Q2 2019 Earnings Call

Operator: are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the company's request. At this time, I would like to pass the call to Charles Liles, Associate Director and Head of Corporate Communications and Investor Relations at Xencor. Please continue.

At this time I would like to pass the call to Charles <unk> Associate director and head of corporate Communications and Investor Relations at Suncor. Please proceed.

Thank you Tiffany good afternoon, welcome to Xencor second quarter 2019 financial results Conference call.

Charles Liles: Thank you, Tiffany. Good afternoon. Welcome to Xencor's second quarter 2019 financial results conference call. Earlier this afternoon, we issued a press release that outlines the topics we plan to discuss today. The press release is available at www.xencor.com. Today on our call, Basil Dahiyat, president and chief executive officer, will provide a business overview and review our pipeline and licensing partnerships, and John Kuch, senior vice president of finance and chief financial officer, will review the financial results from the second quarter and first half of 2019. Then we will open up the call for your questions. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management for future operations, the company's partnering efforts, capital requirements, future product offerings, and research and development programs.

Earlier. This afternoon, we issued a press release, which outlines the topics we plan to discuss today. The press release is available at Www Dot Suncor Dotcom day on our call Bassil, Dahiyat, President and Chief Executive Officer, who will provide a business overview and review our pipeline in licensing partnerships and John Kush Senior Vice President of Finance and Chief Financial Officer will review the financial results from the second quarter and first half of 2019.

Then we will open up the call for your questions.

Before we begin I would like to remind you that during the course of this conference call Xencor management may make forward looking statements, including statements regarding the company's future financial and operating results future market conditions, the plans and objectives of management for future operations. The company's partnering efforts capital requirements future product offerings and research and development programs. These forward looking statements are not historical facts, rather are based on our current expectations and beliefs and are based on information currently available to us.

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 sections of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q.

The outcome of the events described 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 factor sections 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 Beth.

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

Bassil I. Dahiyat: Thanks Charles, and good afternoon everyone. The core of Xencor's approach to creating antibody and cytokine therapeutics is our XMAB engineering platform. By making small changes to an antibody structure, specifically in its FC domain, we can improve its natural functions and performance and create new mechanisms of therapeutic action. The plug-and-play nature of the suite of XMAB FC domains we've created allows us to engineer nearly any antibody to have improved potency, longer half-life, or bi-specific structure. This flexibility and portability enables us to take multiple shots on goal simultaneously and generate proof-of-concept data to guide which programs we will independently advance, which we will partner with, and which we would terminate.

Thanks, Charles and good afternoon, everyone.

The quarter's end cores approach to creating antibody and cytokine therapeutics is our ex Mab engineering platform by making small changes to an antibody structure specifically this FC domain, we can improve its natural functions in performance and create new mechanisms of therapeutic action.

The plug and play nature of the suite of Exenatide seed to basically to create it allows us to engineer nearly any antibody to have improved potency longer half life or by specific structure. This flexibility and portability enables us to take multiple shots on goal simultaneously and generate proof of concept data to guide, which programs, we will independently advance, which we will partner, which we would terminate.

Bassil I. Dahiyat: The bulk of our R&D is the expansion and use of our XMAT BISPECIFIC platform, and over the last two years, we've initiated six Phase I clinical studies evaluating XMAT BISPECIFIC antibodies. Our plug-and-play approach to engineering enables the rapid design and simplified development of antibodies and other protein structures, like cytokines, that combine two or more different targets simultaneously. Biospecifics is a rapidly emerging area of therapeutic development, particularly in oncology.

Bulk of our R&D is the expansion and use of our Xmab Bispecific platform.

With the last two years, we've initiated six phase one clinical studies evaluating ex met by specific antibodies.

Our plug and play approach engineering enables rapid design and simplified development of antibodies and other proteins structures like cytokine that combine two or more different targets simultaneously.

By specifics are rapidly emerging area of therapeutic development, particularly in oncology and in order to stay at the forefront of innovation in the space, we use our engineered heterodyne Merrick FC domain as robust scaffold to rapidly develop new candidates.

Bassil I. Dahiyat: And in order to stay at the forefront of innovation in this space, we use our engineered heterodimeric FC domain as a robust scaffold to rapidly develop new therapies. We grouped these drug candidates to ease our XMAP-Bi-specific FC domain into three classes: T-cell engagers, tumor microenvironment or TME activators, and cytokines. The first and most advanced class is the T-Cell Engager class. These are tumor-targeted antibodies that contain both a tumor-antigen binding domain and a cytotoxic T-cell binding domain, specifically a CD3 binding domain. They activate T-cells at the site of the tumor in order to potently kill malignant cells.

[noise], we group these drug candidates to ease our ex met by specific FC domain into three classes T cell engagers tumor microenvironment Portmiami activators in cytokine.

The first and most advanced as a T cell Engager class. These are tumor targeted antibodies that contain both the tumor antigen binding domain and decide to toxic T cell binding domain, specifically, a cdthree binding to me they activate T cells at the site of the tumor and ordered Potently killed malignant cells.

X now 14, Oh 45 is our CD 123 by Cdthree by specific antibody that's being developed in collaboration with our partner Novartis.

Bassil I. Dahiyat: XNAV14045 is our CD123xCD3 bispecific antibody that's being developed in collaboration with our partner Novartis. It's in an open-label phase one dose escalation study to assess its safety, tolerability, and preliminary anti-tumor activity in patients with relapsed or refractory acute myeloid leukemia, as well as other CD123-expressing hematologic malignancies. Now in the second quarter, we worked with investigational sites to resume enrollment following the lifting of the partial clinical hold that had been placed on the study, and in early July, we dosed the first patient under this amended protocol, which included more prescriptive guidance on the monitoring and management of cytokine release syndrome.

It's in an open label Phase one dose escalation study to assess its safety tolerability and preliminary anti tumor activity in patients with relapsed or refractory relapsed or refractory acute myeloid leukemia.

As well as other Cdone hundred 23, expressing chemetall logic malignancies.

Now in the second quarter, we worked with investigational sites to resume enrollment following the lifting of the partial clinical hold that have been placed on a study in early July we dose the first patient.

Under this amended protocol, which included more prescriptive guidance on the monitoring and management of cytokine release syndrome.

Bassil I. Dahiyat: As we continue this escalation, we are working with our partner to plan the next phase of clinical development. Our next program, XMAP 13676, a CD20 by CD3 bispecific antibody, is also in Phase I, but for patients with advanced B-cell malignancies like non-Hodgkin lymphoma and chronic lymphocytic leukemia. We started dosing patients about a year after XMAB 42045 in February 2017.

As we continue dose escalation, we are working with our partner to plan. The next phase of clinical development.

Our next program ex map 13, 676, a CD 20 by Cdthree by specific antibody is also in phase one but for patients with advanced B cell malignancies, like non hodgkin lymphoma, and chronic lymphocytic leukemia.

We started dosing patients about a year after extra afford to know 45 in February 2017. Later this year, we expect to present initial safety and clinical activity data from this study.

Bassil I. Dahiyat: Later this year, we expect to present initial safety and clinical activity data from this study. XMAB 18087 is our third CD3 targeting antibody and targets as well SSTR2, or somatostatin receptor 2, an antigen highly expressed on some solid tumors. In February 2018, we started dosing patients in a phase one dose escalation study to assess safety, tolerability, and preliminary anti-tumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors. We're now expecting to present initial data from this study in the first half of 2020.

X. men 18 over 87 is our third cdthree targeting antibody and targets as well as the TRT or metastatic receptor to an antigen highly expressed on some solid tumors.

In February 2018, we started dosing patients in a phase one dose escalation study to assess safety tolerability and preliminary anti tumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors.

We're now expecting to present initial data from the study in the first half of 2020.

Our second group of bi specific antibodies are tumor microenvironment activators, rather than directly bridging a T cell to the tumor cell our timi activator seek to more effectively reactivate tumor reactive T cells than existing therapies by engaging multiple T helper T cell targets simultaneously such checkpoints are agonists.

Bassil I. Dahiyat: Our second group of biospecific antibodies are our tumor microenvironment activators. Rather than directly bridging a T-cell to a tumor cell, our TME activators seek to more effectively reactivate tumor-reactive T-cells than existing therapies by engaging multiple T-cell targets simultaneously, such as checkpoints or agonists. This approach not only reduces the need for multiple antibodies typically used in combination therapy but allows for more selective targeting of T-cells with high checkpoint expression and multiple checkpoint expression, which are typically found more in the tumor microenvironment than in the periphery. In the second quarter, we started dosing the first patients in Phase I dose escalation studies of both XMAP22841 and XMAP23104. Including the ongoing phase 1 study of XMAP-20717, these three studies are enrolling advanced patients with a number of different solid tumor types. As I mentioned, each candidate simultaneously engages multiple different targets for T cell activation. For 20717, it's due to the most validated checkpoint combination, PD-1 and CTLA-4. For 22841, it's CTLA-4 and the checkpoint LAG-3.

This approach not only reduces the need for multiple antibodies typically use in combination therapy, but allows for selective targeting of T cells with high checkpoint expression and multiple checkpoint expression, which are typically sign more of the tumor micro environment than the periphery.

