Good day and thank you for standing by. Welcome to the Q1 2021 Xencor Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Charles Liles, Head of Corporate Communications and Investor Relations. Sir, please go ahead.

Thank you and good afternoon. Earlier today, we issued a press release, which outlines the topics we plan to discuss today. The press release is available at www.xencor.com. Today on our call, Bassil Dahiyat, President and Chief Executive Officer, will provide a corporate overview and will review recent partnership news. Allen Yang, Chief Medical Officer, will review clinical updates. And John Kuch, Chief Financial Officer, will review financial results. And then we'll open up the call for your questions. Before we begin, I would like to remind you that, during the course of this conference call, the Xencor management may make forward-looking statements, including statements regarding the Company's future financial and operating results, future market conditions, the plans and objectives of management, future operations, the Company's partnering efforts, capital requirements, future product offerings, research and development programs, and the impacts of the COVID-19 pandemic on these topics. The 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 the 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 10K and quarterly report on form 10Q. With that, let me pass the call over to Bassil.

Thanks, Charles and good afternoon, everyone. Xencor's approach to creating antibody and cytokine therapeutics is based on our existing protein engineering platform. It's built on our extensive protein engineering know-how combined with our suite of XmAb Fc domains, which we use to build novel molecular structures, improve natural protein and antibody functions, and create new mechanisms of therapeutic action. The plug and play portability of our XmAb Fc domains and the speed of our protein engineering capabilities enable us to rapidly explore different targets and biologies so we can select the most promising programs to take forward. We've been focusing our work on the expansion and use of our XmAb bispecific platform, the newest XmAb component, to create antibodies that bind two or more different antigens simultaneously, and also to cytokines with structures optimized for particular therapeutic uses. Now, our many partnerships really highlight its plug and play nature. Currently, we have 15 ongoing partnerships for XmAb technology, which have now resulted in two marketed products, Alexion's Ultomiris for rare blood disorders and MorphoSys' Monjuvi, which is the first second-line treatment for patients with diffuse large B-cell lymphoma. Just this past March, our partner Vir Biotechnology, with its partner GSK, submitted an emergency use authorization application to the FDA for VIR-7831, their anti-SARS-CoV2 antibodies that incorporate our Xtend Fc technology. Based on an interim analysis of the Phase 3 COMET-ICE trial, which demonstrated an 85% reduction in hospitalization or death in high-risk adult outpatients with COVID-19 receiving VIR-7831 as monotherapy, compared to placebo, the primary endpoint of the trial, by the way. Now Xtend was integrated into VIR-7831 for the purpose of reducing the dose administered and potentially enhancing its lung tissue bioavailability. This partnership exemplifies our commitment to enabling the broad use of XmAb Fc technologies outside our core focus of oncology and autoimmune diseases and demonstrates XmAb's vast applicability to underserved areas like serious infectious disease. If authorized, VIR-7831 would then become the third antibody with our XmAb technology to reach the market. Now, switching back to internal programs, we're currently running seven Phase 1 studies evaluating XmAb bispecific antibodies and cytokines. This way, we're taking multiple simultaneous shots on goal clinically, and the proof of concept data we generate will guide which programs we independently advance, which we partner, and which we will terminate. I'll let Allen Yang, our Chief Medical Officer, review updates for our clinical portfolio. Allen?

