Xencor Inc Q3 FY2022 Earnings Call

Good day, and thank you for standing by. Welcome to the Xencor Q3 2022 Conference Call. At this time, all participants are in 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 first speaker today, Charles Liles. Please go ahead.

Thank you, and good afternoon. Earlier today, we issued two press releases, which outlined the topics we plan to discuss today. The press releases are available at www.xencor.com. With me on the call are Bassil Dahiyat, President and Chief Executive Officer; John Desjarlais, Chief Scientific Officer; John Kuch, Chief Financial Officer; and Allen Yang, Chief Medical Officer; Ralph Stitnick, Executive Medical Director and Head of Autoimmune, will join us for Q&A. On our agenda, we will first review recent business news and financial results, followed by the presentation of results from the Phase 1 single-dose study of XmAb564 in healthy volunteers. These slides should be visible on the webcast, and are also available for download on the Events and Presentations page of our website. We will then open up the call for your questions after both the prepared remarks and presentation. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management, future operations, the company's partnering efforts, capital requirements, future product offerings and research and development programs. 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. The outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including the risk factors described in 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.

Thanks, Charles. We'll focus today on our just released XmAb564 data and comment briefly on other topics. To frame the discussion, we've used our array of modular protein engineering tools to create a broad internal development portfolio in oncology and autoimmune disease and take multiple simultaneous shots on goal in the clinic. Our intent is to use proof-of-concept data from our early-stage studies to guide which we advance, which we terminate and which we partner so that we use our resources on programs with the greatest potential for success and make room in our portfolio for the next wave of XmAb bispecifics and engineered cytokines. And we're excited to share with you an important step along this journey, very promising biomarker data for 564, our second engineered cytokine program. First, we'll briefly review upcoming data presentations for other programs and some business highlights. First, vudalimab, our Phase 2 PD-1 by CTLA-4 dual checkpoint bispecific antibody. It's enrolling a Phase 2 study for patients with metastatic castration-resistant prostate cancer after two prior lines of therapy, in combination with chemotherapy or a PARP inhibitor, depending on molecular subtype. It's an indication with a high unmet need and is currently without much checkpoint inhibitor use beyond MSI-high tumors, even though small studies of combination PD-1 and CTLA-4 inhibition showed promise. Later this week, at the Society for Immunotherapy of Cancer Meeting, we will present some data from the first few handfuls of patients in the safety run-in portion of the study, with a focus on patients receiving the combination of vudalimab, a taxane and a PARP inhibitor. We're also conducting a second Phase 2 study with a more convenient every 3-week dosing schedule in patients with clinically defined high risk metastatic castrate-resistant prostate cancer, which will allow us to study vudalimab monotherapy in a specific population of aggressive prostate cancer where we saw confirmed partial response in our study. We're also enrolling towards patients with advanced gynecologic tumors. Now for plamotamab, our CD20xCD3 bispecific, as you probably saw, an abstract was accepted for presentation at the American Society of Hematology Annual Meeting in December. We'll present updated clinical results for the expansion cohorts in a Phase 1 study for patients with non-Hodgkin's lymphoma. We observed that plamotamab has remained generally well tolerated with encouraging monotherapy activity. In addition, we've initiated a cohort to study subcutaneous dosing. We also continue to enroll patients in a Phase 2 combination study with tafasitamab and lenalidomide. Now with that, I'll turn it over to John Kuch to provide a brief financial update.

Thank you, Bassil. Xencor's portfolio of collaborations and licenses with partners provides ongoing revenue streams to support investments in our research activities and our expanding pipeline of bispecific and cytokine candidates. These partnerships provide upfront payments, milestones, cost sharing arrangements for development programs and royalty payments, including royalties from three marketed products. Total revenue for the third quarter and the first nine months of 2022 was $27.3 million and $143 million, respectively. Total reported revenue was primarily royalty revenue from our Vir and Alexion partnerships related to their sales of sotrovimab and ULTOMIRIS, respectively. Total revenue proceeds that we received for the first nine months of 2022 largely funded our operations during the period. Total cash, cash equivalents, receivables and marketable debt securities at September 30 totaled $564.6 million, which is just slightly less than the $664.1 million balance at the beginning of the year. We are updating our year end cash position guidance and now estimate we'll end 2022 with between $575 million and $600 million in cash, cash equivalents, receivables and marketable debt securities. We continue to guide that we have sufficient cash and cash equivalents and marketable debt securities to fund our R&D programs and operations through the end of 2025. I refer you to our press release this afternoon and to our SEC filings for further details about our financial results. With that, I'd like to hand the call back to Bassil.