In the second quarter, we started dosing the first patients in phase one dose escalation studies of both X now two to a four one and actually have two three went up for.

Including the ongoing phase one study of Exenatide 20717. These three studies are enrolling advanced patients.

With a number of different solid tumor types.

As I mentioned each candidates I'm also simultaneously engages multiple different targets for T cell activation.

For 20717, it's to the most validated checkpoint combination PD, one and see Chile for for you to wait for one it see Chile, four and the checkpoint lag three and why we will conduct initial dose escalation as a monotherapy. We designed this molecule to be developed along with the PD one inhibitor to create a triple checkpoint blockade.

Bassil I. Dahiyat: And while we will conduct initial dose escalation as a monotherapy, we designed this molecule to be developed along with a PD-1 inhibitor to create a triple checkpoint block. Finally, for 23104, it's the PD-1 and the co-stimulatory T-cell agonist receptor ICOS targeting bispecific antibodies. We're focused on enrolling patients in all of these studies, and our hope is to be able to drive stronger anti-tumor responses in monotherapy with improved tolerability for patients. For XMAP-20717, we began enrolling patients in the Phase 1 study 12 months ago, and we anticipate initial dose escalation and biomarker data in the first half of 2020. Finally, we're developing a suite of cytokines, which are immune signaling proteins that are built on the XMAP bispecific FC domain. Using our FC domain to build the molecule provides more druggable versions of cytokines with potentially superior tolerability, slower receptor-mediated clearance, and prolonged health. Our first cytokine program, and the lead in our collaboration with Genentech, is XNAV24306. It's an IL-15, IL-15 receptor alpha subunit fused with a bispecific FC domain.

Finally for two three Renault for its a PD, one and the Costimulatory T cell agonists receptor heico's targeting by specific antibody.

We're focused on enrolling patients to all three step all of these studies and our hope is to be able to drive stronger into tumor responses in monotherapy, but improve tolerability for patients for freshen up 207.7, we began enrolling patients in the phase one study 12 months ago, and we anticipate initial dose escalation of biomarker data in the first half of 2020.

Finally, we are developing a suite of cytokine, which are immune signaling proteins that are built on the x. NAV by specific FC demand using our FC domain to build the molecule provides more druggable versions of cytokines, but potentially superior tolerability slower receptor mediated clearance, implying half life. Our first site. It can program in the lead in our collaboration with Genentech is actually have two for three of six it's an ideal 15 aisle 15 receptor Alpha sub unit fuse with a bi specific FC domain as noted it contains both the cytokine and its receptor domain in order to expand and activate immune cells that can be recruited against timber specifically T cells and natural killer cells.

Bassil I. Dahiyat: As noted, it contains both the cytokine and its receptor domain in order to expand and activate immune cells that can be recruited against tumors, specifically T-cells and natural killer cells. 24306 is intended for development with a wide range of combination agents, and importantly, we can form our own clinical trials with both our own pipeline assets and non-genentech agents within this collaboration, subject to some conditions. We look forward to planning a number of these combination studies pending completion of the Initial Just Escalation Study, and we will support Genentech's IND application and multiple oncology indications in the second half of 2019. The next program in our cytokine class, XMAP 27564, is an engineered IL-2 fused to an XMAP bispecific FC domain and is intended for an autoimmune indication.

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

We look forward to planning a number of these combination studies pending completion of the initial dose escalation study and we will support Genentechs I'd application in multiple oncology indications in the second half of 2019.

The next program and our cytokine class X number 27564 is an engineered aisle to fuse to onex mapped by specific FC domain and is intended for autoimmune indications literally file two regimens have demonstrated promising results. Since they were first approved in the early 19 nineties whoever is a drug out to suffers from fast than below clearance in a narrow therapeutic index.

Right do you have technologies are being pursued to improve the drug ability of vial to xencor weve too ill to to increase the preference for regulatory T cells and to have a longer half life by reducing its potency. We also incorporated extend technology in the FC domain again to increase the half life of the molecule.

Bassil I. Dahiyat: Lodos IL-2 regimens have demonstrated promising results since they were first approved in the early 1990s. However, as a drug, IL-2 suffers from fast in vivo clearance and a narrow therapeutic index. A variety of technologies are being pursued to improve the drugability of IL-2. At Xencor, we've tuned IL-2 to increase the preference for regulatory T-cells and to have a longer half-life by reducing its potency. We also incorporated Xtend technology into the EFC domain to increase the half-life of the model.

Preclinical data were presented at a poster at the American Society of Hematology annual meeting last December the program is currently 90, enabling studies.

We'd anticipate submitting a 90 in the second half of 2020, and then rolling healthy volunteers in the first in human study.

Ill now spend a moment reviewing some updates from our licensing partnerships, which provide us with revenue that helped fund development of our own internal pipeline candidates.

Most of these partnerships usually require very limited resources and effort from us.

Bassil I. Dahiyat: Preclinical data were presented in a poster at the American Society of Hematology Annual Meeting last December, and the program is currently in IND-enabling stages. We anticipate submitting an IND in the second half of 2020 and then enrolling healthy volunteers in a first-in-unit study. I'll now spend a moment reviewing some updates from our licensing partnerships, which provide us with revenues that help fund the development of our own internal pipeline. Most of these partnerships usually require very limited resources and effort.

So we previously discussed our newest collaboration with Astellas.

We are applying our bi specific technology to create multiple drug candidates against the target against a target specified by Astellas and then Istel's will conduct all preclinical and clinical development as well as regulatory and commercial activities.

Now shifting to Aleksey on in 2013, we licensed extend FC technology to them to create Ulta myris complement inhibitor with improved half life, which last for less frequent dosing regiments compared with Solaris.

With the ultimate versus approval in the United States last December it became the first antibody Jim corporate annex snap technology to be marketed.

Bassil I. Dahiyat: So, we previously discussed our newest collaboration with Astellas. We're applying our biospecific technology to create multiple drug candidates against a target specified by Astellas. And then Astellas will conduct all preclinical and clinical development as well as regulatory and commercial activities. Now, shifting to Alexion, in 2013, we licensed Xtend FC technology to them to create Ultamiris, a complement inhibitor with an improved half-life, which allows for less frequent dosing regimens compared with Soliris. With Ultimaris' approval in the United States last December, it became the first antibody to incorporate an XMAP technology to be marketed. Ultimirus has now received multiple global marketing authorizations, in Japan this past June and Europe just last month for the treatment of adult patients with PNA. We are receiving milestone payments for each of these approvals and a low single-digit royalty on Netscape and other partners who license from us Tapacitamab, which was previously known as MORC208 and as XMAB5574 before that. It's an anti-CD19 antibody that we built ourselves and incorporated our cytotoxic FC domain for high ADCC function. Morphosis recently reaffirmed that they intend to complete a BLA submission by the end of 2019 for Tapasitima. If approved, we would receive royalties in the high single-digit to low double-digit percentage range, as well as additional milestones.

Ultimately this has now received multiple global marketing authorizations in Japan. This past June in Europe , just last month for the treatment of adult patients with teenage.

We are receiving milestone payments for each of these approvals in a low single digit royalties on net sales.

Another partner Morphosis.

License for must have sentiment, which was previously known as more to go away and as X amount 5574 before that it's an anti cdnineteen antibody, we built ourselves and incorporated our cytotoxic FC demand for high ADCC function.

Morphosis recently reaffirmed that they intend to complete a BLA submission by the end of 2019 for tap a set amount if approved we would receive royalties in the high single digits low double digit percentage range as well as additional milestones.

Finally, I'd like to thank our Chief Medical Officer, Paul Foster, who will be retiring from Xencor at the end of October his contributions and leadership at Suncor over the past decade enabled us to build an internal and an internal clinical development organization as well as launch nearly 10 clinical programs.

We've initiated a search for a successor to Paul who we hope would build on the foundation Paul's created and curiously the advancement of our pipeline.

In addition, we're continuing to expand our senior leadership in the second quarter, we announced the appointment of Jimmy Grinstein as Vice President business development, Jeremy spent more than 15 years of development at Amgen sourcing and executing a wide range of transactions. We also pointed Kirk Rosemont as Vice President regulatory affairs and quality assurance to lead our regulatory strategy. He joined US most recently from Beijing and brings nearly 25 years experience and biopharmaceutical regulatory affairs, we're happy to have both Jeremy and Chris joined our team and look forward to their leadership and contributions.

Bassil I. Dahiyat: Finally, I'd like to thank our Chief Medical Officer, Paul Foster, who will be retiring from Xencor at the end of October. His contributions and leadership at Xencor over the past decade have enabled us to build an internal clinical development organization, as well as launch nearly 10 clinical programs. We have initiated a search for a successor to Paul, who we hope would build on the foundation Paul has created and carry us through the advancement of our pipeline. In addition, we are continuing to expand our senior leadership. In the second quarter, we announced the appointment of Jeremy Grunstein as Vice President of Business Development. Jeremy spent more than 15 years in business development at Amgen, sourcing and executing a wide range of transactions.