Thanks, Bassil. Since our last update about two months ago, we dosed the first subject in the Phase 1 study of XmAb-564, our wholly-owned IL-2 Fc fusion engineered to selectively activate regulatory T-cells or Tregs for the treatment of autoimmune diseases. The goal of an IL-2 therapy for autoimmune disease is to provide sustained low-intensity activation of Tregs while avoiding the pro-inflammatory systemic activation of effector T-cells. An IL-2 therapy that is selected for Tregs with an expanded therapeutic window compared to historical IL-2 approaches would have broad potential across many different autoimmune diseases. Pre-clinical studies indicate this may be the case for our program. It is engineered with reduced potency to improve tolerability and improve the duration of action for this normally toxic cytokine. Using our XmAb heterodimeric Fc domain and Xtend technology enhances its half-life. XmAb-564 is now our second cytokine in the clinic, joining XmAb-306, our engineered IL-15 for oncology, which is partnered with Genentech. The single ascending dose study will characterize the safety, tolerability, and pharmacokinetics of XmAb-564 in healthy volunteers. It will include an analysis of key immunomodulatory biomarkers. For the remainder of the year and into early 2022, we are planning to initiate several additional clinical studies to advance our wholly-owned bispecific antibody drug candidates. First, for XmAb-717, our PD-1 CTLA-4 dual-checkpoint bispecific antibody, in mid-2021, we plan to initiate a Phase 2 study for patients with certain molecular subtypes of castration-resistant prostate cancer as monotherapy or in combination, depending on the subtype, as these patients represent a high unmet medical need. Previously, this was planned as a Phase 1B study, but we have transitioned it to a Phase 2 study. We continue to expect that we will present more data from the ongoing Phase 1 study's expansion cohorts later this year, as the data mature. An additional cohort of patients with relapsed or refractory melanoma has been added, focusing on a more tightly defined disease population. For Tidutamab, our CD3 bispecific antibody that targets SSTR2, we plan to initiate a clinical study in patients with Merkel cell carcinoma and small cell lung cancer, SSTR2-expressing tumor types known to respond to immunotherapy in mid-2021. Due to a COVID-19 related staffing issue at the study site, study startup activities were delayed by a few months. Shifting to plamotamab, under our strategic clinical collaboration with MorphoSys, we are investigating the chemotherapy-free triple combination of plamotamab, our CD20 by CD3 bispecific antibody with Tafasitamab and Lenalidomide in patients with certain lymphomas. We plan to initiate the first of these studies in patients with relapsed or refractory diffuse large B-cell lymphoma, an aggressive type of non-Hodgkin's lymphoma, in late 2021 or early 2022, once we finalize the recommended dose in our ongoing Phase 1 study and complete operational preparations for the multinational trial. Updated data from the Phase 1 study will be presented later this year. Briefly, for XmAb-698, a CD38 by CD3 bispecific antibody, which was formerly known as Amgen's AMG-424, we plan to support investigator-initiated studies, and a new study is currently being planned to start later in 2021. Last, we anticipate filing an IND for XmAb-819, our ENPP3 by CD3 bispecific for renal cell cancer, later this year, and initiating a Phase 1 study in early 2022. XmAb-819 uses our multi-valent 2 + 1 bispecific format, which has two antigen binding domains to the tumor target, providing more selective binding for the high ENPP3 density expression on tumor cells, compared to the lower density on normal cells. The binding selectivity of the XmAb 2 + 1 format extends the range of targets amenable to CD3 bispecifics. For example, our partner Amgen's AMG-509 program, targeting STEAP1 in prostate cancer, uses this format. In summary, we continue to advance our pipeline by graduating molecules into Phase 2 and are bringing new novel agents into the clinic. Bassil?

Thanks, Allen. Now we're always looking to grow this pipeline with new programs, as we have with our IL-2 Treg and ENPP3 programs that Allen just mentioned. Along this front, last month at the AACR annual meeting, we presented data from four pre-clinical stage programs, including our third cytokine, an IL-12 Fc fusion protein for oncology, and two additional XmAb 2+1 CD3 bispecific antibodies targeting different antigens, as well as our PDL1 by CD28 bispecific program. All four posters are available on our website. Now I'd like to take a moment to review this targeted CD28 platform, which is a new class of T-cell engager designed to complement other mechanisms of T-cell activation, such as checkpoint inhibition or CD3 engagement. CD28 is a key immune co-stimulatory receptor on T-cells that has been difficult in the past to safely and effectively engage therapeutically. By targeting a CD28 binding domain to a tumor using a bispecific antibody, we aim to boost the activity of T cells in a tumor-specific way to enhance T-cell directed therapies. Our most advanced wholly-owned lead CD28 candidate is a B7H3 by CD28 bispecific antibody for potentially broad solid tumor use, including in prostate cancer, where B7H3 is highly expressed. This molecule is advancing through clinical development now. Of course, the focus of our new collaboration with Janssen, which we announced a few months ago, is to discover a CD28 bispecific antibody against a prostate tumor target. A core part of our business is to complement our internal development portfolio with partners like Janssen and many other leading companies in the industry. These partnerships generate payments from the licensing of XmAb technologies, the clinical advancement of XmAb candidates, as well as royalties from sales-approved products. There were no COVID-19 impacts to partnering revenue that we were aware of during the first quarter, but we'll continue to monitor potential impacts, of course. Last quarter, we disclosed that we had entered into a licensing agreement with a privately held company, which remained undisclosed at that time. Now, we can disclose that this company is Zenas BioPharma, a new cross-border company developing immune-based therapies for patients in China and around the world. We granted them worldwide rights to develop three pre-clinical programs incorporating XmAb Fc domains for development in autoimmune diseases. We received a 15% equity interest in the company and are eligible for royalties. We also entered a new academic collaboration last quarter with UCLA to extend the use of our XmAb technology, pairing novel targets proposed by scientists at UCLA and Xencor's modular suite of XmAb technology platforms. What we've done is establish a framework with predefined terms to enter sponsored research agreements and potential license agreements to streamline and expedite any potential drug candidates that are selected for further development. The UCLA agreement is our third collaboration focusing on novel target biology to create a new generation of XmAb bispecific antibodies, joining those we've entered with Atreca and MD Anderson. Now with that, I'm going to call over to John Kuch, our Chief Financial Officer, who'll review key highlights from our first-quarter financials. John?

