Dahiyat: One, I just wanted you to talk a little bit about the CD20 by CD3 and the data you had at ASH. You know, there are a lot of similar assets out there, and I just wanted you to talk a little bit about how you think about future studies which could lead to differentiation, whether that be through combinations. My second question is just administrative, is just on 8087 and on the 717, should we expect data in the first half of the year, or is that, or should we expect it now to be kind of somewhere in 2020? And then my last question is just can you talk a little bit about the Gileads and the deal you did with those guys and how, you know, you think about your technology and its applicability to HIV things. Sure, so I guess we should start off with a housekeeping question.
Bassil I. Dahiyat: We're expecting for 7.17 a mid-year update along the lines of what we said in our press release about biomarkers and initial phase one data from dose escalation. For 18.087, we're guiding towards in the second half, so mid-year second half. For, let's see, for the CD20 data, maybe I'll also let Allen comment here a bit, there are a number of programs that use biospecific technology to engage CD20 to try to sort of move the ball in B-cell malignancy, specifically lymphoma at first, beyond where rituxan combination therapies have gone. I think you're right that combination therapy is the only way forward to really advance regimens that are going So, you know, there's a variety that we could think about, and I think it's about the right biologies, and you're going to comment, Allen, on the different kinds of biologies and how we'll guide specifically later this year. Yeah, so first, let me start off with an overview of B-cell malignancies.
Allen S. Yang: There are a lot of B-cell malignancies, and what I want to remind everybody is where we are with our phase one study. We're still in dose escalation. We've seen good activity in diffuse large B-cell lymphoma and enough activity that we're encouraged about that and wanna move forward with diffuse large B-cell lymphoma. We're continuing to dose patients with follicular lymphoma, Waldenstrums, CLL, and so forth. So I think that there's still a lot of activity that we need to explore. But with that said, you're right.
Allen S. Yang: In diffuse large B-cell lymphoma, there is still a very large unmet need, and I think there are a lot of opportunities. If you look at previous approvals for other agents in the relapse or fractured diffuse large B-cell lymphoma space, they've been approved with either single-arm studies or accelerated approvals or breakthrough therapy designation more specific. So with that said, we are exploring our opportunities. We think combinations are a key way to go.
Allen S. Yang: I think there are a lot of opportunities with other agents that are targeted as well and have different mechanisms. Yeah, so we're really focusing on things that already have their own data showing they can kill tumor cells that are B-cells, right, to focus on that rather than thinking of IO-IO combinations. To address the Gilead point, so the technology they licensed was our good old F.C.
Bassil I. Dahiyat: engineering technology to extend half-life and to induce ADCC function, in this case, in antibodies that are broadly neutralizing for HIV, so they stick on to the HIV protein, one of the proteins in HIV, we can't disclose which one; that's up to them, and there are sort of two things you want from our F.C. engineering; one is just to have the antibody last longer. An antiviral antibody is essentially, it's what's called passive immunization; your body's not making the antibody, there's no vaccine to have an antibody forced to be made, so you give the body sort of artificial immunity by giving people a neutralizing antibody exogenously. Obviously, in that case, you want it to last as long as possible.
Bassil I. Dahiyat: The use of our Xtend technology has sort of spread throughout the academic community for anti-infective antibodies quite widely, and I think Gilead sort of was following along with that lead because you'd rather give somebody a passive immunization shot every three months or every six months or what have you, depending on, you know, what the antibody can give you. In addition, the ADCC technology, because of the way the biology of HIV works, you often have budding virus particles on immune cells, and you'd like to kill the immune cells that are harboring that virus. So that's also been a method that's been studied in academic labs for a number of years, how antibodies can kill HIV-bearing cells. GS9722 happens to incorporate both of these approaches in one FC domain, and we're very, very happy to have them go forward. Earlier in the year, we announced a partnership for our Half-Life Extension Xtend technology with VeeRBio, an early stage company looking at a variety of different anti-infective antibodies, or sorry, antiviral antibodies. So we think there's a lot of utility for our approaches in antivirals. Great, thank you. Thank you. And our next question comes from Ted Tenhoff with Piper Sandler.