With that I will turn the call over to John Kush to review, our second quarter 2019 financial results.

Thank you Beth.

And the first half of 2019 Suncor continues to build a strong financial position, which enables us to support a broad pipeline of development and research programs, our cash cash equivalents and marketable securities totaled $626.1 million at June 32019, compared to $530.5 million at December 30, Onest 2018.

The increase reflects upfront proceeds of 135 million received in the first half between 90 from our Genentech and the stealth collaborations offset by cash used to fund operating activities in the first half of 2019.

Bassil I. Dahiyat: We also appointed Kirk Rosemark as Vice President, Regulatory Affairs and Quality Assurance, to lead our regulatory strategy. He joined us most recently from Beijing and brings nearly 25 years of experience in biopharmaceutical regulatory affairs. We're happy to have both Jeremy and Kirk join our team and look forward to their leadership and contributions. With that, I'll turn the call over to John Kuch to review our second quarter 2019 financial results. Thank you.

Total revenue for the second quarter ended June 32019 was $19.5 million, which reflects revenue recognized from our styles collaboration and from our Lexia collaboration which includes 5.5 million and milestones and royalties received.

Total revenue for the six months ended June 32019 was $131.4 million and includes revenue earned from our Genentech collaboration in addition to Celacyn Lexia on revenue.

No revenue was recognized reporter from similar periods in 2018.

John J. Kuch: Thank you, Basil. In the first half of 2019, Xencor continues to build a strong financial position, which enables us to support a broad pipeline of development and research programs. Our cash, cash equivalents, and marketable securities totaled $626.1 million at June 30, 2019, compared to $530.5 million at December 31, 2018. The increase reflects upfront proceeds of $135 million received in the first half of 2019 from our Genentech and Estellas collaborations, offset by cash used to fund operating activities in the first half of 2019. Total revenue for the second quarter ended June 30, 2019 was $19.5 million, which reflects revenue recognized from our Estella collaboration and from our Alexian collaboration, which includes $5.5 million in milestones and royalties received. Total revenue for the six months ended June 30, 2019 was $131.4 million and includes revenue earned from our Genentech collaboration in addition to revenue from Estella and Lexian. No revenue was reported for similar periods in 2018.

Research and development expenditures for the second quarter were $33.3 million compared to $23.3 million for the same period in 2018.

Total R&D expenses for the six months ended June 32019 were $61.5 million compared to $49.4 million for the same period in 2018.

The increased spending on R&D for the three and six months ended June 32019 reflects increased stock based compensation charges and additional spending on our cdthree by civic antibody in cytokine development candidates and technologies.

General and administrative expense for the second quarter were $5.8 million compared to $5 million in the same period 2018.

Total Genie expenses for the six months ended June 32019 were $11.3 million compared to $9.5 million for the same period in 2018.

Increased spending on Genie expenses for the three and six months ended June 32019 reflects this reflects additional spending on intellectual property, which includes patents and licenses and additional expenses related to personal and professional services.

Non cash stock based compensation expense for the six months ended June 32019 was $15.2 million compared to $9.4 million for the same period in 2018.

John J. Kuch: Research and development expenditures for the second quarter were $33.3 million, compared to $23.3 million for the same period in 2018. Total R&D expenses for the six-month period ending on June 30, 2019 were $61.5 million, compared to $49.4 million for the same period in 2018. The increased spending on R&D for the three and six-month ends of June 30, 2019 reflects increased stock-based compensation charges and additional spending on our CD3 biocific antibody and cytokine development candidates and technology.

Net loss for the second quarter was $16 million or 28 cents on a fully diluted per share basis compared to a net loss of $25.9 million.

Or 46 cents on a fully diluted per share basis for the same period.

In 2018 to the lower net loss reported for the second quarter over the net loss for the same period. In 2018 is primarily due to revenue recognized from our stylist and luxoft collaborations in 2019.

For the six months ended June 32019, net income was $64 million or $1.10 cents on a fully diluted per share basis compared to a net loss of $55.4 million or one dollar seven cents on a fully diluted per share basis.

John J. Kuch: General administrative expenses for the second quarter were $5.8 million, compared to $5 million in the same period in 2018. Total G&A expenses for the six months ended June 30, 2019 were $11.3 million, compared to $9.5 million for the same period in 2018. The increased spending on G&A expenses for the three and six months ended June 30, 2019 reflects additional spending on intellectual property, which includes patents and licenses, and additional expenses related to personal and professional services.

The net income reported for the six months ended June 32019 over the last reported for the same period in 2019.

2018 is primarily due to revenue recognized from our genetic collaboration.

The total shares outstanding were 56.

Million 529398 as of June 32019, compared to $55 million 821310 as of June 32018.

Based on current operating plans, we expect to have cash to fund research and development programs and operations beyond 2024, and 2019 with between $575 million to $600 million in cash cash equivalents and marketable securities.

John J. Kuch: Non-cash stock-based compensation expense for the six-month end of June 30, 2019 was $15.2 million, compared to $9.4 million for the same period in 2018. Net loss for the second quarter was $16 million, or $0.28 on a fully delivered per share basis, compared to a net loss of $25.9 million, or $0.46 on a fully delivered per share basis for the same period in 2018. The lower net loss reported for the second quarter over the net loss for the same period in 2018 is primarily due to revenue recognized from our Stellis and Lexian collaborations in 2019. For the six months ended June 30, 2019, net income was $64 million, or $1.10 on a fully delivered per share basis, compared to a net loss of $55.4 million, or $1.07 on a fully delivered per share basis.

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

Thank you ladies and gentlemen at this time if you have a question. Please press. The Star then the number one key on your Touchtone telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question comes from Ed Tenthoff with Piper Jaffray. Please proceed.

Great. Thank you very much and thanks pardon me up to I'm wondering if you are financing targets.

Loyalty are presently and whether that will be breaking those out as a separate line that you.

Hey, Ted you kind of broke up for a second in the beginning your question could you just repeat we couldn't hear your first few words.

Sure a ferry boat. So I was wondering if you could provide some color.

What's the ultimate mirrors royalties on the weather.

John J. Kuch: The net income report for the six months ended June 30, 2019 over the loss report for the same period in 2018. This is primarily due to revenue recognized from our Genentech collaboration. The total shares outstanding were $5,600. $1,529,398 as of June 30, 2019 compared to $55,821,310 as of June 30, 2018. Based on current operating plans, we expect to have cash-to-fund research and development programs and operations beyond 2024 and to end 2019 with between $575 million and $600 million in cash, cash equivalents, and marketable securities. With that, we would now like to open up the call to your questions.

We keep them out in the queue.

Yes.

We will be breaking them out for the Q for the six months reported a royalty of $1.1 million is low single digit royalties and it's an estimate based on the sales reported by Alexia.

Right and that's for the first six months of the year.

Yes.

Okay, and just a quick question I'm guessing, it's a push out in the correct solutions from the tumor microenvironment data read outs I was thinking relate to something this year.

But the mill looks like we'll be getting bid at 2020 is there any push up there or is it just.

The desire to have a fuller dataset.

We recorded thanks, yes, it sort of the balancing the desire to have a fuller dataset to be reported in the resource allocation. It takes to generate the data cut data cleaning and reporting as we balance it across launching two other programs a couple of months before that rapidly advancing the the 717 program itself. So everything's everything's on track, it's just more of a real resource allocation balance weighed with wanting to have pull the data.

Operator: Thank you. Ladies and gentlemen, at this time, if you have a question, please press the star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Ed Tenthoff with Piper Jaffray; please proceed. Great, thank you very much and thanks for the update. I'm wondering if you could provide some guidance. All of those are currently in whether or not you'll be breaking their fat in a separate line in the queue.

Great I appreciate that and I'll wait patiently for it. Thanks, so much guys.

Thank you and our next question comes from Arlinda Lee with Canaccord Genuity. Please proceed.

Hi, guys congrats on other progress.

I had a couple of questions.

On the 15 partnered with Genentech. If you don't can you maybe provide additional color on.

Edward Andrew Tenthoff: Hey, Ted, you kind of broke up for a second at the beginning of your question. Could you just repeat? We couldn't hear your first few words. Sure.

How the collaborations with working today.

Seems like the.

Indeed accelerated.

Edward Andrew Tenthoff: Thank you, Basil. I was wondering if you could provide some color on what the Ultimiris royalties are and whether you'll be breaking them out in the queue.

And then also the timing when we might do it three and four data.

There's been no shift in any of the timing for the program.

It really was fairly.

John J. Kuch: Yes, we will be breaking them out for the queue. For the six-month reported royalty of 1.1 million, it is low single-digit royalties, and it's an estimate based on the sales reported by Alexian.

Seamless with regard to the collaboration.

I think I did in Texas, a company with enormous amount of skill in history in developing biologics. So we're happy to have them as a partner. In addition, they have a really deep and robust oncology pipeline. So again, they're really ideal partner in that regard.

John J. Kuch: Right, and that's for the first six months of the year.

John J. Kuch: Yes.

Edward Andrew Tenthoff: Excellent. And just a quick question.

