Q3 2021 Xencor Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the 3rd Quarter 2021 Xencor Conference Call. At this time, all participants are in a listen-only mode.

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Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations.

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Charles Liles: Earlier today, we issued a press release that outlines the topics we plan to discuss today. The press release is available at www.xencor.com. With me on the call today are Basil Dahiyat, President and Chief Executive Officer, Allen Yang, Chief Medical Officer, John Desjarlais, Chief Scientific Officer, and John Kuch, Chief Financial Officer. After their remarks, we'll open up the call for your questions. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management, future operations, the company's partnering efforts, capital requirements, future product offerings, and research and development programs.

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Good day, and thank you for standing by welcome to the third quarter 2021 Suncor conference call.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

These yet but advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Charles Liles head of corporate Communications and Investor Relations. Please go ahead.

Charles Liles: These forward-looking statements are not historical facts but rather are based on our current expectations and beliefs and are based on information currently available to us. The outcome of the events described in these forward-looking statements 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 factor section of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q. With that said, let me pass the call over to Basil.

Thank you and good afternoon earlier today, we issued a press release, which outlines the topics we plan to discuss today. The press release is available at Www Dot <unk> Dot Com with me on the call today are President and Chief Executive Officer, Allen Yang Chief Medical Officer, John D. Shirley Chief Scientific Officer, and John <unk>, Chief Financial Officer.

After their remarks, we'll open up the call for your questions before we begin I would like to remind you that during the course of this conference call <unk> 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 future operations, the company's partnering efforts capital requirements future pre.

Bassil I. Dahiyat: Thanks, Charles, and good afternoon, everyone. We've used our array of modular approaches and engineering tools to create our internal development portfolio in oncology and autoimmune disease that currently includes six spi-specific antibodies, either in Phase I or Phase II studies, and two cytokines in Phase I. Our portfolio approach allows us to take multiple, simultaneous shots at goal in the clinic, and the proof-of-concept data we generate guides which programs we advance, which we terminate, or with which we partner.

Offerings and research and development programs. These forward looking statements are not historical facts, but rather are based on our current expectations and beliefs and are based on information currently available to us the outcome of the events described in these forward looking statements are subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward looking statements including.

But not limited to those factors contained in the risk factors section of our most recently filed annual report on Form 10-K, and quarterly report on Form 10-Q with that let me pass the call over to Pavel Thanks, Charles and good afternoon, everyone.

We used our array of modular protein engineering tools to create our internal development portfolio in oncology and autoimmune disease that currently includes six bispecific antibodies either in phase one or phase two study and two cytokines in phase one our portfolio approach allows us to take multiple simultaneous shots on goal in the clinic and a proof of concept data we.

Bassil I. Dahiyat: Today, we've announced data from the first of our cytokine programs, XMAP306, a reduced-potency, long-acting IL-15FC fusion protein in co-development with Genentech, which Alan will touch on momentarily. But first, a quick update on our collaboration. Last month we entered a global collaboration and license agreement with Janssen to advance plumodimab, our CD20 by CD3 bispecific antibody, and to create novel CD28 bispecific antibodies against malignant B-cells to combine with plumodimab and potentially other CD3 bispecific synlymphoma. The HSR waiting period expired last week, and the agreement is closed.

<unk> guidance, which programs, we advance, which we terminated or which we partner.

Jay we've announced data from the first of our cytokine programs ex snap three O six reduced potency long acting IL 15 FC fusion protein and co development with Genentech.

Which Allen will touch on momentarily, but first a quick update on our collaborations.

Last month, we entered a global collaboration and license agreement with Janssen to advance polo to map, our CD 20 by CD three by specific antibody and to create novel CD 28 by specific antibodies against malignant b cells to combine to pull them out of map and potentially other CD three by specific cell lymphoma.

Bassil I. Dahiyat: We're delighted to expand our ongoing CD28 work with the Janssen team and to plan Plomodomab's development together. We believe collaborating with Janssen is the best way to broaden and accelerate our efforts in lymphoma and maximize the opportunity for Plomodomab to bring benefits to patients in a very promising and crowded field. Just a few other updates across our partners' programs, which incorporate our plug-and-play XMAB FC domain. Now, in August, Tafacitimab, which was created and initially developed by us, was granted conditional marketing authorization by the European Commission in combination with lenalidomide for the treatment of adult patients with relapsed or refractory Tichelard's B cell lymphoma who are not eligible for autolog In the EU, tafacitimab is marketed by Insight as MinjaV, while in the U.S., it's co-marketed by Insight and Morphosis as MonjaV.

The HSR waiting period expired last week, an agreement is closed we're delighted to expand our ongoing CD 28 worked with the Janssen team and to plan to promote amount of film and together, we believe collaborating with Janssen is the best way to broaden and accelerate our efforts in lymphoma and to maximize the opportunity to promote him to bring benefit to patients that are very promising and crowded field.

Just a few other updates across our partner programs, which incorporate our plug and play action that I see demand now.

Now in August Tampa sit a map, which was created and initially developed by US was granted conditional marketing authorization by the European Commission in combination with Lenalidomide for the treatment of adult patients with relapsed refractory diffuse large b cell lymphoma, who were not eligible for autologous stem cell transplantation.

In the EU tap a city map is marketed by insight as an injury while in the U S. It's co marketed by insight Morphosis is Monte.

Bassil I. Dahiyat: We're also pleased that our partners, VR, and GSK, continue to receive emergency or temporary authorizations for citrovimab, their investigational SARS-CoV-2 antibody that incorporates our Xtend technology, in countries across the globe for the treatment of mild to moderate COVID-19 in high-risk adults and pediatric patients. So with these two products, Monjuvia and Citrobamab, along with Altamiris from the Alexion unit of AstraZeneca, our partnerships have resulted in three marketed ExMab medicines that are available to treat patients with a range of serious illnesses. Now with that, we'll turn to Allen Yang, our chief medical officer, who'll review our recent clinical highlights and upcoming plans. Allen?

We're also pleased that our partners Vir and GSK continue to receive emergency or temporary authorizations versus frozen that their investigational Sars COVID-19 two antibody that incorporates our extend technology.

Countries across the globe for the treatment of mild to moderate COVID-19 in high risk adult and pediatric patients. So with these two products module into trove of map along with Altamira from the lexicon unit of Astrazeneca. Our partnerships have resulted now in three marketed acts Nab medicines, which are available to treat patients with a range of serious illnesses.

That will turn to Allen Yang our Chief Medical Officer, who will review, our recent clinical highlights and upcoming plans.

Allen S. Yang: Thanks, Basil. Today we'll be touching on recent updates across several clinical stage programs, starting with XMAP 306. Today, we announce encouraging initial dose escalation data from our first clinical stage cytokine, XMAP306, which is being co-developed in collaboration with Genentech, a member of the Roche Group. Exceptional NK cell expansion of 40 to 100-fold increases compared to baseline has been observed, and good tolerability has been observed to date. As we continue to escalate, we are now observing signs of effector T cell proliferation in the periphery.

Thanks, Basel today will be touching on recent updates across several clinical stage programs, starting with X map three O. Six today, we announced encouraging initial dose escalation data from our first clinical stage cytokine ex map three O six which is co developed in collaboration with Genentech, a member of the Roche group exceptional NK cell expansion of 42.

100 fold increases compared to baseline has been observed and with good tolerability to date as we continue to escalate. We are now observing signs of effector T cell proliferation in the periphery ex map three O six safety profile biological activity and Blu ray signs of antitumor activity at this early stage provide ines.

Allen S. Yang: XMAP306's safety profile, biological activity, and preliminary signs of antitumor activity at this early stage provide initial validation of our reduced potency approach to engineering XMAP cytokine therapeutics, and we are considering new trials to study combinations with a range of NK and T cell recruiting therapies. Moving to Flamotimab, as you probably saw, we announced that an abstract was accepted for presentation at the American Society of Hematology annual meeting in December. In a few weeks, we'll present updated clinical results from the Phase I study in patients with non-Hodgkin's lymphoma. We identified a dose regimen, 50 mg flat dosing every two weeks after step-up dosing that is much higher than we have previously reported using weight-based dosing.

Validation of our reduced potency approach to engineering ex Mab cytokine therapeutics, and we are considering new trials to study.

Combinations with a range of NK and T cell recruiting therapies.

Shifting to promote a map as you probably saw we announced that in an abstract was accepted for presentation at the American Society of Hematology annual meeting in December and a few weeks, we'll present updated clinical results from the phase one study in patients with non Hodgkin's lymphoma, we identified a dose regimen 50 milligrams flat dosing every two weeks.

After step up dosing that is much higher than we have previously reported by weight based dosing and due to our new step up schedule is generally well tolerated with encouraging monotherapy activity. We believe that the best opportunities for patients require a focus on studying unique combinations of promote them app with chemotherapy free partners.

Allen S. Yang: And due to our new step-up schedule, it's generally well-tolerated with encouraging monotherapy activity. We believe that the best opportunities for patients require a focus on studying unique combinations of Flamotimab with chemotherapy-free partners, and we are working to initiate our randomized Phase II combination study with Tafacitimab and lenalidomide, a highly active regimen now approved in relapsed lymphoma with a label Flamotimab's CD20-targeted T-cell redirection of tumors and Tafacitimab's CD19-targeted enhanced ADCC tumor killing combine distinct immune pathways and tumor-associated antigens, and we think the combination is a differentiated approach for treating patients with lymphoma.