Operator: Please proceed with your question. Good, Thank you very much. When should we be expecting that preliminary update? Have you already started using it in combination with any other agents? Or is that when we really see the opportunity to dose that one as sort of an enhanced dose? Checkpoint inhibitor. Yeah, so we'll guide on what kind of next phase strategy we're contemplating mid-year. I guess that the initial development will be in a single agent because the goal here is to add functionality to PD-1 inhibition within the same molecule, and hopefully in a way that using our avidity hypothesis creates a regimen that's more tolerable by focusing on just T-cells that are double-checkpoint positive. That's my hypothesis.
Bassil I. Dahiyat: We're excited to see some initial data to see whether we can get that kind of T-cell activation function but without some of the immune-related adverse events that seem to really bedevil PD-1 CTLA-4 combination therapy. So really, initially, it's about the single agent. I think when you think about combinations, it's about what indications you go into, some indications you're going to want to combine with chemo, some indications you're going to want to combine with targeted therapies. You know, the milieu of solid tumor indications, each one has its own specific drivers, and, Welcome, everybody. I'm sorry. What was that, Ted?
Operator: You kind of were tough to hear. I said, thanks so much, looking forward to the next one. Thank you so much, Ted. Take care. Thank you. And our next question comes from Mara Goldstein with Mizuho. Great, thank you very much.
Operator: So I had a question on, and it's essentially a similar question for 18087 and 2717, and that is really trying to understand the threshold for advancement, in particular for 717, and whether the focus ends up being more on sort of safety aspects or efficacy aspects and how you think about that. And then also a housekeeping question on the Novartis payment in December. Is that booked as a deferred revenue item, or should we anticipate that being booked in the first quarter of the year? I'll take care of that... Hi Margaret, how are you doing? I'll address the first question with respect to the Lovartis payment. That milestone was not in deferred revenue.
John J. Kuch: That's a separate item. It's sitting in receivable, the $10 million sitting in receivable as of December 31st. So that's totally separate from any deferred item in that arrangement. Thank you. And so, again, your question, Mara, on 717 and 087, our PD-1 CTLA-4 and our SSTR2 CD3 antibodies, was around what sort of data you would, how we're going to assess the data, I guess, and define plans for going forward. Again, these are initial dose escalation data sets. We're looking for all sorts of indications. I mean, Allen, do you want to give it a shot?
Bassil I. Dahiyat: Yeah, let me start with the 717 first because I think you were asking the question of whether we are trying to improve better efficacy or better safety. And just from my experience, I won't tell you our strategy, but just from my experience, proving safety is challenging in a clinical trial design. And so the way that the molecule is designed, we believe it's going to have improved tolerability, which will allow us to escalate where we can get better efficacy. Now, note, it's sort of targeting PD-1 and CTLA-4, which are already approved targets in terms of checkpoint inhibitors, approved agents out there, and so they're well entrenched. So what we would want to do is sort of benchmark it against those sorts of previously completed studies, and we should have a high bar to move forward, given the entrenchment compared to our other molecules in that space. Going to 087, I don't know, should I take that question back?
Allen S. Yang: Sure. Okay. Clearly, somatostatin is expressed in neuroendocrine tumors and GI stromal tumors, and we're studying those.
Allen S. Yang: In addition, it's expressed in other tumors to a lesser extent, but larger tumor populations, small cell lung cancer, liver cell cancer, to name a few. So we're evaluating those right now, and we'll hopefully give guidance on a more complete strategy later on. Okay, so I'll just, please go ahead, Mara. No, no, you go ahead first, sorry.
Bassil I. Dahiyat: Okay, so just to sort of come back to the sort of strategy around it, for our PD-1 CTLA-4 molecule, ExMab 27.1.7, the strategy for the phase one design was expansion cohorts as we've established a go-forward dose, and those are gonna be in the relapsed refractory setting of post-PD-1 exposed patients in PD-1 approved tumors, things like melanoma, non Now, we won't have expansion cohort data by mid-year, but we should be well along in those cohorts by then. So that's arm one, is to go for that relapsed refractory population to PD-1 therapy, where there is a very high unmet need, and even modest activity could be a very big opportunity.
Bassil I. Dahiyat: The second area we're looking at is, and we'll be able to guide more later on, indications where PD-1 therapy alone has not had resounding success but where the addition of CTLA-4 has a good biological rationale, and we'll be exploring that set of opportunities as well and be able to give specifics on what indication we wanna pursue. So I think for both, and I guess this comment will bear on 18-087 as well, is we wanna establish that you can give these agents, that they're safe and tolerable, that we're seeing some initial activity, and then use that as a launch point for how we can exploit them. For 18-087, you've got the rare tumor neuroendocrine tumor, and you've got other ones like myrtle cell that are rarer, or small cells that are less rare.