With regard to the duet three and four we haven't really guided on timing for data yet. We just started the dose dosing of patients a couple of months ago.

Bassil I. Dahiyat: I'm just wondering, is there any pushback in the expectations from the tumor microenvironment data readouts? I was thinking we might get something this year, but it now looks like we'll be getting data in 2020. Is there any push out there, or is it just the desire to have a fuller data set to be reported? Thanks so much. Yeah, it's sort of the balance between the desire to have a fuller data set to be reported and the resource allocation it takes to generate it.

We'll be able to give more clarity probably later in this year is that ball gets rolling.

Okay, and then I guess you had talked about maybe just a follow up.

A triple combination can you talk about how that dose escalation.

Would work thanks.

Yes, sure so you're probably referring to actually have to pay for one which is our CTL before and lag three dual checkpoint inhibitor by specific so the way that the clinical trials constructed is.

Edward Andrew Tenthoff: The data cuts, data cleaning, and reporting as we balance it across, you know, launching two other programs a couple months before and rapidly advancing the 717 program itself. So everything's on track. It's just more of a resource allocation balance weighed with wanting to have fuller data.

To run a dose escalation cohorts with the monotherapy and after a few of those cohorts.

Edward Andrew Tenthoff: Great. I appreciate that, and I'll wait patiently for it.

To add a parallel set of dose escalation cohorts that are that.

Arlinda Lee: Thanks so much, guys. Thank you. And our next question comes from Arlinda Lee with Canaccord Genuity. Please proceed. Hi guys, congrats on all the progress. I had a couple of questions about the IL-15 partnership with Genentech. If you don't, can you maybe provide additional color on how the collaboration has been working to date; it seems like the time to IND is accelerated, and then also the timing of when we might see DUET 3 and 4 data.

Treat patients with a two to a four one on top of Pembrolizumab. So you'd have a little bit ahead in Joe's the monotherapy in and a parallel set of cohorts dose behind.

In the combination.

Great. Thank you very much.

Thank you.

Bassil I. Dahiyat: There's been no shift in any of the timing for the program. It really was fairly seamless with regard to the collaboration. I think Genentech is a company with an enormous amount of skill and history in developing biologics, so we're happy to have them as a partner. In addition, they have a really deep and robust oncology pipeline, so again, they're a really ideal partner in that regard. With regard to DUET 3 and 4, we haven't really been guided on timing for data yet. We just started the dosing of patients a couple months ago. We'll be able to give more clarity probably later in this year as that ball gets rolling.

And our next question comes from Jonathan Chang with STB Leerink. Please proceed.

Hi, Thanks for taking my questions.

First question can you help set expectations ahead of the initial phase one data for Xmab 13, 676 in the fourth quarter.

Yes, so we expect to have data that shows you know given where we are with the dose escalation.

What we see in terms of safety as well as efficacy in our.

In our patients, which all have advanced B cell malignancy. So it's really that that combination of safety efficacy profile. As we proceed through dose escalation will be certainly made good progress, but we're not expecting to be completely done by the data report.

Arlinda Lee: Okay, and then I guess you had talked about maybe just the follow-up. A triple combination. Can you talk about how that dose escalation would work? Thanks.

Bassil I. Dahiyat: Yeah, sure, so you're probably referring to XMAV-22841, which is our CTLA-4 and LAG-3 dual checkpoint inhibitor, biospecific. So the way that the clinical trial is constructed is to run dose escalation cohorts with monotherapy, and after a few of those cohorts, add a parallel set of dose escalation cohorts that treat patients with 22841 on top of Pembrolizumab. So you'd have a little bit ahead in dose, the monotherapy, and a parallel set of cohorts, a dose behind in the combination.

But thats sort of the that's sort of the picture efficacy safety and then.

We are certainly right now thinking very hard about what next steps in development it would be but the next phase of development would look like not sure. What have you been able to guide on that this year, whether we'd want to.

Push that a little bit but those are the that's sort of the expectations. We want to set sort of how we stack up and how we.

Of course look relative to the competitive landscape and b cells.

Got it and just to follow up on that how do you see the competitive landscape for this program and how are you thinking about not just next as a potentially were partnering with us.

Arlinda Lee: Great, thank you very much. Thank you.

Jonathan Chang: Thank you.

Jonathan Chang: And our next question comes from Jonathan Chang with SVB Learning. Please proceed.

Yes, so I think the competitive landscape for B cell malignancy is one of the densest in the industry I think you've got this baseline of long established use it for toxin in combination with.

Bassil I. Dahiyat: Hi, thanks for taking my questions. First question, can you help set expectations ahead of the initial Phase 1 data for XMAB 13-676 in the fourth quarter?

With chemo that sort of sets the bar and that Theres, a number of different emerging modalities people are trying.

Bassil I. Dahiyat: Yes, so we expect to have data that shows, you know, given where we are with the dose escalation, what we see in terms of safety as well as efficacy in our patients, who all have, you know, advanced B-cell malignancy. So it's really that combination of safety and efficacy profile as we proceed through dose escalation. Well, we've certainly made good progress, but we're not expecting to be completely done by the data report. But that's sort of the picture, efficacy, safety.

I think cdthree by specific they're going to be a very compelling approach. There I think early data from.

Some of the competitive programs that have Cdtwenty cdthree is.

Looks promising and I hope to weaken we can fit very well within that we designed our molecule really with the eye towards.

B cell malignancy being really treated by combination therapy monotherapies are unlikely to carry today and therefore, we designed our molecule with that sort of mix of Tolerability and.

Bassil I. Dahiyat: And then we are certainly right now thinking very hard about what the next steps in development would be, what the next phase of development would look like. Not sure whether we'll be able to guide on that this year, whether we'd want to push that a little bit. But that's sort of the expectations we want to set. How we stack up and how we, of course, look relative to the competitive landscape in B-cells.

Dosing convenience along with the potency.

As for for partnering it I think were driven by the strategy of the development of the molecule, which is we want to advance it quickly we want to advance it for as many patients as possible and being thoughtful and aggressive about use in combination with different agents.

Bassil I. Dahiyat: Got it. And just to follow up on that, how do you see the competitive landscape for this program? And how are you thinking about not just next steps but potentially repartnering this asset?

And so that would really drive our partnering strategy not the need for cash or the need for for anything like that.

So we're open to it and I think that we will also give a very strong eye towards maintaining significant commercial rights you can ever predict a precise structure so talking about it.

Bassil I. Dahiyat: Yeah, so, you know, I think the competitive landscape for B-sum malignancies is one of the densest in the industry. I think you've got this baseline of long-established use of rituxan in combination with chemo that sort of sets the bar, and that there are, you know, a number of different emerging modalities people are trying. I think CD3 bispecifics are going to be a very compelling approach there. I think early data from some of the competitive programs that have CD20 CD3s look promising, and I hope that we can fit very well within that. We designed our molecule really with the eye towards B-sum malignancy being really treated by combination therapy. Monotherapies are unlikely to carry the day, and therefore, we designed our molecule with that sort of mix of tolerability and dosing convenience along with potency.

It doesn't make sense, but we would also look towards preserving significant commercial rights.

And that said, we are happily running along and happy to develop this molecule for a while without any part we think there's a lot of avenues to do that.

Got it thanks for taking the questions.

Thank you.

And our next question comes from Shanshan sale is bearing very capital. Please proceed.

Hi, good afternoon understand cenci from Berenberg capital markets, I think with that Xmab FC engineering technology, especially with functions to increase the half life heres the ADCC, you'll potentially created a next generation Solaris our nexgen their hair taxing that matters ask Dan Clorox refiners skeleton key to upgrade the entire class of therapeutic antibodies. I think this is a complicated question to answer but can you. Please help us to understand a little bit better without which subclasses of therapeutic antibodies are tami dates with that.

Bassil I. Dahiyat: You know, as for partnering, I think we're driven by the strategy for the development of the molecule, which is we want to advance it quickly, we want to advance it for as many patients as possible, and be thoughtful and aggressive about its use in combination with different agents. And so that would really drive our partnering strategy, not the need for cash or the need for anything like that. So we're open to it, and I think that we will also give a very strong eye towards maintaining significant commercial rights. You can never predict the precise structure, so talking about it doesn't make sense, but we would also look towards preserving significant commercial rights. And that said, we're happily running along and happy to develop this molecule for a while without any involvement. We think there are a lot of avenues to do that. I got it. Thanks for the payment.

Upgrade by Xmab FC technology, and I have two follow ups.

I would say that there is there is a set of different ex Mab FC demands. We've created each that has a different purpose. The primary are the half life extension wonder the extent and I think in that case, there's a very wide range of.

Therapeutics that could benefit from that I think it really more fits to that question of.

In what instances is the extension of half life, reducing dosing frequency or dose amount going to be a compelling competitive edge, where it might not matter. So I think it's a wide range of therapeutics and we certainly expect and we have been seeing a lot more interest in it.

Bassil I. Dahiyat: Thank you. And our next question comes from Shan Shan Su with Berenberg Capital. Hi, good afternoon. This is Shanshan Xu from Berenberg Capital Markets.