Thanks, John. I'd asked the audience to advance to Slide 5. So the rest of today's comments will be presenting the top line data from the Phase 1 study for XmAb564, our reduced potency cytokine targeting regulatory T-cells, with the goal of treating autoimmune disease. Advance to Slide 6. 564 was designed like all of our XmAb cytokines using the full range of our protein engineering tools. First, we engineer the cytokine receptor binding profile to aim selectively for the particular receptor desired, in this case, CD25. And at the same time, reduce the molecule's potency significantly by 100-fold or more to improve two features, first by avoiding overactivation of the immune system that results from hyper potent native cytokine administration; and second is to reduce how rapidly the cytokine is cleared due to receptor binding internalization. We represent this on the right panel of this slide and show the reduced toxicity activity peak, but a significantly extended duration, which we believe has the potential to create greatly improved therapeutic profiles. We then use our XmAb Fc domains to serve as a stable scaffold and to ease manufacturing, plus extend half-life further. Advance to Slide 7. Moving on to the Phase 1a trial. It's a single ascending dose study in healthy volunteers that showed subcutaneous XmAb564 is well-tolerated and selectively expanded regulatory T-cells starting at lower doses and reaching the highest reported levels we're aware of at the high dose, particularly notable was the exceptional durability we observed with the highest levels of Tregs three weeks after dosing that we're aware have been reported. We're looking forward to exploring multiweek dosing schedules in our already started Phase 1b multiple ascending dose study and believe that longer dosing intervals are a potentially important differentiator for Treg targeting agents and autoimmune disease generally. We're also pleased that 564 is the second XmAb cytokine to show remarkable target cell expansion in the clinic. Last year, we reported data from the Phase 1 study of XmAb306, our reduced potency IL-15 fusion in oncology, where we also saw expansion of target cells, in that case, NK cells and notably significant accumulation of NK cells upon repeat dosing across a range of dose levels. We will be monitoring for similar pharmacodynamics in our multidose trial of 564 and if present, assessing how that could potentially benefit dosing frequency. I'll turn the call over now to John Desjarlais to describe in more detail the Treg targeting rationale and design of XmAb564.

Thanks, Bassil. Let's move on to Slide 8. Now it's well established that Tregs play an important role in preserving immune homeostasis, and there's growing evidence that this balance is perturbed in autoimmune diseases. While there have been tremendous efforts to utilize low-dose recombinant IL-2 for autoimmune disease treatment, we believe our potency reduced long acting IL-2-Fc fusion can promote superior Treg expansion and selectivity, providing more robust and durable Treg expansion with better tolerability. On Slide 9, the fundamental problem with IL-2 itself is that while it preferentially interacts with Tregs, it's not perfectly selected, and at higher doses, it will also expand conventional T cells and other lymphoid types. Its intrinsic preference for Treg is because Treg constitutively express CD25, the IL-2 receptor alpha, and that expression provides the highest affinity receptor complex for IL-2. So our engineering strategy here is two-fold. First, we increased binding affinity to CD25; and second, we decreased affinity to the IL-2 receptor beta. With this strategy, we not only improve selectivity for Treg significantly, we also achieve the overall potency reduction we're looking for to create a long acting and tolerable IL-2. On the next slide, Slide 10, here we show some of our preclinical characterization of XmAb564. The two plots on the left show the potency and selectivity profile of XmAb564, a plot on the top, versus wild type IL-2. Note that due to our engineering, XmAb564 is not only more selective for activation of Treg compared to wild type IL-2, it is also, and here note the difference on the scale on the x-axis, it's also considerably less potent as intended. And as predicted from a reduced potency hypothesis, we saw a nice extended PK profile for XmAb564 in non-human primates. Now I'll turn things over to Allen Yang, our Chief Medical Officer, for a brief summary of our Phase 1a study.