Bassil I. Dahiyat: So it's just how do we get from the starting point we've gotten to with our biology to the best strategy. We'll guide you more later. Okay, and if I could also just ask, on Promodimab, just in the discussion around looking at things like clinical trial design for accelerator pool and whatnot, is there an opportunity, or is it something that the company's interested in pursuing looking at post-CAR-T as a sort of speed-to-market strategy? I'm not so sure there's enough there to make that a speed-to-market strategy in terms of You know, we've treated post-CAR T patients, and we have had a response to post-CAR T patients. As a separate standalone strategy, that's not something super high on our list, so we will continue to enroll them and evaluate it as we see enrollment trends and see if there's enough need there. Okay, thank you.
Operator: Thank you. And our next question comes from Gregory Renzo with RBC Capital Markets. Please proceed with my question. Hey guys, thanks for taking my question and, Basil and team, my question is related to the fact that 2020 looks like a very busy year with early stage programs and certainly as you touch on the plug and play for your technology, just curious if you could comment on the plug and play of your resources and operationally how you're staying nimble to essentially enable matching some of these goals ahead with the right resources and what you're Capabilities. Thanks.
Bassil I. Dahiyat: Yeah, we've built an organization that can very capably handle a pretty large volume of early phase clinical trials, specifically in oncology, where there's a lot of portability of skill sets, of talent, of the infrastructure from CROs that you need to access as well. And so we've built that part of the organization to really feed our strategy of exploiting a very broad and capable platform and having that produce the shots on goal we need to hopefully produce winners in our clinical portfolio out of the reality that biology is very hard to predict as our competitive landscapes three, four years in advance. And so we want to have the highest likelihood as possible of one or more of our programs coming out the other end in late phase development and, hopefully, one day, commercialization by Xencor.
Bassil I. Dahiyat: So we built an early phase broad capability, and we're building now, out of that internal clinical development and preclinical capability, the tools to do late phase development that ought to be ready in time for one of these programs to jump into in the next year or two. So we're very, very mindful of that, and that's why we've expanded the management team and added people with a lot of late phase experience and commercial experience to the mix. Great, thank you very much.
Operator: Thank you. And our next question comes from Arlinda Lee with Canaccord. Please proceed with your question. Okay guys, thanks for taking my questions. I guess maybe just to follow up on those. I was curious about how many programs you think you can take forward yourself.
Bassil I. Dahiyat: to advance to a registrational trial. Yeah, I'll say for the first one. I have no idea because it depends on the specifics of which programs go forward, whether that's one, because it requires multiple broad phase threes, or whether it's two or three, because each one is a relatively small, well-focused clinical study in a smaller population. So you can't really say what you've got to do is build all the pieces for late phase development, which include altogether additive kinds of capabilities, everything from biometrics and data handling to market assessment to clinical data management and medical monitoring. So it's more the capabilities rather than just the numbers of people.
Bassil I. Dahiyat: And now, sorry, what was the second part of your question? I think that actually addressed both of them. Can you maybe talk about what kinds of... Like the scope of the data that we might expect from Pomodimab that we're going to get later this year, is that going to help explain what your strategy is or kind of talk about early indications of what might be interesting? a little bit further before you commit to doing a registration. So we're going to be guiding on what our next stage clinical trials and strategy are later this year. We're not committing to a data release this year. It's a little bit early. We're just coming off of ASH.
Bassil I. Dahiyat: So we'll guide you more on when we'll have our next data release, but the strategy we want to be able to articulate more clearly. And there is a Hi Arlinda, this is Allen Yang calling.
Allen S. Yang: I just want to address something that you and Gregory alluded to. So first of all, I want to say that, in my short time, we have a fantastic clinical development team. And I think Basil is right, it's really dependent on the data. Some of the agents you can get approved, let's say if they're highly active in a rare tumor type, that's a large unmet need, we don't need that many patients and a lot of resources to get them approved. However, if it's a more competitive space, and it'll be a larger program, then we would probably have But again, as Basil alluded to, it'll be based on the data. We're actually suffering from a very good problem, which is multiple agents that are exciting to develop. And I think that's a good place to be. Sorry, Linda, I interrupted your question. Go ahead.