Thank you, Bassil. Xencor's broad protein engineering platform and resulting partnerships and collaborations continue to generate revenue and provide value to support our core portfolio of clinical and research stage bispecific antibody and cytokine drug programs. Cash, cash equivalents, and marketable investment securities total $577.1 million as of March 31, 2021, compared to $604 million on December 31, 2020. The decrease reflects royalties and milestone payments received related to licensing agreements net of cash used to fund operating activities for the first quarter. Based on current operating plans, we expect to have cash to fund research and development programs and operations into 2024, and we currently estimate that we will end 2021 with between $425 million and $475 million in cash and cash equivalents. Total revenues for the first quarter were $34 million compared to $32.4 million for the same period in 2020. Revenues in the first quarter include revenue related to our Janssen collaboration, milestone revenue recognized from MorphoSys, and the royalty revenue from Alexion and MorphoSys, compared to revenues from the same period in 2020 which were primarily milestone revenue from MorphoSys, royalty revenue from Alexion, and licensing revenue from our Aimmune and Gilead collaborations. Research and development expenditures for the first quarter were $41.4 million compared to $33.9 million for the same period in 2020. The increase is primarily due to increased spending on our XmAb 306, XmAb 564, and XmAb 819 programs. General administrative expenses for the first quarter were $8.2 million compared to $7.2 million in the same period of 2020, with the increase primarily related to an increase in staffing. Other income for the first quarter of 2021 was $13.2 million and included a gain of $12.9 million in equity received in connection with the licensing transaction, compared to $0.7 million for the same period in 2020 which was primarily net interest income earned for the period. The net loss for the first quarter was $2.5 million or $0.04 on a fully diluted per share basis compared to a net loss of $8.1 million or $0.14 on a fully diluted per share basis for the same period in 2020. The lower net loss reported for the first quarter of 2021 compared to the net loss for the same period of 2020 is primarily due to other income recognized from equity received in the first quarter of '21 in excess of increased spending on research and development expenses for the period. Non-cash based compensation expense for the first quarter was $8.3 million compared to $6.5 million for the same period in 2020. Total shares outstanding were 58.2 million as of March 31, 2021, compared to 57 million as of March 31, 2020. With that, we would now like to open up the call for questions. Operator?

You have your first questions from Ted Tenthoff of Piper Sandler.

I'm wondering whether or not we should anticipate an update for the Roche program for IL-15 this year. And also, just going back to PD-1 CTLA-4 717, we won't be getting prostate cancer data, but what other cohorts could we expect from that this year?

Thanks, Ted. So regarding our XmAb 306 IL-15 program, that's the oncology collaboration with Genentech. We are discussing a publication plan with Genentech. We don't have specific guidance for timing of data this year. I will point out that the dose escalation in a broad range of solid tumor patients continues for monotherapy, which was started last March, as well as the combination with atezolizumab, their PD-L1 molecule, which started in Q4. So those are ongoing. We'll come up with guidance once we have agreement with Genentech on the publication plan, as well as, of course, keeping people abreast of any additional study starts that happen over the next year. With regard to XmAb 717 or PD-1 CTLA-4 molecule. Yes, there are going to be additional cohorts that we disclosed data for from the expansion cohorts of the Phase 1 study. So in addition to a much more mature data set from our prostate cancer cohort, we'll have a more mature data set; it was only partially enrolled for our renal cell carcinoma cohort, as well as more mature data from our basket cohort of multiple tumors that are not in PD-1 approved indications. We would expect all of that in the second half of this year.