Thanks, John. Before I begin with Slide 11, I would like to recognize the XmAb564 team. We started this healthy volunteer study in 2021, during a time when the pandemic was creating many logistical hurdles. And we have already completed the study and have started dosing in our Phase 1b study in atopic dermatitis and psoriasis patients. The Phase 1a study was a randomized double-blind study of subcutaneous XmAb564 that enrolled 48 healthy volunteers across six dose levels from 0.03 milligrams per kilogram to 0.065 milligrams per kilogram. Patients were randomized six to two XmAb564 to placebo, respectively. The clinical primary outcome measures were safety and tolerability. In addition, PK and biomarkers, such as expansion of T cell populations like Tregs were examined, important data that will inform our dosing strategies moving forward. Next on Slide 12. Overall, the XmAb564 was well tolerated across all dose levels. All adverse events were grade 1 or 2 and self-limited. That is they resolved without intervention. The most common AE was injection site reactions. There were no serious AEs, dose limiting toxicities or early discontinuations due to AEs. There were also no clinically significant abnormalities in laboratory values, vital signs or EKGs. Some subjects had transient increases in eosinophils, though no eosinophil-related AEs were observed. We believe this laboratory increase might be related to the mechanism of action of CD25 targeted IL-2s. Finally, the terminal half-life is estimated to be nine to 10 days at the lower doses and six to seven days at the highest dose. This is consistent with the increase in CD25 target mediated clearance from the expanding Treg cells. Now I'll turn things back over to John to review the pharmacodynamic data.

Thanks, Allen. Let's move on to Slide 13. Okay. On Slide 13, let's start with a look at the CD25 bright Treg population, thought to be the most suppressive Treg population. On the left, we show time course of the absolute CD25 bright Treg counts over time for each dosing cohort. The placebo in red, as expected shows a very low level of CD25 bright Treg that is consistent throughout the 20 days. Then most notably on this plot, you see starting with Cohort 3 in the dashed green line and at higher doses, a very robust expansion of this Treg population, with a strikingly high level of expansion for Cohort 6 in magenta, peaking at about 150 cells per microliter. Now these are averages shown here, but on the right hand plot, we show the peak Treg fold increase for each subject across all dose levels. Here, again, you see a consistent and statistically significant fold increase across all the dose cohorts. These are clearly significant increases in Treg with 10-folds and larger boosts starting at the 15 microgram per kilogram dose, culminating in the dramatic 117-fold increase at the highest dose cohort. You'll also notice a very large jump going from some of the intermediate doses to the high 65 microgram per kilogram dose. This is nicely consistent with our in vitro dose response curves, whereas the serum concentrations we have for these doses, the in-vitro dose response is just beginning to climb up rapidly toward the EC50. Finally, while there is clearly an overall dose dependent trend, you'll notice a lower calculated fold increase for Cohort 5. Digging into this, we find that these fold calculations can be prone to large variations because baseline values used for normalizing to create the fold values can involve dividing by very low numbers of Treg observed at baseline. Let's move on to Slide 14. One way of avoiding this baseline variability is to simply look at the Treg/Tcon ratios. So here, we're showing the time course and peak values for the ratio of CD25 bright Treg to conventional CD4 T cells. Again, we see a nice dose dependent increase peaking around days eight to 10. On the right plot, you can see the individual subjects that now we see the consistent dose dependent behavior more clearly. Notably, the ratio moves from almost zero to an impressive Treg/Tcon ratio of 0.14 at the highest dose. I like this particular readout as it's generally thought that the Treg/Tcon ratio is the most functionally important metric for immunosuppression. And again, you'll see here that big inflection from Cohort 5 to Cohort 6, once again, consistent with our expectations for in-vitro analyses. This is what we expect for the way we designed our molecule to be low potency and promote strong pharmacology near the bottom of the dose curve. Now the other thing I want to emphasize in this data is the durability of this expansion effect. For the high dose cohort, you can see that our Treg counts are still well above baseline value at the last time point three weeks after dosing. Now on Slide 15, let's take a look at the total Treg population. On the left, again, it's the time course, where again you see convincing increases in the absolute Treg counts from cohorts 4 to 6. And with the plot on the right showing fold expansions, which are again, muddied by the baseline variability that contributes to the fold calculation, you see a strong eight-fold boost for the highest dose cohort. We believe this eight-fold boost in total Treg is as high as anything reported elsewhere. Once again, like we saw for the CD25 bright population, you can see on the time course that we still have elevated total Treg three weeks after dosing. Okay. So now moving on to Slide 16. Let's take a closer look at the durability. We show here the remarkable day 21 Treg counts for each subject with the CD25 bright subset on the left and the bulk Tregs on the right. We believe this maintenance of elevated Treg on day 21 holds potential for more convenient dosing, and we look forward to exploring a range of multiweek dosing schedules in our Phase 1b. Finally, on Slide 17, taking a look at non-Treg cell expansion, we see some evidence of a minimal increase in conventional T cells, but it's not clear at this point whether there is a real expansion of the NK cell population. I'll also note that the increases in the conventional T cells are generally not statistically significant. So we'll, of course, be tracking this as we progress to additional studies. Moreover, recall, as I showed you earlier that our Treg/Tcon ratios are also very nicely increased for all of our dose cohorts. Now I'll turn things back over to Bassil to wrap up the presentation and review our ongoing clinical progress and plans.