Bassil I. Dahiyat: I guess I was also curious about whether this update was specific to Pomoda Matter, or might we get... less common in the competitive land. We're not we're not anticipating having specific guidance on next phase clinical trials this year outside of Plamoda MAB and XMAB 14045, where we expect to have additional information on the next set of trials that we're launching the specific indications in in myeloid malignancy. And this is The teams are busy, very busy, sort of progressing all the programs in parallel.
Bassil I. Dahiyat: Yeah, but for this year, next phase guidance would be on the two that I just mentioned, the HIEM program. Thank you, and our next question comes from Dane Leone with RJF. Please proceed with your question. Alright, thank you. Congratulations on a great 2019.
Operator: I just want to touch on a couple things. Can you give us a little bit more detail in terms of where you think the clinical hurdle is going to be for 18087? It's kind of a tricky indication. Please give us a little bit more detail on where you hope to get with the 14.045 program this year.
Bassil I. Dahiyat: And then just anything you can tell us in terms of potential partnerships on OBACS. Thank you. So I'll talk, I'll sort of go in reverse order real quickly.
Bassil I. Dahiyat: We can't really guide on potential partnerships for obicillumab. Partnerships, as I've said, are hard to define. We're working hard to both continue to educate people on the continued analysis from our lupus study where the rich biomarker work that we did in that study is maturing more and more, but as well as look at other opportunities to advance it with different kinds of financing arrangements. So we're busy at work there, but it's very hard to predict how that's gonna land. I mean, we didn't have a good timeline for XNAV7195, and we're very happy with the partnership with AMUNE for food allergy, which I think is a tremendous opportunity for that kind of molecule. With regard to 14.045 details, with our Novartis partnership, we can't speak to when we can announce results details, but again, we should be able to guide pretty specifically on the next set of plans for that. For the clinical hurdle for 18.087, For that one, I mean, you're right. It's an unusual, rare tumor with an interesting bar.
Allen S. Yang: I think it's as much as anything about what we learn from the net and just how we position it broadly and the other tumor types that might be beneficial. Yeah, I would like to add, this is Allen Yang. Neuroendocrine tumors and GI stromal tumors, there have been some recent approvals, so we know the pathway for approvals in terms of a clinical development program. I think the challenge is, you know, these are tumors that are not highly responsive in terms of CR, so you would have to sort of plan larger studies based around PFS. There are other tumors that express somatostatin, and we're sort of exploring those types of tumors.
Allen S. Yang: You know, more recently, Merkel cell, which is a much smaller unmet need but clearly is responsive to immunotherapy. So these are things that we are sort of mulling over, I would say. We're thinking about it very carefully right now, and hopefully we'll have more details for you later in the year. And as for 045, without disclosing any confidential information, you know, AML is an area that I know very well. CD123, in my previous company, we actually had a partnership for a CD123 target agent. Transcribed by https://otter.ai. So is that any other stuff, Dane, or not? Oh, yeah, sorry.
Bassil I. Dahiyat: Actually, on that note, could you just remind us how the partnership works on 14.04.5 with Navaratis? Like, how's the decision-making, Don, and the disclosure? Yeah, so Xencor has U.S. commercial rights, and Novartis has ex-U.S. commercial rights. We split the cost 50-50 for development. We have to have real agreement. It's 50-50. Nobody has veto power on decision-making, so you have to agree, which is both challenging and good in that you get full dialogue on things.
Bassil I. Dahiyat: And on disclosure, both parties have to agree to do a disclosure, which means either one can veto any disclosure. As we said in the past, Novartis is not a company that is into disclosure when it doesn't have to. Okay. Very helpful.
Operator: Thank you. Yep. Thank you, and our next question comes from Shanshan Su. Please proceed with your question. Hi. Hi there. So I actually have two questions for Allen.
Allen S. Yang: Welcome to Xencor's Earning Call. So for your Paloma Tamab, that's your CD20, CD3 molecule, you are very clear that combination is the only way to move the needle as it is right now. And in terms of this drug partner, you seem to have shied away from an IO-IO combination. So if I understand you correctly, you don't want to combine it with PD-1. So Roche actually presented some very interesting data at ASH-19 for their CD20 and CD3 in combination with Godiva. So how do you like that strategy?
Allen S. Yang: Would you consider your CD20 and CD3 in combination with your Kapha-Thetamab? And I have two follow-ups. OK. Hey, Shantan. How are you doing?