As the epilepsy and programs advanced I think for cytotoxic FCS it's a narrow range I think its in the slices of indication where that really compelling balance of tolerability and heightened potency of tumor killing that was seen with half of cinemark consider reuse.

Shan Shan Su: I think with XMAB FC engineering technology, especially functions to increase the half-life and enhance the ADCC, you potentially create a next-generation Solaris and a next-generation Tuximab. So investors ask, did Xencor actually find a skeleton key to upgrade the entire class of therapeutic antibodies? I think this is a complicated question to answer, but can you please help us to understand a little bit better which subclasses of therapeutic antibodies are candidates for an upgrade by XMAB FC technology? And I have two follow-up questions.

I don't want to get into the to the weeds of different oncology drug target and drug targets in their various merits, but I think.

You know that that agents agents with that kind of scope really there's a broad range, but perhaps not as broad as the half life extension ones.

Bassil I. Dahiyat: I would say that there are a set of different XMAP-FC domains that we've created, each that has a different purpose. The primary ones are the half-life extension one or EXTEND. And I think in that case, there's a very wide range of therapeutics that could benefit from that. But I think it really more fits to that question of in what instances is the extension of half-life or reducing dosing frequency or dose amount going to be a compelling competitive edge where it might not matter. So I think it's a wide range of therapeutics, and we certainly expect – and we have been seeing a lot more interest in it as the Alexion program's advanced. But I think for cytotoxic FCs, it's a narrower range. I think it's in the slices of indication where the really compelling balance of tolerability and heightened potency of tumor killing that was seen with tafacitimab could serve a use.

I think our bi specific FC domains.

Thats, one where the future for multi specific antibodies is so wide open an unclear the world doesn't know and I think what we're really talking about there is creating new therapeutic classes and I think thats just going to be limited by the imagination that.

Protein engineers have whether it's the xencor tools or other people's tools that we use it's a vast array of opportunities in bi specific antibodies that I think we're just starting to scratch the surface of.

And I think.

Yes that kind of get it what you are asking.

Yes, absolutely actually you read my mind for my next question is that the actually we saw success with the FC Engineering technology applied to the monoclonal antibody and I was just about to ask how is that applied I mean, just educate us a little bit more about hall FC engineering is applied to different franchises off your bike. This we anybody I know for the cytokine. So you probably have extended half lives and maybe for others. You mean, you mute Dominion South maybe elaborate a little bit on this front. Please.

Bassil I. Dahiyat: I don't want to get into the weeds of different oncology drug targets and their various merits, but I think agents for that kind of scope really have a broad range, but perhaps not as broad as the half-life extension ones. I think our bispecific FC domains are one where the future for multispecific antibodies is so wide open and unclear, the world doesn't know, and I think what we're really talking about there is creating new therapeutic classes, and I think that's just going to be limited by the imagination that protein engineers have, whether it's the Xencor tools or other people's tools that we use. There is a vast array of opportunities for bispecific antibodies that And I think, yeah, does that kind of get at what you were asking?

Sure I think you want to combine different feature sets in a in any protein therapeutic in particular with FC engineered antibodies suited to purpose when it makes sense. So it's nice having these plug and play tools, you can mix and match and that together for example, all of our tumor microenvironment activators and cytokine FC fusions have on top of their heterodyne, Eric FC domain, our extended half life variance distance that made sense for all of those to have longer dosing interval and higher exposure.

Shan Shan Su: Yeah, absolutely. Actually, you read my mind.

Well as goals at least right. So I think again, it's all suit to purpose and and it's hard to say.

Bassil I. Dahiyat: My next question is that actually we saw success with the FC engineering technology applied to the monoclonal antibody. And I was just about to ask, you know, how is that applied? I mean, just educate us a little bit more about how FC engineering is applied to different franchises of your bispecific antibodies. I know for the cytokines, you probably have an extended half-life, and maybe for others, to mutate the immune cells. Maybe elaborate a little bit on this front, please.

The overly specific about it when the number of opportunities is so broad and we're just learning how to use these drugs, but I would say that.

In general for the field, which is.

Using these FC containing RG like.

Shan Shan Su: Sure. I think, you know, you want to combine different feature sets in any protein therapeutic, and in particular with FC-engineered antibodies, suited to purpose when it makes sense. So it's nice having these plug-and-play tools you can mix and match and add together. For example, all of our tumor microenvironment activators and cytokine FC fusions have, on top of their heterodimeric FC domain, extended half-life variants. That made sense for all of those to have longer dosing intervals and higher exposure. In general, for the field, which is, you know..., using these FC-containing, IgG-like platforms for creating bi-specific antibodies. And certainly Xencor feels it's playing an important role there, that the field is about, as rapidly as you can, plugging in different biologies and testing.

Platforms for creating by specific antibodies.

And certainly Xencor feels it's playing an important role there that the field is about as rapidly as you can plugging in different biology is in testing them and I think thats why we specifically made our platform as robust and end sort of re usable as possible in the standard antibody manufacturing.

Processes, just just to simplify the engineering part so we can focus on what's important which is the biology I think once we can start ignoring the the nuts and bolts of reengineering tools and focused on making good drugs and studying the biology, Thats, where you really get the advances like what happened with monoclonal antibodies being humanized 20 years ago.

Absolutely so the last one for me.

Very specific question for Exenatide. Once 3673 should we think about that ash data release, and what is the bar for the efficacy and safety to constitute a <unk> go decision. Thank you, yes, I think I think we're looking at a Q4 data released hopefully at a medical conference until you know where you're going to present, you don't I never like to front run that but we're targeting Q4 for sure.

Shan Shan Su: And I think that's why we specifically made our platform as robust and sort of reusable as possible in the standard antibody manufacturing processes, just to simplify the engineering part so we could focus on what's important, which is the biology. I think once we can start ignoring the nuts and bolts of the engineering tools and focus on making good drugs and studying biology, that's where you really get the advances, like what happened with monoclonal antibodies being humanized 20 years ago.

And.

And he can go no go it really depends on having clarity on you you've completed your your your dose selection and escalation and then you can start looking at your numbers relative to the competition.

Bassil I. Dahiyat: Absolutely. So the last one for me, just a very specific question for XMAT 13673, should we think about an ASH data release, and what is the bar for efficacy and safety to constitute a goal decision? Thank you.

I'm not sure we're going to be all the way there yet at this at this data release, we might or might not be but I think we should be able to see given.

The different sub types of B cell malignancy that have been studied with bi specifics recently, though again the data sets are not large these are just one or two data release, we're talking about we know we have to have pretty robust activity against different.

Shan Shan Su: Yeah, I think we're looking at a Q4 data release, hopefully at a medical conference. Until you know where you're going to present, you don't. I never like to front run that, but we're targeting Q4 for sure.

Different NHL sub types multiple differential sub types really feel compelled and again I wouldnt want to get into the numbers just yet without having numbers talk specifics to talk about.

Bassil I. Dahiyat: I think in GoNoGo, it really depends on having clarity on whether you've completed your dose selection and escalation, and then you can start looking at your numbers relative to the competition. I'm not sure we're going to be all the way there yet at this data release. We might or might not be, but I think we should be able to see, given the different subtypes of B-cell malignancy that have been studied with biospecifics recently, and the data sets are not large. These are just one or two data releases we're talking about. We know we have to have pretty robust activity against different NHL subtypes, multiple different NHL subtypes, to really feel compelled. Again, I wouldn't want to get into the numbers just yet without having numbers to talk about, specifics to talk about.

Thank you so much for your time.

Thank you and our next question comes from Dane Leone with Raymond James. Please proceed.

All right.

Thanks for the call congratulations.

Okay.

On Fortino Fourfive, what's kind of your updated thoughts in terms of how the clinical algorithm has now evolved.

What that kind of means for treatment protocol.

And kind of the next steps and what you need to see out of the program itself clinically.

Yes, I think what it really means is.

The monitoring and treatment of of Crs cytokine release syndrome is getting more specific and I think also becoming more and more uniform across.

Shan Shan Su: Thank you so much for your time. Thank you. And our next question comes from Dane Leone with Raymond James. Please proceed.

Across the field generally as people realize you need to treated aggressively rapidly stabilize patients and then you can really move on one because if you can catch it doesnt create this cascade of sort of audit catalytic T cells activating more T cells with more cytokines, but also after initial exposure with cdthree by specific that first exposure to the incidence and severity of Crs does go down right and people people are seeing this I think you want to be aggressive in catch it fast I think that implication is now spreading around across really across the industry and that's a good thing.

Dane Vincent Leone: Alright, thanks for the call, congratulations. At 14.045, what was kind of your updated thoughts in terms of how the clinical algorithm has now evolved? You know, what that kind of means for treatment protocols and, you know, kind of the next steps and what you need to see out of the program in and of itself clinically?