Thanks, John. Moving on to Slide 18. To sum up, the Phase 1a study of XmAb564 shows that a single dose was tolerable and gave large and selective increases in T cell populations, which match or exceed previously recorded engineered IL-2 programs with particularly notable durability of these increases in our high dose groups. We've already started our Phase 1b multiple ascending dose study in atopic dermatitis and psoriasis, having recently dosed the first patient, and we'll use it to explore multi-dose safety and also assess the potential for multiweek dosing intervals by assessing T cell populations as well as looking at disease modifying activity. We designed this study and selected the indications with the goal of advancing quickly, and I want to echo Allen's thanks to the entire 564 program team, from the molecule designers through the clinical team. Now advancing to Slide 19, let's zoom out and look at our entire XmAb cytokine platform. 564 is the second clinical program, but it will soon be followed by XmAb662, our potency reduced IL-12 for oncology. So we expect to start Phase 1 studies in 2023. We're pleased that our approach of reducing potency and extending half-life has now resulted in two programs showing reduced toxicity compared to native cytokines, plus notable magnitude and duration of immune cell expansion. We're working on a number of additional cytokines and look forward to discussing our cytokine programs during future updates. We'd be happy to take questions now. Operator?

Thank you. At this time, we will conduct a question-and-answer session. One moment for our next question. Our first question comes from Edward Tenthoff with Piper Sandler.

Greetings. Thank you very much and congrats on the exciting 564 data and I really appreciate the way you're laying out this entire cytokine pipeline that's emerging. So I wanted to get a sense what kind of duration of dosing should we expect in the atopic dermatitis and psoriasis patients? Is this going to be out to 16 weeks? Are you able to dose how long yet? And is this something where we could anticipate data in the back half next year? And then just following up on this sort of fit outside of your oncology area of expertise is 564 a potential partnering opportunity or do you ultimately have aspirations to really be in both oncology and autoimmune? Thanks for the time guys?

Thanks, Ted. So I guess with regard to duration of dosing, we're just going to have to follow the data. We just don't know. We know there's some benchmarks out there where the market leader in atopic dermatitis is every two weeks, and it's pretty firmly fixed there. It doesn't look like it will ever be able to extend, but we know that in autoimmune disease and particularly dermatology, the longer the better. So we're just going to follow the biomarker data as we go through this study, look to see if we observe accumulation like we saw with our IL-15 cytokine program in the clinic and do the best we can. So too early to say anything there yet.

Yeah. I'm sorry, I should have been more clear. I meant in terms of follow-up. How long will you be dosing patients? I apologize.

I'm sorry. We'll be dosing patients for eight weeks as the study is designed currently. And I suppose we can amend as we observe the pharmacodynamic data and look at duration. I apologize for that.

No worries. And do you think that eight weeks should be able to do efficacy measures or is it still mostly going to be biomarker data?

I think as designed right now, this is mostly about the biomarkers, but we can observe the data we see in the early cohorts and go from there. I would say that certainly, top of mind for us is thinking about how extending cohorts and using expansion of patients in select cohorts is something that we do a lot in oncology. And I know that some of our competitors have done that in autoimmune disease. So we're very much aware of those approaches and we'll absolutely be thinking about those.

And Ed, to be clear, we are following efficacy in those patients.

Yeah. Efficacy measures.

Well, I think I asked more than my third question. So I’ll hop back in the queue.

That's great. Thanks, Ed. So I will address them though. We'll guide a little bit later on as to our data timing expectations, but we are trying to move this program very quickly. As for partnering in the overall indication strategy, we want to chase the molecules that could be truly differentiated and offer Xencor something that's best-in-class to move forward. If a partnership is something that could really accelerate the program and make each patient faster and more broad, obviously, that's something we've done in the past and we would consider doing. But for now, I think we've got the right plan and we're going to aggressively pursue it for a while. Next question.

