Xencor, Inc. (NASDAQ:XNCR) Q2 2023 Earnings Call Transcript

Xencor, Inc. (NASDAQ:XNCR) Q2 2023 Earnings Call Transcript August 6, 2023

Operator: Good afternoon, and thank you for standing by. Welcome to Xencor’s Second Quarter 2023 Conference Call. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that this call is going to be recorded at the company’s request. I would now like to turn the call over to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations. Go ahead, Charles.

Charles Liles: Thank you, and good afternoon. Earlier today, we issued a press release, which outlines the topics we plan to discuss today, available at www.xencor.com. Providing comments on the call is Bassil Dahiyat, President and Chief Executive Officer; and Nancy Valente, Chief Development Officer. Afterwards, we will open up the call for your questions, and we’ll be joined by John Desjarlais, Chief Scientific Officer; and John Kuch, Chief Financial Officer. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking including statements regarding the company’s future financial and operating results, future market conditions, plans and objectives of management, 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, but rather are based on our current expectations and beliefs and are based on information currently available to us. Outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, those factors contained in the Risk Factors section of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q. With that, I’ll pass the call over to Bassil.

Bassil Dahiyat: Thanks, Charles, and good afternoon. We’ll have brief comments and then get to the Q&A because we’ve received positive feedback on having abbreviated comments on our call in the past two quarters. So I think we’ll keep to that. At Xencor, we’re advancing a broad internal development portfolio of antibodies and engineered cytokines in oncology and autoimmune disease that we’ve built with our array of modular continually advancing protein engineering tools by taking multiple simultaneous shots on goal in the clinic, we can let clinical data guide which programs we advance, which we terminate, which we partner, so that we focus our resources on programs with the greatest potential for success and make room in our portfolio for the next wave of innovative biologics.

Now before heading into our pipeline, we’ll cover some updates on partnerships, which provide validation across our suite of XmAb technologies and revenues, which offset our development costs. First, the label on Ultomiris continues to expand in the EU and Japan, where it is now also approved to include neuromyelitis optica spectrum disorder. We earned $11.2 million in royalties in the second quarter, and if Ultomiris sales keep up, we would anticipate earning our remaining sales-based milestone payments of $20 million this year. Notably, we’re enhancing our extended patent coverage and term in multiple global geographies, and we’ve begun to see country-by-country progress in Europe. Our CD28 bispecific collaborations with Janssen Biotech are also progressing well for both the prostate and B-cell targeted CD28 by specific programs, and we anticipate both of them to advance in the clinical testing.

Finally, as noted in the abstract titles for the European Society for Medical Oncology, we anticipate data from Amgen’s study of AMG 509 in prostate cancer at ESMO. AMG 509 or now xaluritamig, that’s with an X as an XmAb or Xencor utilizes our XmAb 2+1 bispecific antibody format that allows for multivalency of targeting demands. And Amgen previously presented very encouraging PSA response data in early 2022. In the case of xaluritamig, 2+1 format allows for higher avidity and tighter binding to a receptor that is barely exposed extracellularly. But we also use this highly versatile format to dial into high expressing tumor cells much more selectively over lower expressing normal cells, like we do with our XmAb819 and XmAb808 programs or to distinguish between nearly identical receptors in the same family like we do with our XmAb541 program.

Now for updates this quarter on our wholly owned clinical portfolio, I’ll turn it over to Nancy Valenti, our Chief Development Officer.

Nancy Valente: Thanks, Bassil. We’ll be starting with vudalimab, our PD-1 CTLA-4 T cell selective checkpoint inhibitor. In light of encouraging competitor data that we saw last fall for PD-1 CTLA-4 bispecific and our own Phase 1 experience, we are moving vudalimab into frontline treatment for patients with locally advanced or metastatic non-squamous non-small cell lung cancer. The first part of the study will randomize patients one to one at two different doses of vudalimab-plus chemotherapy. The second part will take the recommended dose and randomized two to one against pembrolizumab with both arms in combination with chemotherapy with the primary endpoint of PFS. Preparations for initiating sites are ongoing, and we plan to get this study started by the end of the year.

We anticipate having data from our other ongoing Phase II studies in metastatic castrate-resistant prostate cancer in early 2024. Recall 1 study is testing vudalimab monotherapy in clinically defined high-risk prostate cancer and advanced gynecologic malignancies. The other study is taking prostate cancer all comers, and we’re evaluating vudalimab in combination depending on subtype. Moving along to other earlier stage bispecifics, XmAb819, our ENPP3-targeted CD3 bispecific and XmAb808, or B7H3 targeted CD28 bispecific, both have strong enrollment and dose escalation with more interest from investigators than available slots per cohort. These are just two examples of novel XmAb 2+1 bispecifics with unique designs, enabling us to potentially fill a gap in treatment approaches.