And we are working to initiate a randomized phase II combination study with top of sit them out and Lenalidomide a highly active regimen now approved in relapsed lymphoma with a label in second line and later promote them have CD 20 targeted T cell redirection of tumors and toxicity map CD 19 targeted enhanced ADC see tumor killing combined.

Stinker.

<unk> pathways and tumor associated antigens, and we think the combination is differentiated approach for treating patients with lymphoma.

Allen S. Yang: The study should be initiated in late 2021 or early 2022. Going forward, alongside Janssen, we look forward to investigating additional mechanisms that avoid the downsides of systemic chemotherapy, such as novel CD28 bispecifics, that are anticipated under our collaboration. Moving on to Vudalumab, which was formerly known as XMAS-717, we have started dosing patients in a phase 2 study of the PD-1-CTLA-4 dual checkpoint bispecific antibody. The study is enrolling patients with metastatic castrate-resistant prostate cancer that we classify by molecular subtype as monotherapy or in combination, depending on the subtype.

This study should be initiated in late 'twenty or 'twenty, one or early 2022.

Going forward alongside Janssen, we look forward to invest the gaining additional mechanisms that avoid the downsides of systemic chemotherapy such as novel CD 28 by specifics that are anticipated under our collaboration.

Moving onto with Allomap, which was formerly known as X mapped 717, we have started dosing patients in a phase II study of the PD one CTO lay for dual checkpoint bispecific antibody. The study is enrolling patients with metastatic castrate resistant prostate cancer that we classified by molecular subtype.

<unk> as a monotherapy or in combination depending on the subtype.

Allen S. Yang: This is an indication with a high unmet need and is currently without much checkpoint inhibitor use beyond MSI high tumors, but early studies suggest that PD-1 and CTLA-4 inhibition has promise in prostate cancer. Therefore, dual targeting of PD-1 and CTLA-4 with a potentially differentiated tolerability profile could meet an important unmet clinical need. At the same time, we're initiating a second phase two study in patients with advanced pelvic tumors, including gynecological malignancies, which represent another opportunity for dual targeting of PD-1 and CTLA-4 to address an unmet need.

This was an indication with a high unmet need and is currently without much checkpoint inhibitor use be odd MSI high tumors, but earliest studies suggest that PD, one and CTO a four inhibition has promise in prostate cancer.

Therefore, dual targeting of PD, one and see till it for with a potentially differentiated tolerability profile could meet an important unmet clinical need.

Yes.

At the same time, we're initiating a second phase II study in patients with advanced pelvic tumors, including gynecological malignancies, which represents another opportunity for dual targeting of PD, one and CTO a four.

To address an unmet need.

Allen S. Yang: In addition, this study includes a cohort of clinically-defined, high-risk, metastatic, cast-rate-resistant prostate cancer, which will allow us to study Vidalimab monotherapy in a specific population of aggressive prostate cancer, independent of molecular profiling data. Later this week at CIDSE, we will present mature data from the ongoing Phase I studies expansion cohorts with a focus on patients with prostate cancer, renal cancer, and a These cohorts are those for which the data were still immature at CIDSE 2020.

In addition, this study includes a cohort of clinically defined high risk <unk> metastatic castrate resistant prostate cancer, which will allow us to study with Allomap mono therapy in a specific population of aggressive prostate cancer independent of molecular profiling data.

Later this week at city, we will present mature data from the ongoing phase one studies expansion cohorts with a focus on patients with prostate cancer renal cancer and a basket cohort of tumors without approved checkpoint therapies. These cohorts are those for where the data we're still immature it since the 2020.

Next tie to the Mab is our CD three by specific that targets S. S. T. R. Two and last week, we presented additional follow up from the phase one study in patients with neuroendocrine tumors. The poster is available on our website.

Allen S. Yang: Tidutimab is our CD3 bispecific that targets SSTR2. And last week, we presented additional follow-up from the phase one study in patients with neuroendocrine tumors. The poster is available on our website.

John R. Desjarlais: The results from the study indicate that Tidutimab was generally well-tolerated with a low incidence and severity of cytokine release syndrome, and it induced meaningful T cell activation in a challenging disease setting. We've begun dosing patients in the phase two study in patients with Merkel cell carcinoma and small cell lung cancer, which are SSTR2 expressing tumors, types known to be responsive to immunotherapy. Finally, as we noted in our press release, we do not intend to devote additional internal resources to furthering the development of ibucodumab, the CD123 by CD3 bispecific antibody.

Results from the study indicate that <unk> was generally well tolerated with a low incidence and severity of cytokine release syndrome.

It introduced meaningful T cell activation in a challenging disease setting.

We've begun dosing patients in the phase two study in patients with Merkel cell carcinoma, and small cell lung cancer, which ours S. S. T. R. Two expressing tumors types known to be responsive to immunotherapies.

Finally, as we noted in our press release, we do not intend to devote additional internal resources to furthering the development of Ivaco to map. The CD 123 by CD three by specific antibody.

John R. Desjarlais: In addition, Novartis is terminating its rights to Vibocodumab, which will be effective early next year. This decision reflects our broad portfolio development strategy, which requires us to make difficult decisions like these so we can dedicate resources to our most promising programs and allow room for exciting new drug candidates to be tested in the clinic. So moving on to those, I'd like to turn the call over to John Desjarlais, our CSO. John.

In addition, novartis is terminating its rights to buy Dakota map, which will be effective early next year. This decision reflects our broad portfolio development strategy with which requires us to make difficult decisions like these so we can dedicate resources to our most promising programs and allow room for exciting new drug candidates to be tested in the clinic.

So moving.

Onto those I'd like to turn the call over to Don does relay our CFO John.

John R. Desjarlais: Thanks, Allen. We've dedicated a lot of effort and research years to using the full range of our protein engineering tools to turn native cytokines into therapeutics. Our approach seeks to create drug candidates with a long duration of therapeutic activity that remain under the threshold for toxicity that has limited the clinical use of cytokines historically. First, we make small changes in the cytokine to selectively reduce binding affinity to its receptors, which lowers its potency.

Thanks, Alan we've.

We've dedicated a lot of effort in recent years to using the full range of our protein engineering tools to turn native cytokines to therapeutics.

Approach seeks to create drug candidates with a long duration of therapeutic activity that remain under the threshold for toxicity that has limited the clinical use of cytokines historically.

First we make small changes in the cytokines to selectively reduce binding affinity to its receptors and that lowers its potency.

John R. Desjarlais: This alone creates a better-tolerated, longer-acting, and far more sustained immune-stimulating activity in preclinical models. We take a further step to enhance stability in pharmacokinetics by fusing the cytokine to an XMAP bi-specific SC domain, which includes our XTEN mutations, to further enhance persistence. We're beginning to see clinical data that is now validating our approach, as reviewed by Allen with XMAP-306. And our second cytokine program, designed with the same principles as XMAP564, our wholly-owned IL-2-FC fusion engineered to selectively activate regulatory T-cells, or Tregs, for the treatment of autoimmune disease.

This alone creates a better tolerated longer acting and far more sustained immune stimulating activity in preclinical models.

We take a further step to enhance stability and pharmacokinetics by fusing the cytokine to an X met Bispecific FC domain, which includes our extend mutations to further enhanced persistence.

We're getting to see clinical data that is now validating our approach as reviewed by Alan with Expat three O six.

At our second cytokine program designed with the same principles as X men 564 are wholly owned IL two FC fusion engineered to selectively activate regulatory T cells or T. Regs for the treatment of autoimmune disease. The phase one study for <unk> five six floors ongoing.

John R. Desjarlais: The Phase I study for XMAP564 is ongoing, and our next Cytokine program scheduled to enter the clinic is XMAP662, our preclinical IL-12SC program. IL-12 is a potent pro-inflammatory cytokine that promotes high levels of interferon gamma secretion from T-cells and NK-cells, increasing their cytotoxicity and the immunogenicity of the tumor microenvironment by making tumor antigens more visible to the immune system.

And our next cytokine program scheduled to enter the clinic is <unk> 66 to our preclinical IL 12 F C program.

All 12 is a potent pro inflammatory cytokines that promote high levels of interferon gamma secretion from T cells, and NK cells, increasing their cytotoxicity and the immunogenicity of the tumor microenvironment by making tumor antigens more visible to the immune system.

John R. Desjarlais: It's previously been demonstrated that IL-12 can have strong anti-tumor activity, but as has been the case across therapeutic cytokine development historically, it has a narrow therapeutic index that limits its utility. We believe that XMED 662, which was designed with our cytokine engineering methodology to lower its potency and prolong its duration of action, could be a significant advancement towards an IL-12 that could be therapeutically dead. We anticipate submitting an IED for XMAB 662 in 2022.

It's previously been demonstrated that IL 12 can have strong anti tumor activity, but as has been the case across therapeutic cytokine development. Historically it has a narrow therapeutic index that limits its utility bill.

We believe that ex Med 662, which was designed with our cytokine engineering methodology to lower the potency and to prolong the duration of action could be a significant advancement towards that IL 12 that could be therapeutically dosed.

We anticipate submitting an IND for <unk> 662 in 2022.