Your next question is from Mara Goldstein of Mizuho Securities.

So I wanted to ask two things. The first is around the strategy of converting that Phase 1B in prostate cancer to Phase 2 and what you will achieve by that. And then, the second is around the cytokine strategy. I mean, clearly, we're seeing the beginnings of a lot of early work with novel engineered cytokines and the like, and so, I'm just curious as to sort of what you're thinking from a competitive perspective and a competitive advantage using the XmAb technology versus, let's say, engineered cytokines and other fusion proteins and the like.

Yes. So I guess on the first question that the shift of XmAb 717 PD-1 CTLA-4 study in prostate cancer that multi, that basket study, why shift from a Phase 1B to a Phase 2? My understanding, and Allen, you should pipe in here, was that it was simply a better reflection of what the study actually was doing, given that we have the forward dose we selected for that study, merely that. Anything to add, Allen?

Yes, no, it is a little bit of nomenclature. Remember, a Phase 1B could be looking at combination. So we had already sort of disclosed that this will explore 717 with key combinations of either chemotherapy or targeted agents. Whether you call that a Phase 1B or a Phase 2 with a safety run? I think a Phase 2 is a better, more accurate description. We sort of know our dose. We know the combinations we want to try, and we're really looking for a signal in certain molecular subgroups or clinical subgroups of prostate cancer. So it's more reflective of Phase 1 planning to go to an eventual Phase 3.

Yes. Now on your second question, Mara, for the cytokine, the strategy we're taking for this really rapidly evolving and growing field of engineered cytokines, I'll maybe ask John to interlay, who's actually on the call here to answer questions, to chime in about how our design strategy has some commonalities for how we're looking at all the cytokines and yet how we're tweaking it for the individual ones. We agree, it's a really exciting area, which is why we're committing a lot of additional efforts and resources there. John, you want to get in here?

Yes, sure. Mara, when we first tackled IL-15, we went in, we fused IL-15 to an Fc to make a long-acting cytokine. We made a critical key discovery that natural cytokines are limited in their ability to stay around very long in circulation. So the solution we came up with was to decrease the potency fairly dramatically. In doing so, we found that we actually made a much better drug. It lasts a lot longer in circulation and because it can last longer, even though it's lower potency, can actually mediate its form for a longer period of time. Also, the fringe benefit of that reduced potency was much better tolerability and much better control over toxicities as you dose escalate. Now we turned it around and applied that same concept to the IL-2 program, our Treg expander, followed exactly the same result that we got dramatic improvements in pharmacokinetics and pharmacology when we reduce the potency. So far, that seems to be playing out really nicely with the asphalt program as well, as we detailed on our ACR tester. So that's the unifying theme, which seems to be pretty unique in the community, is going with longer acting, lower potency molecules.

Your next question is from Peter Lawson of Barclays.

And just on IL-2, when did we see data around that? And how do you think about picking particular tumors and combination partners?

Well, our IL-2 is targeting activation of regulatory T-cells. So that's our program focused in autoimmune disease. Our IL-15 is the one that is the collaboration with Genentech, is our play with the cytokine for activating T-cells along that same pathway. So do you want us to talk about the IL-15 or do you want to talk about the 564 program?

I'm just curious if you're thinking of moving that IL-2 as well into oncology or…

No, we don't have any intention to do that. Its biology is really tuned, as John said, well, it's tuned for potency. In addition for that IL-2 molecule, we actually took the direction, like some other companies that are looking at the same approach of increasing the relative binding affinity to the inhibitory, well, to the receptor that's more prevalent expressed on regulatory T-cells, the IL-2 alpha receptor. We really feel that's much more appropriate for autoimmune indications. We haven't yet guided specifically on when we expect to have data from the single ascending dose. Essentially, it's a biomarker and safety study. Initial work in the clinic with that molecule could start later this year, but we'll guide specifically as we get a little further into the study. We just opened the study about a week ago.

And then the B7-H3 construct. I think you talked about that before, just curious where that is and where you're thinking of positioning that construct.