We also anticipate submitting our IND for our third internal 2+1 bispecific XmAb541, a CLDN6 targeted CD3 to be developed in ovarian cancer and other solid tumor types later this year and plan to submit an IND for our second internal CD28-bispecific in 2024. In regard to our cytokines, we’ve initiated a Phase 1 study this quarter for XmAb662, our engineered potency reduced IL12 Fc fusion protein in oncology. Now with that, please refer to our press release for financial results, and we’ll open the call to your questions. Operator?

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Q&A Session

Operator: Thank you. We will now conduct our question-and-answer session. [Operator Instructions]. Our first question comes from Mara Goldstein of Mizuho. Your line is open.

Mara Goldstein: Great. Thank you. This is Mara Goldstein. Hey, I wanted to ask just on the [indiscernible] mix. I understand there’s probably limited information that you can share. But given now that the compound has a name and we’re going to see more data, are — I guess the question is, is it fair to assume that this will advance, we’re looking at advancement here? And then the second question I just had is on vudalimab and when you will provide results for the prostate cancer part of the study, can you talk a little bit about what should the expectations there be around the patient numbers and whatnot?

Bassil Dahiyat: Sure. So I’ll take the first one, Mara. So we do know that Amgen has and they publicly disclosed this expanded their Phase 1 study quite substantially to include many different cohorts, both in combination with energy deprivation therapy as well as a subcutaneous dosing format as well as continuing to advance this monotherapy IV. And I think that’s a pretty good sign that, that’s a good commitment to advancement. I think that we should always keep in mind that in today’s day and age, in oncology, people stay in Phase 1 and keep adding patients for quite a long time. So I can’t speak to their specific tactical approach. But we are very encouraged, and we’re watching closely as they keep moving forward. For the results for the prostate cancer that we mentioned we would have in early 2024 from both our monotherapy and combo study, roughly maybe Nancy can give a little bit of rough guidance on that.

Nancy Valente: Yeah. I mean we’re excited. Yeah. So we’re excited about vudalimab in prostate cancer. We previously presented data in Phase 1, where there were a few responses, two responses with long duration of six and 10 months. And then in combination with chemotherapy at last year’s SITC again, with some responses and duration of about 8 months. These studies are enrolling well. It’s hard to say right now, more than that. We’ll have data in early ’24 from the monotherapy cohort and some of the chemo combination cohort. So remember, the combination cohort includes combination both with chemotherapy and a PARP inhibitor. So we hope to have some early data from that as well as longer-term data or more data from the monotherapy cohort.

Mara Goldstein: Okay, thanks. Appreciate it.

Bassil Dahiyat: Thanks, Mara.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Etzer Darout of BMO Capital Markets. Your line is open.

Etzer Darout: Great. I guess the first one, I just wanted to know if you could comment a little bit more on some of the interest that you’re seeing from investigators on XmAb819. Is it just really more around sort of the pace of enrollment that you’re seeing? And then secondly, just wondered if you’ve made constructs of some of the other PD-1 CTLA-4s that are in the clinic. And then maybe specifically about lung cancer, if you see anything differentiating about your molecule and how that may do in non-small cell lung cancer versus what we’ve seen from some of these other PD-1 CTLA-4? Thank you.

Bassil Dahiyat: Sure. Thanks, Etzer. I’ll just say on 819, I think, yes, just to be clear, the interest is from really strong enrollment and strong engagement and maybe the rationale for that and why investigators think this agent has a place. Maybe, Nancy, do you want to comment on that?

Nancy Valente: Yeah, I mean we’ve heard comments that they are really thrilled that someone is developing a product specific for kidney cancer. So typically, kidney cancer is included with other solid tumors studied along with them. But we are really studying the ENPP3 in only kidney cancer because it’s highly expressed there, it makes scientific sense to go there. So — and no one — I guess no one’s ever done that.

Bassil Dahiyat: Yeah. And I think that given the mechanistic rationale and the very strong and specific expression of ENPP3 in renal tumors, I mean it’s a really good fit, a targeted agent against the tumor-specific or tumor-associated antigen in RCC, I think it’s really — is very, very timely. To your question on sort of competitors CTLA-4, PD-1, and lung cancer, I’ll just comment maybe on the structural piece and maybe Nancy can comment on some of the more clinical rationale for why there’s big unmet need. Our PD-1xCTLA-4, vudalimab was designed to really only engage well with target T cells that express both antigens. We really dialed down the affinity on each side, in particular, on the CTLA-4 binding side, so you have to have both targets there to engage or you really don’t get much binding and derepression of the T cell response.