John R. Desjarlais: Shifting to our antibody work, we have two biocivic antibody candidates that we anticipate will advance to the clinic before that, XMAB 819 and XMAB 808. Later this year, we anticipate submitting the IND for XMEP 819, or EMPP3 by CD3 by CIVIC, for renal cell cancer. This is our first internal program engineered with reduced potency CD3 binding combined with a multivalent 2 plus 1 biocivic antibody format. Using two antigen binding domains to the tumor target provides for more selective binding to cells with high DnPP3 density, like tumor cells, compared to lower density that may be found on normal cells.

Shifting to our antibody work, we have two bispecific antibody candidates that we anticipate will advance to the clinic before that extra up 819 that extra eight zero.

Later this year, we anticipate submitting an IND for excellent beat one nine R. E. M. P. P. Three by CD three by civic for renal cell cancer.

It's our first internal program engineered with reduced potency seeded three binding combined with a multi valent two plus one by a civic antibody format using.

Using two antigen binding domains to the tumor target provides for more selective binding to cells with high Ian P. P. Three density like tumor cells compared to lower density that may be found on normal cells.

John R. Desjarlais: We believe the XMAP 2 plus 1 format opens up a wide range of potential solid tumor targets for T cell redirection. For example, we've incorporated a 2 plus 1 format into our most advanced, wholly owned LEED CD28 by Civic Candidate, XMAP 808, which targets B7H3.

We believe the extra that two plus one format opens up a wide range of potential solid tumor targets to T cell redirection.

For example, we've incorporated a two plus one format into our most advanced wholly owned lead CD 28 by Civic candidate X fab eight O eight which targets be seven H III.

John R. Desjarlais: We intend to develop the candidate for potentially broad cellular tumor use, including in prostate cancer, where B7H3 is highly expressed. We anticipate a 2022 IND submission for XMAP 808. Finally, I'd just like to mention that we're presenting four preclinical programs at CIDC this week. XMAP 662, the IL-12 program we discussed, and the second one is PD-L1 by CD28 by Cific

We intend to develop the candidate for potentially broad solid tumor news, including in prostate cancer would be 73 is highly expressed.

We anticipate a 2022 IND submission for <unk> eight O eight.

Finally, I'd just like to mention that we're presenting four preclinical programs at city. This week X map six six to the IL 12 program we discussed.

Second one or a PD L. One by CD 28 by Civic antibody program.

John R. Desjarlais: Poster on our TGF beta platform and our initial disclosure of a NK cell engager platform. These programs show the power of our platform to create XMAP drug candidates that access new biologies and continually supply our clinical pipeline with differentiable. With that, I'd like to hand the call over to John Kuch, our CFO, to review our third quarter financials. John?

Poster on our TGF beta platform and our initial disclosure about NK cell engagement platform.

These programs show the power of our platform to create X fab drug candidates that access to Biology's and continually supplier clinical pipeline with differentiated molecules.

With that I'd like to hand, the call over to John Krish, Our CFO to review, our third quarter financials, John Thank you John.

John J. Kuch: Thank you, John. A critical part of our business is leveraging our protein engineering capabilities through partnerships and collaborations for XMAP drug candidates and technologies, which generate multiple revenue streams. As Basil mentioned, there are now three marketed products that have been developed for the NextMap technology that we are enrailed in. Additionally, our second Janssen collaboration will generate a significant upfront payment, potential milestones and royalties, and the opportunity to share development costs for our Promotormab program with our partner Janssen.

Critical part of our business is leveraging our protein engineering capabilities to partnerships collaborations for X mirth drug candidates and technologies, which generate multiple revenue streams. As Pascal mentioned there are now three marketed products that have been developed for the next map technology that we earn royalties. Additionally, our second Janssen collaboration will generate a significant upfront payment.

Potential milestones and royalties and the opportunity to share development cost for a promoter Mab program with our partner Janssen.

John J. Kuch: Revenues from these and other partnerships allow us to maintain a strong balance sheet to support our broad portfolio of bi-specific antibody and cytokine programs. Cash, cash equivalents, receivables, and marketable debt securities totaled $537.9 million at September 30, 2021, compared to $610.2 million at December 31, 2020.

He was from these and other partnerships allow us to maintain a strong balance sheet to support our broad portfolio of Bispecific antibody and cytokine programs.

Cash cash equivalents receivables and Rockwell debt securities totaled $537 9 million its attempt at September 32021.

<unk> to $610 2 million at December 31, 2020.

John J. Kuch: The decrease reflects cash used to fund 2021 operating activities, offset by proceeds from royalties, milestone payments, and the sale of an investment security. The September 30th balance also excludes payments due to us under our second Janssen collaboration, which includes a $100 million upfront payment and a $25 million payment for the sale of Xencor common stock, which we expect to receive before year-end. Based on current operating plans, we expect to have cash to fund research and development programs and operations into 2025, and we currently estimate we'll end 2021 with between $575 million and $625 million in cash, cash equivalents, receivables, and marketable debt security.

The decrease reflects cash used to fund 2021 operating activities offset by proceeds from royalties milestone payments and the sale of an investment security.

The September 30 balance excludes payments due to us under our second Janssen collaboration which include $100 million upfront payment and a $25 million payment for the sale of <unk> common stock, which we expect to receive before yearend.

Based on current operating plans, we expect to have cash to fund research and development programs and operations into 2025, and we currently estimate we will end 2021 with between 575 $625 million in cash cash equivalents.

Civils and marketable debt securities.

John J. Kuch: Now I'll review our third quarter nine-month financial... Total revenue for the third quarter ended on September 30, 2021 was $19.7 million compared to $35.4 million for the same period in 2020. Revenues in the third quarter were primarily related to revenue earned under the company's first chance collaboration and royalty revenue, compared to revenues from the same period in 2020, which was primarily a milestone payment for Morphosa. Total revenue for the nine months ended September 30, 2021 was $121.1 million, compared to $80.8 million for the same period in 2020.

Now I'll review, our third quarter and nine month financials.

Full revenue for third quarter ended September 32021 was $19 7 million compared to $35 4 million for the same period in 2020.

Revenues in the third quarter were primarily related to revenue earned on the company's first chance collaboration and royalty revenue compared revenues from the same period in 2020, which is primarily a milestone payment for morphosis tore.

Total revenue for the nine months ended September 32021 was $121 1 million compared to $80 8 million for the same period in 2020.

John J. Kuch: Revenues for the nine months were primarily earned from research collaborations with Janssen, Genentech, and Novartis, milestone revenue from Morphosis, and royalty revenue. Compared to the same period in 2020, which is primarily milestone revenue from Morphosis and licensing revenue from Gilead and AMU, research and development expenses for the third quarter were $50.6 million, compared to $44.5 million for the same period in 2020. Total R&D expenses for the nine month period were $141.5 million compared to $121.9 million for the same period in 2020.

Revenues for nine months were primarily earned from research collaboration with Janssen Genentech Novartis milestone revenue from our forces and royalty revenue compared to the same period in 2020, which was primarily milestone revenue for more focused and licensing revenue from Gilead and Amy.

Research and development expenses for third quarter were $50 6 million compared to $44 5 million for the same period in 2020.

Total R&D expense for nine month period were $141 5 million compared to $121 99 for the same period in 2020 and.

Increased R&D expenses for the third quarter and nine month period over the same amounts for the same periods. In 2020 were primarily due to additional spending on our IL 15 drug candidate programs and other early stage programs.

John J. Kuch: Increased R&D expenses for the third quarter and nine-month period over the same amounts for the same periods in 2020 were primarily due to additional spending on our IL-15 drug candidate programs and other early stage programs. Additional spending on XMAB 819, or EMPP3 by CD3 candidate, also contributed to increased R&D expenses during the third quarter. General administrative expenses for the third quarter were $10.4 million compared to $7.6 million for the same period in 2020.

Additional spending an extra half 819 R. E N P. P. Three by CD three candidate also contributed to increase R&D expenses during the third quarter.

General and administrative expense for the third quarter were $10 4 million compared to $7 6 million for the same period of 2020 total G&A expenses for the nine month period were $27 5 million compared to 22.1 million for the same period of 2020.

Increased G&A expense for the third quarter and nine months period over mouse for the same period 2020 were primarily to the increased G&A staffing spending on professional services and facility costs.

John J. Kuch: Total G&A expenses for the nine-month period were $27.5 million compared to $22.1 million for the same period of 2020. Increased G&A expenses for the third quarter and nine months over amounts for the same period of 2020 were primarily due to increased G&A staffing, spending on professional services, and facility costs. Total other income for the third quarter was $1.1 million compared to $4.2 million in the same period in 2020. Other income for the nine-month period was $57.5 million compared to $7.5 million in the same period in 2020.

Total other income for the third quarter was $1 1 million compared to $4 2 million in the same period 2020. Other income for the nine month period was $57 5 million compared to $7 5 million in the same period in 2020.

Other income for the nine month period includes realized gains on the sale of an investment equity securities and an increase in unrealized gains on the company's marketable equity investments.

Net loss for the third quarter was $40 2 million or 69 cents on a fully diluted per share basis compared to net loss of $12 6 million or <unk> 22 cents on a fully diluted share basis for the same period in 2020.

The increased net loss for third quarter, comparing the same period in 2020 was primarily due to lower milestone revenue and higher operating expenses in 2021.