One moment for our next question. Our next question comes from Mara Goldstein with Mizuho.

Great. Thanks so much. Thank you actually for the slides, I appreciate that. Could you spend a couple of minutes just talking about 564 in relation to maybe respeg, which is another drug in development with a somewhat similar mechanism of action? And then I also just wanted to get an update on the plamotamab combination trials with lenalidomide and tafasitamab and just what that recruitment looks like?

So I'll address quickly the question of plamotamab Phase 2. We are recruiting patients and now we've got the study opened up in a number of countries beyond just the U.S., which is where we started, and we're moving forward. We don't have any more granularity that we're offering on that. Now going up to 564, there's so many ways to answer that question. So you're referring to a PEGylated IL-2 that is CD25 biased. I will point out that our half-life of nine to 10 days and then shifting to six to seven days as you build up that antigen sink is very competitive with PEGylated IL-2. I'll also say that our dose response and the magnitude of both total Tregs and CD25 bright Tregs, the most immunosuppressive population, I think the whole field is really focusing on now. I think our magnitudes look really good in comparison. And one interesting metric that I know is out there, the multi-dose study in atopic dermatitis and psoriasis that were reported earlier this year for that compound had about a 50 cell CD25 high 50 cells per microliter CD25 high Treg count at steady state. Note that we are a single dose; we approach that certainly with our lower doses and greatly exceeded it even at 21 days for our highest dose. So we think there's a lot of room here for us to operate and potentially have durability as well as magnitude of increases that could exceed competitive programs. Too early to say, but I think that the ground laid with this single ascending dose study is very promising.

Okay. Maybe you could just indulge me for a quick sec. The company has really talked a lot and put a lot of effort behind the cytokine pipeline. But clearly, on the oncology side, that's been very heavy lifting as it relates to sort of IL-2 and even some of the other programs, which are still early stage. So can you talk about sort of the risk/reward and how you're going about making those decisions?

We, again, go back to we follow the data. The risk, I think, comes down to how differentiated of a profile you might have for any given compound. As you say in oncology, it's a heavy lift because you're treating patients that have seen multiple layers of immunotherapy typically. And in the cytokine case in oncology, you're essentially, in many cases, looking at them as ways to complement other immunotherapies to increase NK cell activity, increase T cell activation, et cetera. And so combination studies inherently are much more challenging, larger, more complex and slower. In the case of autoimmune disease, the situations have been flipped where there you've got monotherapy activity that you would be looking at right out of the gate. There are niches and slices of patient populations, even naive to biologics, that have still a high unmet need. So it's a very different situation. But in all cases, we've got to look objectively: can we put our resources behind something that's got the best shot of being differentiated because an undifferentiated compound is one that is going to be problematic for a small biotech if you put too much resource behind it.

All right. Thanks, I appreciate it.

One moment for our next question. Our next question comes from Jonathan Chang with SVB Securities.

Hi, guys. Congrats on the progress and thanks for taking my questions. First question on 564, can you provide any additional color on the details of the newly initiated Phase 1b study?

Sure. So maybe, I don't know, Allen, do you want to take that?

Yeah. It will be a randomized double-blind placebo-controlled study in atopic dermatitis and psoriasis. We'll start at a higher dose than we started in our Phase 1, and the study will allow us to go higher than we've dosed in the Phase 1 as well since these are patients, if needed. We'll initially start at four doses given every two weeks and assess the PK and pharmacodynamic data as we go and optimize the potential longer dosing intervals as the data presents itself.

Got it. Thank you. And second question on vudalimab, what would you highlight as key things to look for in the upcoming SITC presentation?

Go ahead, Allen.

Yeah. So we'll have updated data at SITC. As we said, we have an abstract there. Bassil mentioned that we'll have a couple of handfuls of patients. This is the first time we've combined vudalimab with chemotherapy. So I think we'll have the safety and tolerability of those chemo combinations.

Got it. Thanks for taking my questions.

Thanks, Jonathan.

One moment for our next question. And our next question comes from Brian Cheng with JP Morgan.

Hi, Bassil and team. Thanks for taking my call. So a couple on 564. Just following up on your comments regarding the magnitude of Treg expansion. Do you have any insights in terms of correlation of the magnitude of Treg that you need to see to achieve improvement in atopic dermatitis and plaque psoriasis? And then I have a follow-up. Thanks.