Yes. I'll touch on the timeline, and then if John wants to jump in on how we're positioning it. That molecule, we hope to have in the clinic in 2022, it's in active preclinical development now, with all the requisite manufacturing scale activities just getting started. John?

Yes. In terms of thinking about applying that, the reason we selected B7-H3 as a target is it's very broadly expressed across a range of solid tumors. We wanted a molecule that we could use to target tumors, get tumor-specific CD28 co-stimulation, which is your signal 2, and then you could use that to build on whatever signal 1 is being provided. That signal 1 could be provided either by just natural T-cell reactivity against neoantigens, in which case you'd probably want to be exploring our B7-H3 x CD28 and a P-1 combination study, or signal 1 could come from any one of our T-cell engagers. They're classic CD3 bispecifics in our silent tumor pipeline, the first of which will be an ENTP3 x CD3. Beyond that, I would also say B7-H3 is a particularly interesting target in prostate cancer. It's very bright there, and we, of course, would want to explore that in prostate cancer as well.

Your next question is from Alethia Young of Cantor.

This is Li for Alethia. We just have a follow-up on the IL-2 program. Since you just recently started a trial, can you just talk a little bit about how your molecule is differentiated from others in the space, and what advantages that you expect to see in the clinical setting?

Right. The design follows the rule of our cytokine engineering that John sort of laid out, which was, it's taking the natural IL-2 molecule and making mutations in it, to dramatically dial down its potency. I think we're north of a hundredfold less potent than wild-type IL-2 fused to an Fc domain. The things that make this particularly well-suited for autoimmune disease are that our protein engineers biased the binding to actually have a significantly higher ratio of binding to the CD25 or IL-2 alpha receptor than to the IL-2 beta gamma receptors. That receptor is heavily expressed on regulatory T-cells to bias it towards T-regs. So how do our designs differ from the – sort of what’s the positioning? We hope that our dramatically lower potency as well as our Fc domain, which contains our Xtend technology, gives us an enhanced therapeutic window. We won't know until we see. We can get excellent T-reg amplification. John, am I missing anything on – and maybe John, if you want to comment on the monomeric IL-2 nature and how that's distinctive in the industry.

Yes, no, that's a good point. We designed ours using our Fc heterodimers, which enables this. We designed ours to only have a single IL-2 for the Fc domain whereas competitors like Amgen or other efforts have a bivalent IL-2. We think having the monovalent IL-2 actually helps reduce internalization through receptor binding. That's kind of a classic paradigm in terms of biologics and internalization. The bottom line is, again, we applied our potency reduction, monomeric IL-2. We would hope that we have highly competitive, or even best-in-class pharmacokinetics and pharmacodynamics.

I have another question on your IL-12 program. I know it's preclinical, but just curious how you're thinking about designing a molecule that can potentially address the narrow therapeutic window here.

John, you want to take that, I guess?

Yes, of course. You can find a compelling narrative about this in our ACR poster. We discovered that the potency reduction provided us with much better control. When we administered the potency-reduced version of IL-12 to monkeys and compared it to a wild-type IL-12 Fc fusion, we observed that as we increased the dosage in nonhuman primates, there was a much more gradual rise in a significant pharmacodynamic marker, IP-10, which is triggered by interferon-gamma. This is a well-known function of IL-12. As we escalated the dose of our potency-reduced version, the increase in that pharmacodynamic marker was much smoother compared to the wild-type IL-12 Fc. This indicates that we should have an easier experience with dosage escalation because we have much better control over the outcomes in humans when using this reduced potency molecule. That's what we have at this point. The preclinical data supports this, but of course, we need to observe what occurs in the clinical setting.

Our next question comes from Etzer Darout of Guggenheim.

So really for the XmAb 564 I guess, if you see the appropriate therapeutic window, do you have any thoughts on how, maybe the low-hanging fruit indications, if you will, or maybe interesting indications that you could pursue initially, obviously assuming success? And then I have a second question.

Yes. We're not guiding on specific indications we're selecting yet, though we're hard at work putting ourselves in a position to hopefully start them as soon as we come out of dose escalation. Of course, there's a multiple-ascending dose escalation component to the study that'll start after the single ascending dose. We think there's a lot of opportunity for these novel mechanisms of action, like T-reg inhibition, in some of the smaller autoimmune indications. So we're certainly looking there, but I think when you look at the competitive landscape in some of the larger indications where there's still open room, we believe many of our competitors have already hit those. So more to come on that. We are working hard on that. Now, did you have a follow-up question?