For nine month period ended net income was $9 6 million or 16 cents on a fully diluted per share basis.

John J. Kuch: Other income for the nine-month period includes realized gains on the sale of an investment equity security and an increase in unrealized gains on the company's marketable equity investment. Net loss for the third quarter was $40.2 million, or $0.69 on a fully diluted per share basis compared to a net loss of $12.6 million, or $0.22 on a fully diluted per share basis, for the same period in 2020.

We had a net loss of $55 6 million or 97.

Diluted per share basis for the same period in 2020.

Net income reported for the nine month period compared to net loss of four for the same period of 2020 is primarily due to higher collaboration revenues and realized and unrealized gains from equity investment securities in 2021 compared to 2020.

Noncash stock based compensation expense for the nine month period was $26 6 million compared to $23 1 million for the same period in 2020.

John J. Kuch: The increased net loss report for the third quarter compared to the same period in 2020 is primarily due to lower milestone revenue and higher operating expenses in 2021. For the nine-month period, ended net income was $9.6 million or $0.16 on a fully diluted per share basis, compared to a net loss of $55.6 million or $0.97 on a fully diluted per share basis for the same period in 2020. The net income report for the nine-month period compared to the net loss report for the same period in 2020 is primarily due to higher collaboration revenues and realized and unrealized gains from equity investment securities in 2021 compared to 2020. Non-cash stock-based compensation expense for the nine-month period was $26.6 million compared to $23.1 million for the same period in 2020.

And total shares outstanding were $58 5 million as of September 32021, compared to $57 4 million as of September 32020.

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

<unk>.

Thank you.

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We have our first question from the line of Ben <unk> of Piper Sandler Your line is now open.

Great. Thank you very much plus kind of IL 15 data can you share a little bit more in terms of where you are in.

It's an anti corrosion tend to take us an unprovoked behind US do you guys have your ability to do studies on your own. Thank you.

Yeah. Thanks, Ted So I'll start with the second piece, we do have the ability to do studies on our own under the contract with them with Genentech, obviously, we have to to to meet certain conditions like the agents, we're going to combine it would have to make sense we have to.

Operator: And total shares outstanding were $58.5 million as of September 30, 2021, compared to $57.4 million as of September 30, 2020. With that, we'd now like to open up the call to your questions. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press the pound key.

We have to go through that kind of process with genentech to make sure everybody's aware and understands what we're doing but yes, we do have the ability to do these studies that are in both the compounds in our portfolio as well as with molecules that we don't control now.

Now as to where we're going.

Can't speak to Genentech's plan exactly they do lead to collaboration for things that happen within the collaboration so distinct from the trials, we were going to run ourselves.

Operator: Please stand by while we compile the Q&A roster. We have our first question from the line of Ted Tenthoff of Piper Fandler. Your line is now open.

Bassil I. Dahiyat: Great. Thank you very much. Impressive by the IL-15 data, can you share a little bit more in terms of where you and Genentech or Ocean tend to take this? And also, remind us, do you guys have the ability to do studies on your own?

But we do know they have a lot of engagement and expertise and a lot of potential combination partners in their own portfolio. Allison is yes, we're interested in we can't get into the specifics yet and there's a number of possibilities across both NK cell therapies and T cell therapies, we can combine with.

Bassil I. Dahiyat: Thank you. Yeah, thanks, Ted. So I'll start with the second piece. We do have the ability to do studies on our own under the contract with Genentech. Obviously, we have to meet certain conditions, like the agents we're gonna combine it with have to make sense, and we have to go through the kind of process with Genentech to make sure everybody is aware and understands what we're doing. But yes, we do have the ability to do studies on our own, both with compounds in our portfolio and with molecules that we don't control.

So NK cells are critical for the ADC function of molecules like like Rituxan Moms Ub urban tax of course, our acumen ma'am.

In myeloma, there's an excellent mechanistic rationale for an agent that boost NK cell number and activate similar or drive them to be more mature like an IL 15 at too. So we think thats a direction to go with the NK cell angle and then on T cell directed therapies of course, we're already combining within the collaboration with capitalism map their PDL, one inhibitor and we can certainly imagine.

Bassil I. Dahiyat: Now as to where we're going, we can't speak to Genentech's plans exactly, but they do lead the collaboration for things that happen within the collaboration, so distinct from the trials we are going to run ourselves, but we do know they have a lot of engagement and expertise and a lot of potential combination partners in their own portfolio. Now as to the things that we're interested in, we can't disclose specifics yet, but there are a number of possibilities across both NK cell therapies and T cell therapies we could combine.

Our own programs like the gala mab potentially benefiting and even R.

Our CD three bi specifics as well so there's a lot on that wheat lots to consider we're going to guide it on them.

When we have specifics, but I think we view it as whats the best NK cell approaches.

Leverage and what's the best T cell approaches.

To leverage with this kind of agent if results, we're starting to see in the phase one continue to bear fruit.

Fair enough and looking forward to all the data <unk> payment space.

Bassil I. Dahiyat: So NK cells are critical for the ADCC function of molecules like rituxan, manjubi, herbitux, and, of course, daratumumab in myeloma. There's an excellent mechanistic rationale for an agent that boosts NK cell numbers and activates them or drives them to be more mature, like an IL-15 ought to. So we think that's a direction to go with the NK cell angle. And then on T cell-directed therapies, of course, we're already combining within the collaboration with teslizumab, their PD-L1 inhibitor.

Thank you.

Our next question comes from the line of Mara Goldstein of Mizuho. Your line is now open.

Great. Thanks.

Hum.

I suppose on that line of questioning with Ted's question I'm, just curious about so you've reached the point in which you have.

A therapeutically active dose alright, and so I'm curious as to how you would have us think about benchmarking yourself seem to date relative to other agents in the space.

Bassil I. Dahiyat: And we can certainly imagine our own programs like budalumab potentially benefiting, and even our CD3 bi-specifics as well. So there's a lot on that, lots to consider. We'll guide you when we have specifics, but I think we view it as what are the best NK cell approaches to leverage and what are the best T cell approaches to leverage with this kind of agent if the results we're starting to see in Phase I continue to bear fruit. Yep, fair enough. I'm looking forward to all the data in 15 hours. Thanks.

What I guess should we think about from a from a quantitative perspective yet.

Allow us to see the potential activity that you're seeing so far.

Right. So I think theres two pieces to that how we think about that within this.

Within this as we continue to escalate by the way, we're not done escalating just to be clear.

While you maintain if you can maintain a tolerability profile that is acceptable and we feel good about the tolerability profile, we've seen to date and what you want to look at our the.

Operator: Thank you. Our next question comes from the line of Mara Goldstein of Missoula. Your line is now open.

Effector cell populations and the amplification that youre doing of them how that's sustained.

Allen S. Yang: Great, thanks. Just continuing on that line of questioning with Ted's question, I'm just curious about, so you've reached the point where you have reached a therapeutically active dose, and so I'm curious as to how you would have us think about benchmarking results seen to date relative to other agents in the space. What, I guess, should we think about from a quantitative perspective that would allow us to see the potential activity that you're seeing so far? Right, so I think there are two pieces to that. How should we think about that?

How how you can maintain and that would be NK cells and T cells, So, particularly CDA T cells, you want to look for.

So that's one metric the levels the durability.

You can start getting into details of subtypes. The other metric is when you get into combination studies, what kind of efficacy you see now at this early stage, we think that.

Do you want to look at the magnitude of increases of MKS.

<unk>.

We're clearly very active for NK cells, we're starting to see the T cells proliferation proliferation signals.

And we think that the initial antitumor activity, we're seeing an unconfirmed responses monotherapy and combo with <unk>.

Allen S. Yang: Within this, as we continue to escalate, by the way, we're not done escalating, just to be clear, while you maintain, if you can maintain a tolerability profile that's acceptable, and we feel good about the tolerability profile we've seen to date, what you want to look at are the effector cell populations and the amplification that you're doing of them, how that's sustained, and how you can That would be NK cells and T cells, so particularly CD8 T cells you want to look for. That's one metric; the levels, the durability, you know; you can start getting into details about subtypes.

Those small numbers and still unconfirmed just indicate there's immunological activity happening at the tumor site, which is what you want to see so I think that the presence of that is encouraging. So that's one piece the benchmark and then you can't really extrapolate beyond there just do you see something happening in the tumor and in the magnitude and durability in and.

Of the effector cell populations like NK cell Ts.

Alright, Thanks I appreciate it.

Our next question comes from the line of David Mann Garden of Wedbush Securities. Your line is now open.

Well continuing on the NK cell.

Allen S. Yang: The other metric is when you get into combination studies, what kind of efficacy you see. Now, at this early stage, we think that you want to look at the magnitude of increases in NKs as we're, you know, we're clearly very active for NK cells. We're starting to see the T cell proliferation signals, and we think that the initial anti-tumor activity we're seeing, you know, unconfirmed responses, monotherapy, and in combo with a T cell, those small numbers, still unconfirmed, just indicate there's immunological activity happening at the tumor site, which is what you want to see.

Therapy and enhancement question theme here I was curious if you had any.

Thoughts or ways to benchmark the activity or the enhancement of NK cell activity.

Patients compared to engineered NK cells, especially of course ones that have the IL 15 engineered to.

Because especially the active and those.