So there's two directions of data you can take. At this point, only two. I think there's the ample data from the historic use of low-dose IL-2 that I believe increased Treg counts, bulk Treg, total Tregs, on the order of about two-fold, maybe a touch higher. And in open-label small studies showed disease-modifying activity across a range of indications from lupus to dermatology to even GI autoimmune disease. So that's one bucket, but very uncontrolled data, small studies, open-label academic studies. Then the other bucket we have is the data we referred to from a competitor data of a pegylated IL-2 presented in September at the EADV conference in both psoriasis and atopic dermatitis — where a multi-dose study, relatively short, I believe 12-week treatment showed that when you increase the CD25 bright around to about 40 to 50, more like 40 cells per microliter absolute, you can see promising activity, particularly in atopic dermatitis with a remarkable durability post end of treatment. So I think those are the two metrics that give us a feeling that we're probably in a pretty good range right now with what we saw in the single ascending dose to come up with a potentially very attractive dosing schedule in our MAD, which we have to do careful work on.

Great. And just a follow-up. We went back to your presentation at ASH 2018, 2019 on this molecule where you presented NHP data. A couple of questions on this one. So I think the impact on albumin is pretty much in line with what you expected and also the class as a whole. Just one quick question is whether you saw any impact on albumin that we saw back in the NHP model? And how do you think about whether these observations could impact your dose selection moving forward?

We did not see any impact on albumin. We did not see any clinically meaningful changes in albumin in the study.

Yes. And the baseline values or anything like that? We didn't see notable changes.

Thank you, guys.

Thank you.

One moment for our next question. And our next question comes from Dane Leone with Raymond James.

Hi. How is it going. Congrats on the data on 564. Great to see that program moving along. Actually, I wanted to ask just because I still can't get to the website to work. But are you guys able to disclose what's in the abstract for vudalimab at this point given the issues, the technical issues that are going on there?

As far as we know we're not. I will say that our ability to communicate with SITC has not been any better than anybody else's that we've been aware of. I apologize for that.

All good. Do you guys have any idea when the issues might get resolved?

We don't, but I will say that our abstract is — the data is almost entirely in our poster presentation, which I believe is coming out on Thursday morning, and the abstract is really the setup of the study for the most part. So our abstract, we're a little less concerned about these perennial SITC snafus on data releases for that society.

That's actually super helpful. So it's basically the abstract is just the study description and then you'll actually have the data on the poster?

Essentially. Essentially.

Okay. That's great. On 564, you chose atopic dermatitis and psoriasis just as a way of getting early clinical proof of concept. Is that necessarily indicative of what you want to do from longer-term drug development or what areas you want to go into? Let me phrase it this way for you. As you look at the landscape of autoimmune and inflammatory disorders, where do you rank atopic dermatitis and psoriasis and disorders that could be mediated by dysfunction of Tregs? Notably in RA, right, there's been good evidence of Treg dysfunction. But does that necessarily hold true in some of these other indications?

Maybe I'll address the strategic question, and I don't know if John wants to comment on the literature linking Treg and disease. You're right about the RA data being among the clearest. So our goals for this Phase 1b for the indication selection was, first and foremost, how can we move fast, getting a clear set of biomarker data that can help us understand schedule and dose as well as have the potential to look for disease modifying activity relatively easily. I think in particular, psoriasis fits that bill for both. Atopic dermatitis is something we added because there could be potential. In particular, if you see this long-term remission function that was observed with a pegylated IL-2 from a relatively small number of patients, there is absolute unmet need and potential there. So I'll say it's maybe on atopic dermatitis. And then we're actively both looking at our competitors' clinical work. I think there's lupus data coming shortly from some competitors within the next 12 months. And then there is also work in ulcerative colitis still ongoing. We are, of course, looking at a number of other indications that we'll disclose in due time. We just finished our Phase 1a. So psoriasis for speed, atopic dermatitis because there could be potential there. And we'll brief you more on that later. John, do you want to comment on the quality of data supporting indication choice?

Yeah. I mean, it's basically — there seems to be an overall consensus that for most of the autoimmune diseases there is a deficit, either in ratio or absolute counts of Tregs or in function of the Tregs. And so that's why it's really encouraging to see the CD25 bright population, a very suppressive population, increase. We see other markers of activation of the functional markers of that population. So super encouraging and potentially applicable to a wide array of autoimmune disease.