Bassil I. Dahiyat: Yeah, I think what it really means is... The monitoring and treatment of CRS, cytokine release syndrome, is getting more specific and, I think, also becoming more and more uniform across the field, generally, as people realize you need to treat it aggressively, rapidly, stabilize patients, and then you can really move on. One, because if you can catch it, it doesn't create this cascade of sort of autocatalytic T-cells activating more T-cells with more cytokines. But also, after initial exposure to CD3 bispecifics, that first exposure, the incidence and severity of CRS does go down, right, and people are seeing this. So I think you want to be aggressive and catch it fast, and I think that message is now spreading around across, really across the industry, and that's a good thing.

I think for this program in particular.

We've we've aside from instituting those kind of Crs protocols, we are.

We're also continuing to dose escalate we of course have to be very mindful of Crs. There's of course heightened scrutiny now just once you have the FDA has around you they're of course going to keep it on you.

But I think we also are are right now planning the hopefully the imminent completion of our dose escalation exercise in the next phase of development. Both exploring earlier line in combination in the right settings as well as this current relapsed refractory line, which I can be more specific we just got the ball rolling again, and we should be back on track in a few months.

Bassil I. Dahiyat: I think for this program in particular, aside from instituting those kinds of CRS protocols, we are also continuing to dose escalate. We, of course, have to be very mindful of CRS. There's, of course, heightened scrutiny now. Just once the FDA has their eye on you, they're, of course, going to keep it on you. But I think we also are right now planning, hopefully, the imminent completion of our dose escalation exercise and the next phases of development, both exploring earlier lines and combination in the right settings, as well as this current relapse of fracture lines. I wish I could be more specific. We just got the ball rolling again, and we should be back on track in a few weeks.

Is the is the algorithm sorry.

He probably knows what is the new algorithm like prophylactic steroids or total ism hours alone.

Oh.

The the use of prophylactic steroids isn't new it's certainly been done and Weve mandated it I think it's really more how rapidly and.

Without waiting for full blown crs symptoms to manifest there's a number of different symptoms that could be the first ones the benefits whether its fever, whether its initial hypertension, there's a variety of others that the minute you see any of those assume crs and start treating for it with with additional steroids into our tough Elisman. That's that's the logic. Once you see that first glimmer just just treated.

Dane Vincent Leone: Is the algorithm, sorry, I should probably know this, but is the new algorithm like prophylactic steroids or tocilizumab or something?

Bassil I. Dahiyat: The use of prophylactic steroids isn't new. It's certainly been done, and we've mandated it.

Dane Vincent Leone: I think it's really more about how rapidly and without waiting for full-blown CRS symptoms to manifest. There are a number of different symptoms that can be the first ones to manifest, whether it's fever, whether it's initial hypotension. There's a variety of others that the minute you see any of those, assume CRS and start treating for it with additional steroids and or tocilizumab. That's the logic. Once you see that first glimmer, just treat it, because it almost certainly is that, and you can really catch it and really save a lot of risk for the patient after that.

Because they are almost certainly is that and you can really catching and really save a lot of a lot of risk for the patient after that.

Thats really really amounts to.

Yeah, we'd like generally speaking, we haven't really seen.

An impact on the efficacy with the car T's once once you're resolving Crs is there any reason to think that the the bi specific cdthree T cell redirected antibodies would behave any differently in terms of clinical effect.

Okay. Thanks for that I don't think Theres any if there is any basis for expecting there to be difference and I think the data that we've seen published from others that weve seen ourselves with a Republican nonpublic.

Bassil I. Dahiyat: That's really what he amounts to.

Dane Vincent Leone: Yeah, we, like, generally speaking, we haven't really seen an impact on the efficacy of the CAR-Ts once you're resolving CRS. Is there any reason, I think, that the bi-specific CD3 T cell redirected antibodies would behave any differently in terms of clinical effect? I don't think there's any basis for expecting there to be a difference, and I think the data that we'

There doesn't seem to be a strong.

Any kind of any kind of signal that you see when you when you pre treat with either steroids or toss either it has any effect whatsoever later on with much larger numbers in the future we might glean something but I think so far it does not seem to be an impediment that as these aggressive crs treatments do not seem to be impediment for whatever efficacy might be achieving.

Bassil I. Dahiyat: From published from others that we've seen ourselves, whether public or not public, there doesn't seem to be a strong signal that you see when you pre-treat with either steroids or TASI that it has any effect whatsoever later on. Again, with much larger numbers in the future, we might glean something, but I think so far it does not seem to be an impediment. That is, these aggressive CRS treatments do not seem to be an impediment to whatever efficacy you might be achieving.

Right.

How many.

Is it like are all the trial sites backup open no and enrolling or what's how those are things, where we got our first patient on back on last month and I know there is a number that are open I don't I don't know the fully answer to that question is.

There's a number of sites there's multiple open.

First patient was on almost exactly a month ago. So I don't know the specifics so.

Any chance, we get an update on the patients because when a when you had the hold you start patients on that were allowed to still be treated and followed.

Dane Vincent Leone: Right, and how many is it like? Are all the trial sites back up and open now and enrolling, or what? How are things? We got our first patient on.

Would we need is there any chance we get an update on on those patients at least in the back half this year.

Bassil I. Dahiyat: There's a number of sites; there are multiple open. The first patient was on almost exactly a month ago, so I don't know the specifics.

And then in the back half of this year, we're targeting next year for that.

Okay alright, thank you.

Dane Vincent Leone: Any chance we can get an update on the patients, because when you had the hold, you still had patients on that were allowed to still be treated and followed? Is there any chance we can get an update on those patients, at least, in the back office here?

Thank you and our next question comes from Mara Goldstein with Mizuho Securities. Please proceed.

Thanks, very much just a quick follow up and then another question.

On.

Very good.

Bassil I. Dahiyat: Not in the back half of this year; we're targeting next year for that.

Coming from protocol for Europe at some point or Crocker with an odd Margo.

Dane Vincent Leone: Alright, thank you.

Dane Vincent Leone: All right, thank you.

Protocol.

Mara Goldstein: Thank you. And our next question comes from Mara Goldstein with Mizuho Securities. Please proceed. Great. Thanks very much. Just a quick follow-up and another question. On the change in protocol for CRF, at some point is TOSOLizumab mandated in the updated protocol?

I'm trying to remember the verb that was using on the wrong person to ask I think very you can never dictate a physician's treatment decision of the patients their caring for they are always.

Bassil I. Dahiyat: I'm trying to remember the verb that was used, and I'm the wrong person to ask. I think very strongly you can never dictate a physician's treatment decision for a patient they're caring for. They are always... the final word. I think that what you could have in your algorithm is, if you see this kind of symptom, you will treat it with this, but of course, that's all under the heading of any clinical protocol, and any decision under that is up to the discretion of the physician for what they think is best for the patient. So, I guess in essence, we strongly sort of guide to that, but you could never really dictate what a doctor will do.

The final word I think that what you can have in your algorithm is if you see this kind of symptom you will treat with this but of course thats all in under the heading of any clinical protocol in any decision under that is up to the discussion of the position for what they think is best for the patient so to it I guess in essence, we strongly sort of guide to that but you could never really dictate what a doctoral do.

Okay, and then actually a question on guidance because.

Mara Goldstein: Okay, and then actually a question on guidance, because your actual expectation to end the year with cash actually went up, which we don't see all that often, and I'm just curious, is that more a function of just the deals in the quarter or in the first half of this year, or just forward looking at potential royalty revenue? How should we think about that?

Correct.

No.

Expectation to end the year with FX rate went up we don't see all that often and I'm. Just curious is that more a function of just the gear here in the quarter or in the first half of this year or.

Just forward looking at potential royalty revenue or how should we think about that.

John J. Kuch: Yeah, we try to, we're fairly conservative in our guidance because there are a lot of milestones and events from partners we really can't control. I mean, sometimes they give us public guidance, and we'll use that information. For example, Morphosis guided us on submitting the BLA, that's public knowledge, but it's just updated based on new information that we've had. And like I said, we try to be a little bit conservative on these things. So when we have more information and a better idea for spending as well as milestones, we'll update it.

Yeah, we try to.

We're fairly conservative on our guidance because there's a lot of milestones and events from partner really can't control I mean, sometimes they give us public guidance and we'll use that information for example.

Morphoses guided on submitting the Dalai that's public knowledge, but it just updated based on new information that we've had and like I said, we try to be a little bit conservative on these things. So when we have more information and better idea for spending as well as milestones we'll update it.

Mara Goldstein: All right, thank you very much. Thank you. And our next question comes from Tom Schrader with BTIG. Please proceed. Good afternoon. Kind of related questions. As you get into the CD20 trial, are you seeing CRF in the same place? Are you getting confidence that you sort of know where things get tricky, and maybe dosing in the future could start higher? Can you tell us where you are?

All right. Thank you very much.

Thank you.

And our next question comes from Tom Shrader with BTI cheap. Please proceed.

Good afternoon kind of related questions as you get into this the 20 trial are you seeing Crs at the same place are you getting confidence that you sort of know where things get tricky and may be dosing in the future could start higher.

Can you tell us where you are there.