Cell therapies.

So curious about that.

So if I know Jon wants to have a few things to say about that generally are John <unk> our CFO.

Two parameters count how many cells are there.

Allen S. Yang: So, I think, you know, the presence of that is encouraging, so that's one piece to benchmark, and then you can't really extrapolate beyond there, just because you see something happening in the tumor, and then the magnitude and durability of the effector cell populations like NKs and Ts. All right, thanks. I appreciate it. Our next question comes from the line of David Nierengarten of Wedbush Securities. Your line is now open

And are they the right subtype of the active and do you want to yeah, Yeah, I'm trying to remember however, I did that back of the envelope calculation and I was comparing to one of the NK therapies because they they they state you know how many in case they actually.

Grafts into the human and I think we were at about a 100 fold higher so basically you could think of the yen cases.

John R. Desjarlais: Well, continuing on the in-case cell therapy and enhancement question theme here, I was curious if you had any thoughts or ways to benchmark the activity or the enhancement of in-case cell activity in patients compared to engineered in-case cells, you know, especially of course ones that have the IL-15 engineered to essentially be consensually active in those cell therapies. I'm obviously curious about that. Thanks. So, I know John wants to have a few things to say about that. John Desjarlais, our CSO.

The my oil play and then they they replace the encase that we're there with their engineered it in case, we're taking the encase that exist that expanding expand those 100 fold higher and so that's a it's like.

About 100 fold more cells than you see with the allogeneic approaches that have been reported to date from again, our back of the envelope with a lot more cells and we're certainly seeing the mature phenotypes, which you know have characteristic markers like <unk> 16 on them yet so.

They are active and can do the job.

Beyond that it's going to be.

John R. Desjarlais: I think you have two parameters, count how many cells are there, and are they of the right subtype, and are they active. Maybe you want to comment on that? Yeah, I'm trying to remember. I did that back of the envelope calculation, and I was comparing to one of the NK therapies, you know, because they state, you know, how many NKs they actually engraft into the human. And I think we're at about 100-fold higher, so basically, you could think of the NKs as they sort of demyelinate, and then they replace the NKs that were there with their engineered NKs.

Can it be how things go as we start doing the clinical trials in combination.

And you touched on this before but I wanted to be a little bit more explicit with Genentech do you need.

Genentech to sign off on you guys doing area.

Study with our with.

And an NK cell engaged or for example, or.

Can you just can you pursue that without their let's say so.

We can pursue studies.

With any any third party agents that we want as long as we don't create.

Undue safety risks the resource drug supply.

We can't duplicate something going on within the collaboration for example, we Couldnt do our own study in combo with Ts Elysium have that we simply can't do that but outside of that as long as we check basic governance boxes and we're responsible then we have a lot of flexibility.

John R. Desjarlais: We're taking the NKs that exist and expanding those 100-fold. And so that's about 100-fold more cells than you see with the allogeneic approaches that have been reported to date from, again, our back of the envelope. So it's a lot more cells, and we're certainly seeing the mature phenotypes, which have characteristic markers like CD16 on them. That would imply that they're active and can do the job.

Cool Okay. Thank you.

Our next question comes from the line of go very forming of V. P. I G. Your line is now open.

Yeah good afternoon.

John R. Desjarlais: Beyond that, it's going to be, how do things go as we start doing the clinical trials in combination? And you touched on this before, but I wanted to be a little bit more explicit with Genentech. Do you need Genentech to sign off on you guys doing a study with this and an NK cell engager, for example? Or can you pursue that without their say-so?

Thanks for the update and thanks for taking my question. My first question is regarding your last readout showed a couple of responses in patients treated with.

PD one combination.

Do you know what's driving the response there.

At the higher doses allow you to push the button harder safely.

John R. Desjarlais: We can pursue studies with any third-party agents that we want, as long as we don't create undue safety risks or exhaust drug supply, or we can't duplicate something going on within the collaboration. For example, we couldn't do our own study in a combo with tesolizumab. We simply can't do that.

Oh Gosh I'll, let Allen take that one but this is this is delving into the realms of the unknown, yes. So I think what you're asking is why we're seeing responses with <unk>, formerly <unk> hundred seven in patients who had previously been treated with other checkpoint inhibitors either PD.

Operator: But outside of that, as long as we check the basic governance boxes and we're responsible, then we have a lot of flexibility. Cool. Okay. Thank you. Our next question comes from the line of Kaveri Pohlman of BTIG. Your line is now open.

One or at the <unk> combination.

The answer is no.

We don't know for certain but what we do know is that the way that the molecule was designed was to favor PD one binding.

Allen S. Yang: Yeah, good afternoon. Thanks for the updates, and thanks for taking my questions. My first question is regarding Udallimab. Your last readout showed a couple of responses in patients pre-treated with EPN-PD-1 combinations. Do you know what's driving the response there? Is it that the higher doses allow you to push the buttons harder safely? Oh, gosh.

The diminished the CTO law for binding so in other words, you only get CTO at four being employed after PD, one buys and we believe that that minimises the toxicity.

But encourages the dual activity.

So one of the things is we think that it could be more tolerable and you can get more doses in or more specifically you could be recruiting T cells that are both PD, one and see till a four expressing so the ones that are enriched in the tumor and so that dual targeting in a single molecule may have a molecular advantage over given the agents.

Allen S. Yang: I'll let Allen take that one, but this is delving into the realms of the unknown. Yeah, so I think what you're asking is why we're seeing responses with Udallimab, formerly 717, in patients who had previously been treated with other checkpoint inhibitors, either PD-1 or ipilimumab in combination. The answer is we don't know for certain, but what we do know is that the way that the molecule was designed was to favor PD-1 binding and diminish CTLA-4 binding.

Candidly I don't know if you want to add anything John or <unk>.

You covered it I mean, it's yes.

You are potentially zeroing in on the most tumor reactive T cell population.

Got it thanks and for Qdoba Mouse study.

Allen S. Yang: So, in other words, you only get CTLA-4 being employed after PD-1 binds, and we believe that that minimizes the toxicity but encourages the dual activity. So one of the things is that we think that it could be more tolerable, and you can get more doses in, or more specifically, you could be recruiting T-cells that are both PD-1 and C-TLA-4 expressing, so the ones that are enriched in the tumor, so that dual targeting in a single molecule may have a molecular advantage over giving the agents separately.

How much do you think that the recent data.

As an indication of the limitation of the approach because you have a very cold tumor, but you're dragging T belt. There do you think that Oh tells.

Tells us that the approach is unlikely to be useful and really cold tumors.

You need some neo antigens.

Priming cytokines like IL 12.

That's it.

Question I think the one thing I will say is that we are seeing that.

Allen S. Yang: I don't know if you want to add anything John or not, but I think you covered it. I mean, you're potentially zeroing in on the most tumor-reactive T-cell population. Got it, thanks. And for the Keduda Map Study, how much do you think that the recent data is an indication of the limitation of the approach? Because you have a very cold tumor, but you're dragging T-cells there.

The Biomarkers, we reported for the <unk> study we are in the periphery. So a lot of increased T cells in the periphery of lot of activation of them in the periphery you raise a good point, we don't know what's happening with very limited biopsy data in the tumor could that be enhanced by other therapies that change how the T cells behave have them home or migrate happen to be more pro <unk>.

<unk> quite possibly.

I mean, that's part of the driver of us going to small cell lung cancer and medical Hall carcinoma, which are are hotter tumors for immune therapy.

Allen S. Yang: Do you think that tells us that the approach is unlikely to be useful in really cold tumors? Do you need some neoantigens or perhaps some priming cytokines like IL-12? That's an interesting question.

Your question there that we don't have a perfect answer for US why we have reagents that were building to make our next programs come along and I'd also like to add we mentioned our <unk> program, our B seven H Street by <unk> 28 <unk>.

Allen S. Yang: I think the one thing I will say is that the biomarkers we reported to do the MAP study were in the periphery. So a lot of increased T cells in the periphery, and a lot of activation of them in the periphery. You raise a good point.

One of the whole point of interrogating. These CD 28 by civic antibodies as they could potentiate <unk> threes.

Allen S. Yang: We don't know what's happening. There's very limited biopsy data in the tumor. Could that be enhanced by other therapies that change how the T cells behave, have them home or migrate, and have them be more pro-immunogenic? Quite possibly.

Particularly in the cold tumor setting we could see 28 causes a much stronger proliferative signal.

And I would add along those lines, there's been a lot of investigator interest in combining <unk> with either a PD one within our portfolio or you know later on with the CD 28, and I think Theres a lot of interesting science. There. However, immediately we're going to test small cell lung cancer Merkel cell cancer that phase.

Allen S. Yang: I mean, that's part of the driver of us going into small cell lung cancer and mercal cell carcinoma, which are hotter tumors for immune therapy. But your question there that we don't have a perfect answer for is why we have reagents that we're building to make our next programs come along. Yeah, I'd also like to add, you know, we mentioned our XMAP808 program, our B7H3 by CD28 biocivic. I mean, one of the points of interrogating these CD28 biocivic antibodies is that they could potentiate CD3s, particularly in the cold tumor setting, because CD28 causes a much stronger proliferative signal.

Two has started enrolling an old address an important scientific question that you're asking is it the seed or the soil hypothesis, which is the ongoing debate on oncology, but.