Got it. Yes. Just a second question, on the initiation of the plamotamab, tafasitamab study. And I guess based on the interim remarks, is the data from the ongoing Phase 1, if you will, sort of the main hurdle to getting that started in terms of the timeline variability that you described?

I believe it aligns well with our operational aspects, and we are hopeful that everything will come together. We are currently in the dosing phase of Q2 with a weekly run-in period, similar to what we've seen in other programs. This process is ongoing, and we anticipate presenting the data by late this year as planned. We are hopeful to begin Phase 2 soon.

Our next question comes from Tom Shrader of BTIG.

For 564, what is the theoretical safety concern from too many T-regs?

I don't know if it's from too many T-regs. I think it's a combination of being non-selective and having lots of T-cells period amplified is the problem. And that can cause your usual capillary leak syndrome, cytokine syndrome, the toxicities that are seen with IL-2 therapy, with proleukin. So you just need to control that from coming on too strong, whether it's the T-regs you're amplifying or T-effectors.

Another way of saying it is we optimize the selectivity of our IL-2 for T-regs, but there's no such thing as perfect selectivity. At some point, if you dose high enough, you're going to start tickling effector cells and other cell populations.

And to just dig in a little bit to the last question. I mean this molecule could in fact play in many, many places. Do you think your likely first trial would be something like psoriasis where you get a clinical readout very quickly and then you'd be confident to try many other things? Or do you think a good biomarker signal would be enough to go into more challenging applications?

Yes, it's a great question because that's something that, with many programs, we mull over, and I think people around the industry mull over. Do you want to get some kind of disease modification signal, even if it's an indication that is not necessarily a great development path because of competitive density, or do you trust the biomarkers? I think that the thesis around T-regs' role in modifying disease activity is one risk that most companies seem to be willing to take as long as you can get good biomarker movement. You know what you're trying to do, how that plays into disease. I wonder if, even if you proved it in something like psoriasis, which is probably a tough hill to climb from a development and a competitive standpoint, even if you showed disease-modifying activities, I don't know how well it would translate. So I don't know if Xencor really favors that approach as opposed to, like many of our competitors, looking at the T-reg counts and the other T-cells as the biomarker, that's really definitive for a go signal.

Our next question comes from Zhiqiang Shu of Berenberg.

The first one, on 717, you said that you're going to move to the combination trial in prostate cancer. What kind of combinations are you thinking to potentially move to, to treat different set groups there? That's the first one.

We're not stating anything explicitly. Depending on the subtype and the known responses to treatment, the plan will involve both chemotherapy combinations and some targeted therapies relevant to certain molecular subtypes. I'm not sure we can elaborate further on that.

Yes. I think it's fairly obvious. There are some targeted agents that have been approved for prostate cancer like PARP inhibitors. The chemotherapy is still used in certain aggressive types as well. So those subtypes you would have to combine with a checkpoint inhibitor, and so obviously, we're going to explore those.

Got it. I'm curious about the biology of CD28. What is the difference between CD28 bispecific and CD3 bispecific in terms of safety and efficacy?

That's a long question. John, why don't you try to answer it briefly. Go ahead.

Yes, that's a great question. The CD3 acts as a broader tool. It signals T cells without being specific to any particular subset. Its purpose is to engage any T cell nearby and direct it against the tumor. However, this presents challenges regarding safety, particularly concerning cytokine release syndrome and potential on-target, off-tumor toxicity. The CD28 concept is quite interesting because it provides a secondary signal that can enhance the primary signal and work with an existing signal from another source. For example, a primary signal could originate from a natural T cell interacting with a tumor, and adding the CD28 can boost that natural anti-tumor response. Alternatively, the primary signal could come from a CD3 bispecific approach, allowing for a combination of both strategies. We are actively considering both methods.

Got it. Final quick one on 698 CD38-CD3 molecule. I guess where do you see this molecule go in the future development?

So right now, we're following the lead of some investigators who were enthusiastic about a CD38-CD3. We'll note that Amgen decided to jump out of development. This was a molecule we had enabled with our technology but hadn't actually made for them. They just took our various building blocks and put them together for CD38-CD3 and FC domain. In myeloma they felt that the AE profile wasn't consistent to go forward with it. We'll say that, without disclosing until we've got the trial up and running, there are other hematologic malignancies that express CD38 where the tolerability profile might seem quite reasonable in that context. So more to come on that.