Allen S. Yang: So getting back to 676, I think I'm very happy that the molecule is very active as a single agent in diffuse large B-cell lymphoma. So saying that we wouldn't develop it in other indications as a single agent is, I think it's too early to commit to that. We just don't have enough data.
Allen S. Yang: In terms of combinations and the competitive landscape, you have to look at what's going on in CAR-T and the morphosis compound as well. So I think combinations make a lot of sense in terms of value, in terms of what's gonna be initially in the relapse refractory. And eventually, what you would like to do on the front line, where combination is the standard of care. So, you know, that's not a lot of detail, but, you know, I don't want to disclose what our plans are at this point. But yes, we are thinking of a combination.
Allen S. Yang: We are thinking of broader indications. And what about your other, oh, the checkpoint inhibitors? I think it's still early, and I think there's a lot of combination potential in other immunotherapies, antibodies without a payload that seem to have high activity, whether they be CD20 or CD19.
Bassil I. Dahiyat: So I think there are a lot of opportunities, chemotherapies, ADCs as well. In terms of the CD20 antibody, and which CD20 antibody to consider, I think there's overlap with our target, and so scientifically, you would be more interested in sort of other targets, since we have a CD20 target, a device-specific one. I don't know if that answers your question. So, Rogen Genetics hosted an analyst day last week and started to talk more about theirs. Actually, it's your IL-15 franchise.
Bassil I. Dahiyat: Given that there are several therapeutic strategies to target IL-15, such as a super agonist or a biospecific strategy to target PD-L1, can you please provide your perspective just to compare and contrast a little bit regarding those different strategies? So we think a strategy of having a molecule that maximizes the therapeutic window is the best one. That was our goal when we designed XMAP24-306, and really was the basis for our whole IL-15 program. So when we attached it to our FC domain, we specifically dialed down the potency of the IL-15 unit so that you wouldn't. Superactivate the T-cells, create a pulse of cytokine release and toxicity, and then burn out the T-cells, have their activity wane, and rapidly clear your drug.
Bassil I. Dahiyat: So we wanted long duration and tolerability. So we tuned down the L-15, as I said, attached it to our FC domain, and used our extended half-life technology. That was a package that Genentech found very attractive. So that's a baseline to get broad systemic IL-15 activation. The next strategy beyond that, which there's no real clarity on whether it's better, worse, nobody knows, is to target the IL-15 functionality to specific populations, whether they're NK cells or T cells. So using our biospecific FC domain, we've developed, or rather constructed, a number of such molecules that we're working on in collaboration with Genentech.
Bassil I. Dahiyat: And those are about, again, optimizing therapeutic index, about steering the functionality to the T cells that you want, or the NK cells that you want, a lot of unknown biology. But I think the idea of making cytokines much more specific and localized in their function has been a holy grail of cytokine engineering for a long time. So we're very happy to have tools to let us target that to T cells and NK cells, and we'll see where that takes us in the next few years. Note that we do expect Genentech to dose the first patient for our non-targeted IL-15 very soon. Okay, so this is the last one, I promise.
Bassil I. Dahiyat: So this year, I'm actually committed to reading out the solid tumor data for your CD3 bispecific antibodies. Historically, it has been challenging to develop a CD3 bispecific in solid tumors, given the severity of the CRS. Is there anything in the molecular design of the XMAP 18087 and also AMG 509 that could potentially prevent that pitfall? Thank you. Yeah, they were designed differently.
Bassil I. Dahiyat: XMAB 18087 has one antigen binding domain and one CD3 binding domain. In that case, we were going after a tumor type that's known to be very resistant to having objective responses, neuroendocrine tumors in particular. And so we went with a fairly potent molecule strategy. Again, there's a lot of unknowns here, and we need to see what the tolerability looks like, and what the kind of activation of immune function looks like. Note, of course, that these FC constructed by specifics as we do them are significantly less potent than the first generation byte-type structures, on the order of 100 to 500 times less potent.
Bassil I. Dahiyat: So there's already been a tuning down, and we'll just see where that lands. AMG 509 was constructed with two binding domains to the antigen, a steep one, and one to the CD3. And our partners at Amgen did a lot of work looking at how much potency and affinity to have on each side of that specific to hit the tumor cells they wanted. And so that's an example of using a format that gives you the avidity against your tumor antigen, a steep one, to steer yourself towards the right cells. So there are all these tools that have come about, the formats themselves, and the 2 plus 1 format to give you higher antigen density selectivity. They're all themes being played with, and we're going to see those more and more, and every tumor type is going to have its own answer. So we'll see.