Early Amgen has seen responses with their AMG 757, So we're very excited about our phase two and if we see responses I think that will add a lot of information for the field.

That's helpful. Thank you sure.

Our next question comes from the line of Charles <unk> of Guggenheim Securities. Your line is now open.

Allen S. Yang: And I would add along those lines, you know, there's been a lot of investigator interest in combining titutumab with either PD-1 in our portfolio or, you know, later on, with the CD28. And I think there's a lot of interesting science there.

Hey, guys. Thanks for taking my questions. Congrats on the early <unk> three of six data you obviously have considerable expansion of NK cells with this drug and on that note I was also kind of wondering.

To what extent are the peripheral effector T cells potentially driving any early signs of efficacy yours youre observing in any potential color. He can also provide around things like peripheral versus an intra tumoral presence something sales. Thanks.

Allen S. Yang: However, immediately, we're going to test small cell lung cancer and Merkel cell cancer. And phase two has started enrolling and will address an important scientific question that you're asking. Is it the seed or the soil hypothesis, which is an ongoing debate in oncology.

Yes, I don't believe we have data on intra tumoral.

Operator: But, you know, clearly, Amgen has seen responses with their AMG 757, so we're very excited about our phase two. And if we see responses, you know, I think that will add a lot of information to the field. That's helpful, thank you. Our next question comes from the line of Charles Zhu of Guggenheim Securities. Your line is now open.

Biomarkers are cells, yet I think maybe John if you want to go to the mechanistic mystery of T cells in the periphery, then and what do they do.

It is a big mystery.

I don't think anybody knows if you need a particular level of T cell expansion in the periphery to promote anti tumor activity really the big question is what's going on in the tumor again, we don't we don't have any data on that yet.

John R. Desjarlais: Hey guys, thanks for taking my questions. You obviously have considerable expansion of the NK cells with this drug. And on that note, I was also kind of wondering, you know, to what extent are the peripheral effector T cells potentially driving any early signs of efficacy you're observing? And any potential color you can also provide around things like peripheral versus intertumoral presence of these cells.

And Theres a lot of hypotheses for why you would see more activity in the tumor T cells in the peripheral.

Particular, we had shown early on and preclinical data that when you when you stimulate a T cell say through CD, three engagement or TCR engagement. It actually up regulates the IL two receptors, which of course at the same receptors that IL 15 works through so you can imagine those.

John R. Desjarlais: Thank you. Yeah, I don't believe we have data on intratumoral biomarkers or cells yet. I think maybe, John, if you want to go into the mechanistic mystery of T-cells in the periphery, then, and what do they do? Yeah. You know, it is a big mystery.

For two royalty cells actually being more responsive to IL 15, then the peripheral T cells.

But I guess to really get at the point of what might be going on in the tumor if you can observe.

Tumor shrinkage, whether in combination with a checkpoint inhibitor like <unk> or even in monotherapy I think thats in a sense and a marker of what's happening in the tumor immunologically right. Because these are immune therapies are in very advanced solid tumor patients who've exhausted all prior therapies. So many of them would've seen checkpoint inhibitors in the past and and.

John R. Desjarlais: I mean, I don't think anybody knows if you need a particular level of T-cell expansion in the periphery to promote antitumor activity. Really, the big question is what's going on in the tumor. So, again, we don't have any data on that yet, and there are a lot of hypotheses for why you would see, you know, more activity in the tumor T-cells than in the peripheral. In particular, we have shown early on in preclinical data that when you stimulate a T-cell, say, through CD3 engagement or TCR engagement, it actually upregulates the IL-2 receptors, which of course are the same receptors that IL-15 works through.

On those or not responded this so so I think that's an important piece of the puzzle when you put it together with the biomarker data youre seeing in the kind of.

The kind of increases in cell counts in the periphery, we don't know exactly what's going on in the tumor yet we're eager to see that biopsy data as it starts coming in but obviously much harder to get them in the <unk>.

Blood itself.

John R. Desjarlais: So, you can imagine those intratumoral T-cells actually being more responsive to IL-15 than the peripheral T-cells. But I guess to really get at the point of what might be going on in the tumor, if you can observe tumor shrinkage, whether in combination with a checkpoint inhibitor like tezolizumab or even in monotherapy, I think that's, in a sense, a marker of what's happening in Because these are immunetherapies, these are in very advanced solid tumor patients who have exhausted all prior therapies, so many of them would have seen checkpoint inhibitors in the past and progressed on those or not responded to those.

Got it got it thanks for that color and maybe just one more a big picture question from me on this front. So you have multiple different approaches of engaged multiple and distinct approaches of engagement the immune system through multiple different means whether it's recruiting T cells recruiting NK cells and now it looks like Youre also.

Going to be able to.

Make them proliferate as well and.

A lot of your combination partnership strategy seems to have been more external facing I guess to what extent are really more internal combinations on your mind and what are your thoughts around potentially realizing synergy of something like <unk>.

NK cells and tumor specific NK cell engagement with NK cell expansion agent and also what are your thoughts on potential for synergistic toxicity as well.

John R. Desjarlais: So I think that's an important piece of the puzzle when you put it together with the biomarker data you're seeing and the kind of... that kind of increase in cell counts in the periphery. We don't know exactly what's going on in the tumor yet. We're eager to see that biopsy data as it starts coming in, but obviously much harder to get than the blood cells. Got it, got it, thanks for that color.

Regarding the toxicity question, it's hard to say of course, we do know that that.

NK cell mediating mediated agents like the classic antibodies rituxan or <unk>.

Now to our team of Mab tend to be fairly well tolerated with regard to their immune stimulation immune related reaction infusion related reactions and what they see.

John R. Desjarlais: And maybe just one more big picture question from me on this front. So you have multiple different approaches to engaging the immune system through multiple different means, whether it's recruiting T cells, recruiting NK cells, and now it looks like you're also going to be able to make them proliferate as well. And a lot of your combination partnership strategies seem to have been more external facing, I guess.

I think from a potential of internal combination that's really why we're making these agents for combination of course of the nearer term opportunity might be with marketed agents, but we want to be able to create an internal pipeline that has the best.

Combination partners stayed with the best checkpoint inhibitor, we hope we can establish <unk> as as an important option because it has.

John R. Desjarlais: To what extent are really more internal combinations on your mind, and what are your thoughts around potentially realizing synergy of something like, you know, an NK cell and tumor-specific NK cell engager with an NK cell expansion agent? And also, what are your thoughts on potential for synergistic toxicity as well? Regarding the toxicity question, it's hard to say, of course.

A differentiated profile for both PD, one <unk> four inhibition, we think our CD 28 bi specifics as well as the cytokines. We're trying are giving us those tools to figure it out it's an experiment to figure out which combinations.

We mentioned <unk> as potential combination partner for NK cell expansion.

John R. Desjarlais: We do know that NK cell-mediated agents, like the classic antibodies Rituxan, or Giziva, or now Dartumumab, tend to be fairly well-tolerated with regard to their immune stimulation, right? Infusion-related reactions are what they see. I think from the potential for internal combination, that's really why we're making these agents for combination. Of course, the nearer-term opportunity might be with marketed agents, but we want to be able to create an internal pipeline that has the best combination partners, say, with the best checkpoint inhibitor.

Call, we created that molecule and we still have a pretty important economic stake so the wall not internal.

It is important to us and we are I think talking about some of our NK cell engaging novel molecules at 50 next or this week.

So that's really the big driver for it whereas the short term pieces to do the combinations with external parties.

Got it thanks.

Our next question comes from the line of Gregory <unk> of RBC capital markets. Your line is now open.

Hi, This is <unk> on for Greg. Thank you for taking our questions and congrats on the progress maybe.

John R. Desjarlais: We hope we can establish Fudalumab as an important option because it has a differentiated profile for both PD-1C and TLA-4 inhibition. We think our CD28 biospecifics, as well as the cytokines we're trying, are giving us those tools to figure it out. It's an experiment to figure out which combinations.

Maybe first question on <unk> can you remind us of the rationale is collecting b 700 Grand in your first target CD 20 platform versus the more tumor specific approach and how does your design methodology gives me confidence in the safety profile that could avoid some of the concerns from Paas program. Thank you.

Yes, yes, sure I mean.

Really it was it was a pragmatic decision selecting b seven H three first of all it's very broadly and high density expression of <unk> 73 across multiple solid tumor histology.

John R. Desjarlais: We mentioned Mongivia as a potential combination partner for NK cell expansion. Recall, we created that molecule, and we still have a pretty important economic stake, so while not internal, it is important to us. We are, I think, talking about some of our NK cell-engaging novel molecules at CITSE this week. So, that's really the big driver for it, where the short-term piece is to do the combinations with external parties. You got it. Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is now open.

I wanted a one size fits all solution that could could.

Could potentially coupled with with PD, one inhibitors or other checkpoint inhibitors as well as CD three by civics.

And.

The justification for going with a fairly broad tumor expressed antigen was that CD 20 engagement by itself.

Shown this in all of our preclinical studies doesn't.

Operator: Hi, this is Ying Wang for Gregg. Thank you for taking our questions and congratulations on the progress. Perhaps my first question on 808. Can you remind us of the rationale for selecting B783 as your first target for the CD28 platform versus the more tumor-specific approach? And how does your design methodology give you confidence in the safety profile that could avoid, you know, some of the concerns from the past programs? Thank you. Yeah, sure. I mean, you know, really it was a pragmatic decision to select B783.