Tom Schrader: Without getting into talking about data that we haven't pulled together to release yet, I think all of these CD3s do have CRS. In all cases reported to date, and from our experiences generally, CRS is most pronounced upon the first exposure to the drug and attenuates significantly as you go through, as you get your second dose, third dose, etc. And that's attenuation in both frequency, how many patients get it, and in severity. The tools of the trade that have emerged are, in addition to, management of CRS in a proactive way, and mandate as much as you can that proactive treatment. The other real tool of the trade is that you do step dosing. You start out with a slightly lower exposure, enough to get the T cells going and cause that sort of conditioning that reduces CRS upon subsequent exposures, and then you step up the doses on subsequent exposures and doses. We've implemented that with our 14045 protocol.

Without getting into talking about data that we havent pulled together release, yet I think all of these cdthree is do have Crs in all cases reported to date and I can say with our experience is generally that Crs is most pronounced upon the first exposure of the drug and attenuates significantly as you as you go to.

As you do your second dose their dose et cetera.

And Thats attenuation in both frequency, how many patients get it versus end in severity that you see.

The tools of the trade that has emerged or in addition to management of Crs.

In a in a proactive way.

And as as a mandate as much as you can practice treatment.

The other real tool the trade as you do step dosing you started out with a slightly lower exposure enough to get the T cells going and caused that sort of conditioning that reduces crs. Upon subsequent exposure then you step up the doses.

Subsequent exposures and doses, we've implemented that with our fortune of 45 protocol. It's been it's been shown for Cdtwenty Cdthree is from our competitors and I think thats going to be a general general tool that you use first exposures. The most delicate sensitive one and the subsequent doses and exposures can be can be more we're confidently done and I think thats really going to help the whole class of drugs. We use more confidently is lessons of all emerge really over the last two three years. So the pace of learning how to use these drugs is really rapid and I'm very optimistic for the future for this whole class.

Bassil I. Dahiyat: It's been shown for CD20, and CD3s from our competitors, and I think that's going to be a general tool that you use for the first exposures, the most delicate, sensitive ones, and the subsequent doses and exposures can be more confidently done. And I think that's really going to help the whole class of drugs be used more confidently. These lessons have all emerged really over the last two, three years, so the pace of learning how to use these drugs is really rapid, and I'm very optimistic about the future for this whole class.

Tom Schrader: I guess.

Okay I guess.

Bassil I. Dahiyat: I'm not saying that the CRS sort of appears at the same level as CD3 binders. Oh, the same amount of dose of drug...

But you're not saying that the Crs sort of appears at the same level of Cdthree binding the state the same amount of dose of drug you meant I misunderstood your question no each drug.

Tom Schrader: right question now, each drug each drug is going to have a completely different offset so to speak of what mass of drug per body mass of patient causes CRS. It depends on the density of the antigen, right? CD123 versus CD20. It's going to also depend on the design of the molecule. How tight of a binder did you make in terms of either the CD3 or the antigen binding? I mean, both of those have an impact.

Each drug is going to have a completely different offset so to speak of what.

What.

Mass of drug per body mass of patient causes Crs it depends on the density of the antigen.

Right Cdone hundred 23 versus CD 20, its going to also depend on the design of the molecule how tight of a binder did you make in terms of either the cdthree or the antigen binding I mean, both of those have an impact a really nice publication by our partner Amgen on their Cdthirty eight Cdthree program, which was built on our tools.

Bassil I. Dahiyat: A really nice publication by our partner Amgen on their CD38-CD3 program, which, you know, was built on our tools. A recent publication demonstrates how you can tune those things and completely raise or lower the offset for what doses cause CRS. This was in their primate. So it all depends on the program. But the Primate is a reasonable way of zeroing in on where you're going to start. So far, what we've seen with our experience and what we've seen from our partners.

Really nice recent publication.

Demonstrate how you can tune those things and and completely razor lowered the offset for what doses cost Crs is within the primate models at least so it all depends on the program, but the primary is a reasonable way of zeroing in on about where you're going to start seeing it.

So far that we've seen with our experience and what we've seen from our partners.

Okay, and then the US tell us I hope to program you've talked in more detail than I've heard you book for what's the opportunity here is it.

Tom Schrader: Okay, and then you talked about the Astellas IL-2 program in more detail than I've heard you before. What's the opportunity here?

Bassil I. Dahiyat: Is it peg accumulation, or do you think there's more safety to be had by a tuned IL-2? Or do you have more?

Pega accumulation or do you think there's more safety to be had by attuned oil too.

Well you have more efficacy we are our work with IL two has nothing to do with the Stellus. It just we happened to those.

Tom Schrader: Our work with IL-2 has nothing to do with Estella.

Bassil I. Dahiyat: near each other on the phone call. Our stellar collaboration is for a biospecific antibody program, not cytokine. Our IL-2 program is internal. You know, the idea there is that really tuned potency can give you benefits, whether you're trying to boost the effector T cells, like in our IL-15 case, or the regulatory T cells for autoimmune disease, like in our IL-2 case. And so I think that the strongest distinction we have is that we really reduce the potency. Slow down the expansion of that antigen sink that you create that sucks away all your drugs. You want to balance out that T-cell and Treg expansion with the presence of the drug for a while. So I think that's really the opportunity. There wasn't any kind of specific counter-engineering we were doing relative to other approaches like pegylation. It's just that we think that an FC domain is a great way to extend half-life, and with tuned potency, you really get a double win. All right, I got it.

Near each other in the phone call.

Our stylist collaboration is for a bi specific antibody program not cytokine, our IL two programs and turtle.

You know the idea there is that really tuned potency can can give you benefits, whether you're trying to Jack up the effector T cells like with our Alpha teen case or the regulatory T cells for autoimmune disease like in our IL. Two cases, so I think that the strongest distinction. We have is that we really reduce the potency is trying to broaden the therapeutic window as well as slowdown the expansion of that antigen sync that you create that sucks away. All your drugs you want to balance out that T cell T. Reg expansion with the presence of the drug for a while so I think thats really the opportunity there wasn't any kind of specific counter engineering, we were doing relative to other other approaches like Pegylation. It's just we think that an FC domain is a great way to extend half life and with tuning potency.

You really get a double win.

All right got it thank you.

Alec Warren Stranahan: Thank you. Thank you. And our next question comes from Alethea Young with Cantor Fitzgerald. Please proceed. Hi, this is Eileen on 4LESIA.

Thank you.

And our next question comes from Alexia Young with Cantor Fitzgerald. Please proceed.

Hi, This is irene on friendly yeah. Thank you very much for taking my question just so as these tumor microenvironment antibodies advance through the clinic can you just discuss the CP consideration that you're most focused on particularly as we think about.

Alec Warren Stranahan: Thank you very much for taking the question. Just, as these tumor microenvironment antibodies advance through the clinic, can you just discuss the safety considerations that you're most focused on, particularly as we think about 2717? And then for the initial data for that asset, I believe you mentioned the sort of biomarker data that we should be expecting, but should we be thinking about this in terms of across all of the tumor types in the study, or can you characterize one that's maybe enrolling well or showing any early advocacy that you might be able to comment on? Thanks.

20 717.

And then for the initial data for that asset I believe you mentioned sort of biomarker data that we should be expecting.

But should we be thinking about that in terms of across all of the tumor type and the study or can you characterize one that may be enrolling wahler, showing any early efficacy that you might be able to comment on thanks.

Okay. So the kind of safety signals were looking for really are around this the.

Bassil I. Dahiyat: Okay, so the kind of safety signals that we're looking for really are around the... Immune-related adverse events, or IRAEs, that have been seen across the class of checkpoint inhibitors but that also seem most pronounced when using an anti-CTLA-4 therapy, you know, like ipilimumab, and that those get even more severe and pronounced and frequent when you combine CTLA-4 blockade with PD-1 block So even though in indications like melanoma and RCC, you see really promising and usually superior activity of those combinations relative to, say, PD-1 alone, the adverse events, specifically the IRAEs in their severity and frequency, really limit use and enthusiasm for those. So how do you get that efficacy with the safety? We tried to design a molecule to be more specific and selective for double-positive cells, and of course, you know, those are more prevalent, generally believed, in the tumor microenvironment.

Pretty well characterize now.

Immune related adverse events or IRA fees that have been seen across the class of checkpoint inhibitors, but that also see most pronounced.

When using an anti seasonally for therapy like the let me, Matt and those those get even more.

More severe and pronounced in frequent when you combined.

Regionally for blockade with PD, one blockade so even though in indications like like melanoma in RCC really promising unusually superior activity.

Of those that combination relative to say a PD one alone.

The the adverse events, specifically the IRA ease in their severity and frequency really I think limit let me use an enthusiasm for those so how do you get that efficacy with that with the safety. We tried to design a molecule to be more specific and selective for double positive cells and of course have that those are more prevalent generally believed in the two microgram and so what we're going to look for is really what kind of IRA profile that we have how does it how does it as you've grown pin number patient number how does that stack up against.