Operator: And our next question comes from Jonathan Cheng with... Hi guys, this is John Barrett on behalf of Jonathan.
Operator: Thanks for taking my questions. For my first one, we noticed that the XMAB24306 clinical trial identifier was posted for exploration with atezolizumab. Previously, you commented that Genentech wants to move really fast into combinations with this molecule. Could you comment on what the next combination strategies could be, the types of patients you want to recruit for these trials, and any opportunity for a rough timeline of when we might see the first data? Unfortunately, I can't answer any of those questions because those are Genentech's to answer as the way this IL-15 collaboration is constructed. The atezolizumab combination is, I think, a fairly obvious one given their franchise there, and we think it's a very good scientific hypothesis. And so I imagine they're going to have a pretty broad clinical development approach there, as we've stated, and there are a variety of different indications Atezo's already approved in, so we'll see where they take that one. As for the timing of data, I can't say, but I would not expect any this year. I got it.
Bassil I. Dahiyat: And we were talking a lot about avidity and affinity recently, and there has been some interest in IgM antibodies recently and the engineering of those types of antibodies. Could you just compare and contrast the advantages and disadvantages of engineering IgM versus IgG and how they might compare in the clinic when we get to those data? Well, I mean, given that there's never really been much in the way of IgM antibodies over the years, I think there's not a lot of data to go on and do the comparison. They've always been very difficult to manage, and nobody's really pursued them, except for one company.
Bassil I. Dahiyat: And I guess they're in the clinic now, so they've clearly made excellent progress. I think that what you're seeing with antibody, bispecific antibodies in general, and again, the vast majority are IgG formats, is that the ability to move these binding domains around and have multiple valencies has given us an enormous palette to deal with just from the IgG format. So, for example, 2 plus 1 IgG formats, because you have two antigen binding domains, allow you to tune the potency so broadly because you can do a lot with that potency and still stick selectively to your target.
Bassil I. Dahiyat: You know, we've published data showing no detectable cytokine release in vitro from 2 plus 1 formats tuned the right way. So, we've got a really broad palette of tools in the IgG formats, and that's only going to get broader as we look at cytokine fusions, as we look at multiple antibody binding domains with different kinds of proteins attached as well. So, that really robust, stable, easy-to-use scaffold gives you enormous flexibility already, and I think the time will come not that far off when we stop worrying about this individual format.
Bassil I. Dahiyat: We start trying to worry about what format makes sense for this target, or that target, or the other one. Got it. Thanks for answering my question. Thank you, and our next question comes from Michael Schmidt with Guggenheim. Hi, this is Etzer for Michael.
Operator: Thanks for taking my question and the updates here. First, is there an opportunity for an accelerated path for O45 and relapsed refractory AML given historical responses in that setting? And I wondered if you could also provide a little bit more color on plans to evaluate O45 in the broader CD123 positive indications. And the last question, you know, a number of programs in the clinic right now. I'm wondering if you could maybe talk about the pace of R&D spend in 2020 relative to 2019, to the extent that you can comment. Thanks. You always roll out all the questions at once, so we can't remember what the first one was by the time you get to the last one. Sorry, I wrote them down. I have a pen. Accelerated approval pathways, we really aren't going to comment on specific regulatory pathways when we haven't even announced what the specific slices of indication are. There's always that potential in relapsed and refractory tumors or in any tumor with a high unmet need, but that's too much detail than we really can offer at this point.
Bassil I. Dahiyat: Ditto on the specific kinds of indications; that'll come a little bit later in the year; we're happy to tell you about it all then. I don't know how much granularity we're giving on the guidance, John, if you want to comment. I don't think we typically go R&D versus G&A.
John J. Kuch: The only thing I can comment on is R&D spending went up about 20% from 18 to 19. We expect the spending to continue to increase because we've got more programs going to further stages. All we can count at this point is that it will be higher. And I think going 20% is a starting point due to the 18-19.
Operator: Somewhere along there, possibly higher. Great. Well, that's helpful. Thank you. Thank you, and I'm not showing any further questions at this time. I will now turn the call over to Basil Dahiyat for any further remarks. And thanks very much, Operator. And I thank everybody very much for joining us today. We look forward to giving further updates on our progress throughout the year. Goodbye. Ladies and gentlemen, this concludes today's conference. Thank you for participating; you may now disconnect.