It's not expected to do anything unless Theres also a signal one coming from a TCR.

Recognition of a tumor cell or in combination with the CD three by a civic.

We'd also thought at some of the drug conjugate programs that are out there seem to be safely targeting such a broadly expressed antigen. So all of those things put together.

Led us to that as our first target but of course, we are considering more tumor specific marker markers as well.

Great. Thank you and then maybe just another one on the IL two program when should we expect to learn of some data from that program and what is your development strategy ultimately considering the recent pharma in China, That's where I'll review our strategy with other autoimmune programs.

John R. Desjarlais: You know, first of all, it's a very broadly and, you know, high-density expression of B783 across multiple solid tumor histologies. I kind of wanted a one-size-fits-all solution that could, you know, could potentially couple it with PD-1 inhibitors or other checkpoint inhibitors, as well as CD3 biostatics. And, you know, the justification for going with a fairly broad tumor-expressed antigen was that CD28 engagement by itself, you know, and we've shown this in, you know, all of our preclinical studies, doesn't, you know, it's not expected to do anything unless there's also a signal one coming from a TCR, you know, recognition of a tumor cell or in combination with a CD3 biostatic.

So for <unk> four we hope to have initial data from the <unk>.

Single ascending dose in healthy volunteers next year that studies that trials ongoing.

We in terms of development strategy, we see this new modality it's.

In early phase development in a number of parties T. Reg expansion right teammates stimulation as really an unproven therapeutic hypothesis, we think that as that validation happens in phase two we wanted to have our irons in two fires one of those is in.

Smaller indications, perhaps railroad or at least uncommon indications that have a high unmet need that you can try this new mechanism is and one is in.

John R. Desjarlais: We also thought that some of the drug conjugate programs that are out there seemed to be safely targeting such a broadly expressed antigen. So all of those things put together led us to that as our first target. But, of course, we are considering more tumor-specific markers as well. Great, thank you.

More a larger indications with perhaps other established therapeutic mechanisms of action, but where you can rapidly understand whether you are actually impacting disease, because you have clear endpoints and clear marker. So you really want to have.

Both of those those pieces of ground covered something that you could be really pioneering yen to maybe accelerate development opportunities and create your own <unk>.

John R. Desjarlais: And then maybe just another one on the IL-2 program, when should we expect to learn initial data from that program, and what's your development strategy ultimately, considering the recent pharma interest as well as your strategy with other autoimmune programs? So for 5.6.4, we hope to have initial data from the single ascending dose in healthy volunteers next year. That study, that trial is ongoing. We, in terms of development strategy, you know, we see this new modality that's in early phase development at a number of parties, Treg expansion, right, Treg stimulation, as really an unproven therapeutic hypothesis. We think that as that validation happens in phase two, we want to have our irons in two fires.

One little our Bailiwick, and then really answered the scientific question crisply and clearly not one of the other with us.

Great. Thank you.

Our next question comes from the line of Peter Lawson of Barclays. Your line is now open.

Hey, Thanks for taking the questions. Thanks for the update.

Three years its just.

Around that the responses <unk> seen just curious do they do you think that correlate with the.

<unk> sustained isotype Hyatt.

A high affinity <unk> 16 on NK cells just.

Thoughts there and then what kind of CDA T cell expansion do you think you'd want to see if that's a relevant question David yes.

Yes, we have no idea, whether there's what the phenotype is of CD 16, whether it's the highest seen any veiling $1 58 is a lower affinity phenylalanine and it's not clear what the underlying mechanisms are that are driving response, even though you again are seeing.

John R. Desjarlais: One of those is in smaller indications, perhaps rare or at least uncommon indications that have a high unmet need that you can try this new mechanism in. And one is in larger indications with perhaps other established therapeutic mechanisms of action, but where you can rapidly understand whether you're actually impacting the disease because you have clear endpoints and clear markers. So you really want to have both of those pieces of ground covered, something that you could be really pioneering in to maybe accelerate development opportunities and create your own little labelloic and then really answer the scientific question, not one or the other, but both.

Just the beginnings of T cell proliferation markers in the periphery that doesn't tell us what's happening with the T cells into tumors. The NK cells I think NK cells are very much underappreciated by the way across all the different oncology indications because they are part of driving immune immune responses more broadly.

And then just maybe the obvious ADC function, but we don't have any any correlation understanding beyond that.

And what number of T cell increase do you need to see in the periphery I think we talked about that earlier.

There is no clarity there right.

Operator: Great, thank you. My next question comes from the line of Peter Lawson of Barclays. Your line is now open.

I think you would certainly want to see activation markers.

John R. Desjarlais: Hey, thanks for taking the questions. Thanks for the update as well on 306. Just around that, the responses you've seen for 306, do you think they correlate with the CD16 isotype or the high affinity CD16 on NK cells? Just your thoughts there.

Just to let you know that your molecules doing the things that ought to do and we're certainly seeing.

Seeing activation.

And proliferation marker of T cells and in addition to this really encouraging and dramatic NK cell expansion that can that can play in a lot of different ways, but mechanistic understanding I think we're still a ways off.

John R. Desjarlais: And then what kind of CD8 T cell expansion do you think you'd want to see, if that's a relevant question? Yeah, we have no idea whether it's what the phenotype is of CD16, whether it's the high affinity valine 158 or the lower affinity phenylalanine. And it's not clear what the underlying mechanisms are that are driving the response.

Does that sorry does.

The NK cell expansion correlate with with activity with us to kind of simplistic <unk> patients and <unk> too few data points now to understand that.

Whether it correlates with activity I Couldnt tell you I do think that within the realm of ADC driven antibodies like for example, Rituxan there is growing.

John R. Desjarlais: You know, even though you again are seeing just the beginnings of T cell proliferation markers in the periphery, that doesn't tell us what's happening with the T cells in the tumors. I think NK cells are very much underappreciated, by the way, across all the different oncology indications because they're part of driving immune responses more broadly. Just to let you know that your molecule is doing the things it ought to do, and we're certainly seeing activation and proliferation markers of T-cells, in addition to this really encouraging and dramatic NK cell expansion that can play in a lot of different ways. But mechanistic understandings, I think we're still a ways off.

Growing literature, validating that NK cell counts in patients high NK versus low end case.

Correlates with response, where likelihood of benefit I think even not even response clinical benefit like a less so so that's pretty clearly establish more encase are better for ADC antibiotics in particular Rituxan has been well documented and I think suggestions of that for a number of other antibodies.

For T cell mediated therapies like checkpoint inhibitors, nobody knows the role of encase.

John R. Desjarlais: And does the NK cell expansion correlate with activity, or is that too kind of simplistic? Too few patients and too few data points now to understand that. Whether it correlates with activity, I couldn't tell you.

But theres a lot of opportunity, we think in NK cell driven therapies. The current generation and we think theres going to be a lot more on the horizon in the future and particularly now that you're starting to have tools like these cytokines to make more encase. When you want it. There's also a school of thought that with a lot of patients under a lot of different checkpoint therapies and various T cell therapy.

John R. Desjarlais: I do think that within the realm of ADCC-driven antibodies, like, for example, Rituxan, there's growing literature validating that NK cell counts in patients, high NK versus low NK, correlates with response or likelihood of benefit, I think even, not even response, actual clinical benefit like OS. So that's pretty clearly established. More NKs are better for ADCC antibodies. In particular, Rituxan has been well documented, and I think suggestions of that for a number of other antibodies. For T-cell mediated therapies like checkpoint inhibitors, nobody knows the role of NKs.

Fees that NK cell.

Tools are going to be more important over time.

The MHC status of those patients changes due to the selective pressure.

Thank you and then.

The recent novartis or yourself kind of moved away from your CD 123 constructed.

Any details there would be great and then.

Is that a tug you could pursue with your CD 28 construct as well.

John R. Desjarlais: But there's a lot of opportunity, we think, in NK cell-driven therapies. The current generation, we think there are going to be a lot more on the horizon in the future, in particular now that you're starting to have tools like these cytokines to make more NK cells when you want them. There's also a school of thought that with a lot of patients under a lot of different checkpoint therapies and various T cell therapies, NK cell tools are going to be more important over time as the MHC status of those patients changes due to selective pressure.

So I'll answer the first one and then John can talk about the cdna construct concept so the.

The landscape in AML has has gotten I think a lot more challenging as venetic classes become more and more entrenched with an earlier line and that we would be in later line does that change the landscape a minute more challenging and the opportunity I think shrunk.

But also CD 123 is a difficult target with a very narrow therapeutic window and and challenges in pecan dosing frequency and so in spite of the the very encouraging early complete remissions that we have had continuing additional activity. We've seen all those pieces make the product profile and the competitive landscape tough really frankly tough for us.

John R. Desjarlais: Thank you. And then the reason Novartis or yourself kind of moved away from your CD-123 construct is... Any details there would be great. And then is that a target you'd pursue with your CD28 construct as well? So, I'll answer the first question, and then John can talk about the CD28 construct concept. So, the landscape in AML has gotten, I think, a lot more challenging as phonetic lax has become more and more entrenched, both in the earlier line and now even in the later line.