Bassil I. Dahiyat: So what we're going to look for is really, what kind of IRAE profile do we have? How does it, as you, you know, grow in patient number, how does that stack up against? This sort of baseline set by the combo therapy, so it's really all about IRAEs and their frequency and severity, and can we have this dual blockade be done in a context where it's more tolerable and easily used and better adapted, and better adopted? And certainly we're looking at all sorts of biomarkers, you know, peripheral and, when possible, tumor biopsy, to look at immune activation, right? We're doing that in this initial dose escalation across a wide range of indications, generally skewed towards those that have seen activity for checkpoint inhibitors. That's, you know, on the web in the clinicaltrials.gov entries. I don't think there's really any guidance I can give right now on particular slices or indications of that set just yet, but we're, of course, characterizing for everybody.

The sort of baseline set by the combo therapy. So it's really all about IRA ease and frequency and severity and can we can we have this dual blockade be done in a context, where it's more tolerable and easily used and better adapt better adopted.

And certainly we're looking at all sorts of Biomarkers.

Peripheral and when possible tumor biopsy to look at immune activation right.

We're doing that in this initial dose escalation across a wide range of indications generally skewed towards those two that have seen activity for checkpoint inhibitors. That's.

On the web in the clinical trials that govern trees.

I don't think there is really any guidance I can give right now one's particular slices and indications of.

Of of that set.

Just yet but were of course characterizing for everybody.

And the kind of markers we're looking for are.

Bassil I. Dahiyat: And the kind of markers we're looking for are, you know, things like T-effector counts, CD8s, also CD4 counts, you know, looking at when possible. Again, they're more difficult to get a biopsy of tumor and T-cells there when possible. So in general, how hard are we activating the immune system? You know, the efficacy data that we have, we'll obviously share. But how hard are we activating the immune system versus how much, how tolerable is it? That's where we'll see whether there's anything really new that we have with these agents across all of them.

Things like T effector count CD rates also CD four accounts.

Looking at.

When possible again, the more difficult to get biopsy of tumor and T cells, there when possible. So in general how harder we activating the immune system.

Efficacy data that we have we'll obviously share, but how hard we activating the immune system versus how how how much how tolerable is it that's that's where we'll see whether there's anything really new that we've got with these agents across all of them.

Alec Warren Stranahan: Okay, thanks so much. That's helpful. Thank you. And our next question comes from Michael Schmidt with Guggenheim Securities. Please proceed.

Okay. Thanks, that's helpful.

Thank you and our next question comes from Michael Schmidt with Guggenheim Securities. Please proceed.

Michael George King: Hey guys, this is Charles Zhu speaking on behalf of Michael Schmidt. Thanks for taking the questions and congrats on another quarter. Broadly speaking, how are you thinking about T-cell engagers in solid cancers and how might the 18087 readout impact your thinking?

Hey, guys. This is Charles Zhu on for Michael Schmidt, Thanks for taking the questions and congrats on the quarter.

Broadly speaking how are you thinking about T cell engagers in solid cancers, and how might the 18 OE seven Rita readout impact your thinking.

Bassil I. Dahiyat: T-cell engagement, we think, should have significant promise. But I think it's early days for that, for CD3s in solid tumors. I mean, it's early days everywhere, but it's really early days in solid tumors. I think, you know, we've all seen glimmers of activity from some programs out there, like the CEACD3 program, you know, from Roche. So I think that it's early days, and we're going to learn a lot from how these initial set of molecules perform and what kind of design decisions we made around them, and what kind of activity and tolerability we see.

T cell Engagers, we think should have significant promise I think it's early days for that.

For for Cdthree is in solid tumor I mean, it's early days everywhere, but its really early days in solid tumor I think we've all seen glimmers of of activity from some some programs out there like the Cdthree program.

From Roche, so I think that that it's early days and I think that we're going to learn a lot by how these initial set of molecules perform.

And what kind of design decisions, we made around and what kind of activity and Tolerability, we see obviously the issue with solid tumors.

Bassil I. Dahiyat: Obviously, the issue with solid tumors is that those antigens tend to be expressed all over the place. It's not just in the tumor. They tend to be a lot less restricted than hematologic malignancy targets, or even in the cases where those are on healthy tissue, those are on, you know, heme cells, and depleting those often can be tolerated. So I think we've got this tolerability and selectivity issue in how we design these biospecifics, whether we use valencies like 1 to 1, 2 to 1, the affinities that we pick for our Those are all going to be a lot of learning.

Is that those antigens tend to be expressed all over the place. It's not just in the tumor they tend to be a lot less restricted.

Then hematologic malignancy targets or even in the cases, where those or are on healthy tissue those around him himself in depleting those often can be tolerated.

So I think we've got this tolerability and selectivity issue and how we design. These bi specifics, whether we use valence he's like one to one to two one the affinities that we pick for a cdthree is and how how hot we make these molecules those are all going be a lot of learning so whatever specific learnings, we see around the efficacy tolerability window. If rates you know 87, I think are going to play into that generally.

Bassil I. Dahiyat: So whatever specific learnings we see around the efficacy and tolerability window for 18087, I think they're going to play into that generally. You know, every solid tumor is also different. I think it's really dangerous to lump these all together. You know, neuroendocrine, just within 18087, the neuroendocrine tumor, both the way the patient presents, the way the tumors are distributed, their treatment history, like in these NET patients, they've often been treated for many, many years. It's rather indolent, but it can, you know, relentlessly grind on, or they're generally unresponsive. And then we're looking at gastrointestinal stromal tumors, and these GIST tumors have a whole different set of behaviors. I don't think you can overgeneralize, but I think in general that selectivity and whether you can get efficacy against the tumors and activate that tumor, the T-cells around that tumor, and how it plays against safety are going to be the big data sets we're all going to learn from all of these solid tumor programs out there.

And.

Every solid tumors also different I think it's really dangerous to lump these altogether.

Nora under can just within 18 already seven the neuroendocrine tumor both the way the patient presents with a tumors are distributed their treatment history like in these net patients. They have often been treated for many many years, it's rather indolent, but it can relentlessly grind on or tent generally unresponsive and then we're looking at at gastrointestinal stromal tumors and he's just tumors have a whole different set of behaviors. So.

I don't think you can over generalize, but I think in general that selectivity and can you get efficacy against the tumors and activate that tumor.

The T cells around that tumor and how it plays again safety is going to be a big data sets were all going to learn from all of these solid tumor programs out there.

Got it that makes sense and Doug.

Bassil I. Dahiyat: God, that makes sense. And given that the dual checkpoint or co-stimulatory bispecifics have a similar design rationale where bivalent interactions result in enhanced avidity, how much read-through would you say the XMAP 20717 readout would have on 23104 and 22841?

Given that the dual checkpoint or costimulatory bi specifics have a similar design rationale where by vaillant interactions, resulting in enhanced liquidity how much read through would you say what the Exmar. So 2717 readout head on 23, 104 and 22 for one.

And I wouldn't overstate over over read out anything there I think that the the targets are really quite different.

Bassil I. Dahiyat: I wouldn't overstate the read through there. I think that the targets are really quite different, and whether you can get an avidity effect for binding, that's great, but those targets are all expressed with different kinds of densities at different stages of T cell exhaustion. I wouldn't, I wouldn't overstate the read through there.

And.

Whether you can get and a video effect for binding that's great, but those targets are all expressed with different kinds of of densities at different sort of stages of T cell exhaustion I wouldn't I wouldn't overstate the the read through there.

Bassil I. Dahiyat: Okay, and last question from me: how many patients do you think you'll have treated by the 4Q update for the CD20 bispecifics? And if you could provide any incremental color around how many you would anticipate within the therapeutic doses, thank you.

Okay and a last question from me.

How many patients do you think you'll have treated by the Fourq you update for the CD 20 by specifics.

Could provide any incremental color around how many you would anticipate within the therapeutic doses. Thank you.

Bassil I. Dahiyat: You know, I really don't think we can comment on that at this time. We've certainly been working through quite a number of dose escalation cohorts, as is typical for a CD3 biospecific, given the policies set by regulators around where you can start. So I wouldn't want to try to guide you too specifically to numbers. I think it should be... Enough numbers to see what's going on, I don't know if that's terribly helpful, but until we're ready to really lay it out, it's really, I think it's imprudent for me to say in particular because the trial is moving very rapidly.

I really don't think we can we can comment on that at this time, we've certainly been working through quite a number of dose escalation cohorts.

As is as is typical for a cdthree by specific given the policy set by regulators around where you can start.

So I just I wouldn't want to try to guide to specifically the numbers I think it should be at.

Enough numbers to see what's going on either.

Thats terribly helpful but.

Until we're ready to really lay it out.

It's really it's.

I think it's important for me to say in particular, because the trial is moving very rapidly.

Michael George King: Got it. Thanks for taking the questions. Thank you.

Got it thanks for taking the questions.

Thank you.

Bassil I. Dahiyat: Okay, and I am currently showing no further questions in queue. I'd like to turn the call back over to Basil Dahiyat for closing remarks.

Okay and I'm currently showing no further questions in queue I'd like to turn the call back over to Brazil, Dahiyat for closing remarks.

Bassil I. Dahiyat: Thank you, operator, and thank you all for joining today's call. We look forward to updating you all again later this year.

Thank you operator, and thank you all for joining todays call. We look forward to updating you all again later this year.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program you may now disconnect everyone have a great day.