And speakers, our last question is from Arlinda Lee of Canaccord Genuity.

This is Ben calling in for Arlinda. A lot of them have been answered. I just wanted to ask a few on 717 and plamotamab. A few PD-1 CTLA-4 programs have data that have been presented at this point. I'm just wondering regarding 717, how is the safety looking versus nivo versus an IPI combination regimens? And what you guys ultimately hope to show in the data?

I'll start by addressing what we hope to demonstrate in the data. Our aim is to find indicators that we can significantly impact patient outcomes, whether that's in challenging relapse-refractory situations or, more intriguingly, in areas where there are currently no approved checkpoints. We believe that the combination of MOAs and the tolerability profiles of CTLA-4 and PD-1 could lead to meaningful advancements in treatment. Prostate cancer serves as a notable example of this potential. As for the safety profile we've seen so far, I’ll let Allen respond to that question.

Yes. Bassil, thanks. It's fair to say that nivo-IPI combination is probably more effective than PD-1 blockade alone, but clearly you get a lot of toxicity. Only about 1/3 of patients remain on study past a few courses. The most common toxicity is colitis, which leads to interruption or discontinuation. So we haven't seen that high frequency of colitis. We believe that the indications, as Bassil alluded to, is where PD-1 plus CTLA-4 has been shown to be synergistic. Perhaps you haven't seen that much of an improvement in activity, and prostate cancer is a classic example of that.

Okay, great. That's very helpful. Switching gears to plamotamab, and I understand that MorphoSys might be driving a little bit of a bus here. It's a competitive space. I'm just wondering how do you think of plamotamab in a competitive positioning? Can you comment on what you think the development strategy will be? Do you expect maybe data in 2022 at some point?

Yes. I'll address that. You're correct that the CD20 and CD3 space is very competitive, especially in lymphoma. We recognize that this competition will be tough, so we’re focusing on a strategy that combines the two most effective regimens with the strongest scientific rationale to pursue the best combination approach. The key element of our strategy is moving toward chemotherapy-free treatments, which is a direction the field in lymphoma is eager to explore, similar to advancements seen in leukemia with the success of CLL, ibrutinib, and venetoclax combined with antibodies. The combination we're focusing on involves plamotamab with tafasitamab and lenalidomide, which has proven to be a highly effective and durable therapy for second-line and later aggressive lymphoma. This regimen is well-tolerated and employs complementary mechanisms of action with plamotamab to target CD20 and CD3. It also utilizes effector and aid effector cells driven by the Fc technology incorporated into Tafasitamab and the binding to CD19, providing an alternative target to CD20/CD3. This distinct mechanism of action is designed to work synergistically. Our strategy aims to leverage the most effective and tolerable agent and create a chemotherapy-free regimen that shows significant efficacy. This is how we plan to set ourselves apart.

Okay, great. So that would be a simpler regimen than existing regimens right now?

Well, hopefully, again, more tolerable and without the chemotherapy type of toxicities, which can often include long-term toxicities and secondary malignancy risks. Okay. Go ahead. Go ahead, Allen. Sorry. Before you go onto another one, Ben.

Maybe I can add some color. The strategies have been sort of declared by our competitors, right? So there's two chemotherapy regimens that are often used for the second line. It's either GemOx or bendamustine Rituxan. The strategies that our competitors are using are either to compete against that directly as a single agent or add on to that regimen like GemOx. Our strategy is sort of a little bit different. Tafasitamab, at least in the transplant-ineligible population, has already been approved for that second-line indication, so now we're adding our CD20 to their CD19. Of course, lenalidomide potentiates CD19. It could potentially potentiate CD20 as well. That is the differentiating approach. We think our approach is vastly different from the others. Sorry, back to you Ben.

No worries. I'm sorry to interrupt you. The data readout, do you think, might be in 2022 or maybe later?

We're not guiding on that yet. We want to get the trial started, then we'll give specifics. All right. Well, I guess that's the last question. We'd like to thank everybody very much for joining us today. Hope you have a wonderful rest of the afternoon, and we look forward to catching up again and getting further updates on our progress throughout the year. Thank you.

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