To want to pursue and our partner Novartis agree Theres certainly investigator interest in niche isn't we're very supportive of trying to help patients when sophisticated investigators think there could be a role for the agent and trials.

Maybe the CD 28 combination with PD 123, intriguing, but yeah, but again due to the competitive landscape. It's I'm not sure that's where we want to put our put our effort.

John R. Desjarlais: So, that's changed the landscape and made it more challenging, and the opportunity, I think, has shrunk. But also, CD123 is a difficult target with a very narrow therapeutic window and, you know, challenges in PK and dosing frequency. And so, in spite of the very encouraging early complete remissions that we've had and, you know, the continuing additional activity we've seen, all those pieces make the product profile and the competitive landscape tough, really, frankly, tough for us to want to pursue, and our partner, Novartis, agrees.

Got you okay. Thanks, so much thanks for the update.

Thank you.

Yes.

Our next question comes from the line of Arlinda Lee of Canaccord Genuity. Your line is now open.

Hey, guys. It's been on for Arlinda. Thanks for taking my question Congrats escalated congrats on their yachts and partnership.

Just wanted to dovetail on.

Most recent comments you made about CD 28.

Does the Johnson partnership give you flexibility to pursue collaborations with other partners.

CD 28 combinations.

Is there an appetite for it.

The Yadkin collaboration is very narrow to within <unk>.

John R. Desjarlais: There's certainly investigator interest in niches, and we're very supportive of trying to help patients when sophisticated investigators think there could be a role for the agent in trials. Maybe the CD-28 combination with CD-123 is intriguing, but... Yeah, but again, due to the competitive landscape, I'm not sure that's where we want to put our efforts.

B cell malignancy, so it'd be some malignancy targets combined with <unk> 28, and it's got a time bound on it whereas targets that we don't advance to certain development stages within the <unk>.

Senior collaboration period.

So we'd like to control things. So it would be a very limited number of just b cell target. So we could go and partner with whomever I think now that we've gotten the ball rolling with with <unk>, eight Oh wait, which the broad tumor marker and now that we've got yadkin is pushing hard in prostate cancer.

Operator: Thank you for the update. Thank you. Our next question comes from the line of Arlinda Lee of Canaccord Genuity. Your line is now open. Hey guys, it's Ben on for Arlinda.

Really work with us on <unk> and really accelerate that program with the CD 28. So we think that it might not be it now is the time to sort of pull in and focus on internal work preceding 28, not really look at partnering around the CD 28 platform now and wait until we've really built up a data set and understand its full potential and value. After we've been in.

Bassil I. Dahiyat: Thanks for taking my question. Congratulations, and belated congratulations on your Janssen partnership. I just wanted to dovetail on the most recent comments you made about CD28. Does the Janssen partnership give you flexibility to pursue collaborations with other partners in CD28 combinations? And is there an appetite for it? The Janssen collaboration is very narrow to within B-cell malignancy, so B-cell malignancy targets combined with CD28, and it's got a time limit on it, whereas targets that we don't advance to certain development stages within the two-year collaboration period, you know, that's it. So we like to control things.

The clinic for a while.

Okay that makes a lot of sense.

Regarding the Johnson partnership itself can you give us an idea of what the next near term milestones will be after you get the stock purchases this quarter.

Okay.

Let's see that would be and then of course as part of the collaboration we're going to start our cap city Madeline <unk> trials either late this year early next year.

Bassil I. Dahiyat: So it would be a very limited number of just B-cell targets, and we could go and partner with whomever. I think now that we've gotten the ball rolling with XNAB 808, which is a broad tumor marker, and now that we have Janssen pushing hard in prostate cancer and is going to really work with us on plamodimab and really accelerate that program with the CD28. So we think that now might be the time to sort of pull in and focus on internal work for CD28 and not really look at partnering around the CD28 platform now and wait until we've really built up a data set and understand its full potential and value after we've been in the clinic for a while. Okay, that makes a lot of sense.

And we would expect to get the subcutaneous formulation of <unk> in the clinic in 2022 as well we are well on our way manufacturing it and having a formulation we think is quite promising.

To use in humans next year.

And then.

With the earlier collaboration or collaboration around prostate cancer with a CD 28 by specific the next milestones we can't guide exactly on timing, because it's up to them, but it would be taking a candidate into.

Into full development into IND, enabling development.

Which we've been making rapid progress on that on that collaboration it's been less than a year now and we've made we've got a long way.

Great. That's very helpful. Thank you very much.

Our next question comes from the line of Alicia Young of Gander Fitzgerald. Your line is now open.

Bassil I. Dahiyat: Regarding the Janssen partnership itself, can you give us an idea of what the next near-term milestones will be after you get the stock purchased this quarter? Let's see, that would be, and, of course, as part of the collaboration, we're gonna start our tafcidimab linolidomide trial either late this year or early next year. And we would expect to get the subcutaneous formulation of plumodimab into the clinic in 2022 as well.

Hi, Thanks for taking my question and congrats on all the progress. This quarter. This is may not grow EPS.

We're curious if you could speak more on your CD 20 program with Janssen and.

How it differentiates in the competitive landscape and also if you think.

At Ash, if youll get high enough doses that we may be able to make any conclusions around efficacy.

Bassil I. Dahiyat: We're well on our way to manufacturing it and having a formulation we think is quite promising to use in humans next year. And then, you know, with the earlier collaboration, our collaboration around prostate cancer with a CD28 bispecific, the next milestones, we can't guide exactly on timing because it's up to them, but would be taking a candidate into full development, into IND-enabling development, which we've been making rapid progress on that It's been less than a year now, and we've gotten a long way.

So I guess on the first one on the differentiation.

I think we believe we have now with.

A good monotherapy step up and up to a much higher dose we had before now at 50 milligrams.

We're very encouraged by the both the Tolerability profile, there as well as as the efficacy we are seeing an admittedly a relatively small number of patients at that dose, but I think the real differentiation is about the development strategy. Alan you want to speak to that yeah, I think biological it'll be hard to distinguish these antibodies from each other but the development strategy is key here. So we've sort of gone for this.

Bassil I. Dahiyat: Great. That's very helpful. Thank you very much. Our next question comes from the line of Alethea Young of Gander Fitzgerald. Your line is now open. Hi, thanks for taking my question and congratulations on all the progress this quarter. This is Nenad for Alethea.

Chemotherapy free sort of strategy, combining with <unk> and Lenalidomide <unk> 19 versus <unk> 'twenty targeting the ADC versus the T cell engaging and the potential that lenalidomide could potentiate both on the other front another chemo free strategy would be combining with a b cell CD 28 director.

Allen S. Yang: We were curious if you could speak more about your CD20 program with Jensen and how it differentiates in the competitive landscape. And also if you think, at ASH, you'll get high enough doses that we may be able to make any conclusions around efficacy. So, I guess on the first one, on the differentiation, you know, I think we now have a good monotherapy step-up and up to a much higher dose than we had before now at 50 milligrams. We're very encouraged by both the tolerability profile there as well as the efficacy we're seeing in admittedly a relatively small number of patients at that dose. But I think the real differentiation is in the development strategy.

<unk>.

Modality, and that's our partnership with Janssen as well so we think that the molecules looked fairly similar early on.

And the data to date I think we have good activity and we've seen good activity, we'll be reporting additional activity I think we've done a lot of time sort of <unk>.

Figuring out our dose and schedule to optimize a much higher dose than previously reported with a very good step up strategy, which minimize the Crs and so we're excited into moving to the next phase, which is our randomized phase two in combination with tap a set amount of lenalidomide and to be clear that that additional data will be presented at ash.

Allen S. Yang: Allen, do you want to speak to that? Yeah, I think biologically it'll be hard to distinguish these antibodies from each other, but the development strategy is key here. So, you know, we've sort of gone for this chemotherapy-free sort of strategy combining with tafacitamab and lenalidomide, the CD19 versus CD20 targeting, the ADCC versus the T-cell engaging, and the potential that lenalidomide could potentiate both. On the other hand, another chemo-free strategy would be combining with a B-cell and a CD28- So we think that the molecules look fairly similar early on, and based on the data to date, I think we have good activity, and we've seen good activity.

With still a small, but we think it's a growing number of patients, giving us a clear picture of where we are on efficacy and safety with this new step up regimen.

Thank you.

There are no further questions at this time I am now turning the call back to <unk>, President and Chief Executive Officer. Thank you.

Thank you very much operator, and thanks, everybody for joining US today, we look forward to updating you guys again over the coming weeks and have a tricky goodbye.

Allen S. Yang: We'll be reporting additional activity. I think we've spent a lot of time sorting out our dose and schedule to optimize a much higher dose than previously reported with a very good step-up strategy, which minimizes CRS, and so we're excited about moving to the next phase, which is our randomized phase two in combination with tafacitamab and lenalidomide. And to be clear, additional data will be presented at ASH with still a small, but we think it's a growing number of patients, giving us a clearer picture of where we are on efficacy and safety with this new step-up regimen.

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

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Operator: Thank you. There are no further questions at this time. I'm now turning the call back to Basil Dahiyat, President and Chief Executive Officer.

Bassil I. Dahiyat: Thank you. Thank you very much, Operator, and thanks, everybody, for joining us today. We look forward to updating you guys again over the coming weeks, and have a terrific evening. Bye-bye. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Operator: BF-WATCH TV 2021