We're waiting to hear from Amgen and Lilly. Amgen has a Phase 2 program coming and Lilly is going to present their data at EULAR in the spring. That's really interesting to us. We'll have more low data in the spring in SLE. The other programs use ulcerative colitis; some of those are paused and some are continuing, but that's a very good indication as well. RA is one we've heard about historically but had challenges. I think lupus, ulcerative colitis and atopic dermatitis are probably our best near-term interests.

At the moment, there's still so much to be discovered about this mechanism and class of drug. What we want to do is make sure we establish the most competitive, hopefully, highly differentiated dosing regimen and biomarker activity that is the measure of how much immune modulation this drug is really doing. We think our design might really put us in the driver seat there, and so we want to exploit it as best as possible.

Excellent. Thanks, guys.

Thanks, Dane. Next question.

One moment for our next question. And our next question comes from Kaveri Pohlman with BTIG.

Good afternoon. Thanks for the updates and congratulations on the progress. For 564, any insight into anti-drug antibodies? Are you testing those?

Yeah. Allen, I guess do you want to touch on this one?

Yeah. We didn't see any evidence of anti-drug antibodies, and the PK data did not suggest any evidence of ADA as well. We are still early in the process of analyzing this data.

Got it. And my second question is for vudalimab chemo combination for prostate cancer. Can you tell us what drove your interest in choosing cabazitaxel over other chemo agents like docetaxel, which is also used for earlier lines of treatment, at least in a subset of patients?

The current study allows both cabazitaxel and taxane. I think what we're doing is we're exploring both. Physicians seem to have a preference depending whether it's their first or second line and payers may make them use a specific taxane, and they go to cabazitaxel in later lines. So we're interested in understanding the activity in combination with both of those agents, either alone or in combination with a platinum, and in both settings.

Got it. Yeah. I believe I just saw it on clinicaltrials.gov, but that's really helpful. And maybe a last one on plamotamab. So the abstract had a data cut-off date of July, I believe. Will you be providing updated data at ASH? Also, if you could just tell us about how you plan to introduce the subcutaneous formulation. Do you plan to incorporate it into the ongoing pivotal trial?

So a couple of questions. We will have incremental data at the time of the presentation in December. The plan for the subcutaneous formulation is not to incorporate it into the pivotal study, which is our Phase 2, but to evaluate it in the ongoing Phase 1 where it's the most convenient and fastest way to accelerate the subcutaneous development. So we have an established group of investigators who have been working on this for a while. It's a Phase 1 study that's open and it will be incorporated into the current Phase 1. So there will be additional cohorts where we're studying our optimal IV dose and expansion cohorts, and then there will be a cohort of subcutaneous patients.

Got it. Thank you for taking my questions.

Sure.

One moment for our next question. And our next question comes from Etzer Darout with BMO Capital Markets.

Great. Thanks for taking the question and congrats on the 564 progress. Just wanted to ask on some of the variability we see at the three higher doses, but obviously, really robust and compelling expansion at these doses. Just wondered if this was just a phenomenon of small n's? And how much confidence or weight you put on the high-dose data? And then I guess, secondly, you mentioned the MAD study. Just wondered how many patients you'll dose in each of the indications, atopic dermatitis and psoriasis? And whether or not the placebo to drug arm ratios will be the same as we saw for the single ascending dose? Thank you.

Maybe I'll have Allen or Ralph touch on the Phase 1b patient allocation.

Per cohort, the plan is eight patients in psoriasis with a six-to-two randomization, and for atopic dermatitis we'll double that cohort size to 12 patients per cohort, maintaining the randomized ratio. So per cohort, it's eight and six-and-two, and 16 in total in the expansion cohorts for AD depending on how many cohorts we progress.

And that's per cohort. The number of cohorts we do will be dependent on the data we see, so it could be a few cohorts or it could be several cohorts.

And we're doubling the n in atopic dermatitis, of course, to see if there is a better shot at looking at a signal. Now going back to the variability question, we have a lot of confidence in the data, even though it's relatively small numbers, six patients on study drug for each SAD cohort, because of the consistency across multiple measures, in particular, looking at Treg/Tcon ratios that don't involve that baseline variability when you look at fold measurements as well as the consistency of absolute Treg counts. So though there's jumpiness in the fold-change metric because of the small numbers and low baselines, I think the trend is quite clear. We're replicating a dose response curve like we saw in vitro, pretty nicely. So I think that all those things point with pretty high confidence in the data, and you can see the individual subject plots; the clustering is fairly consistent as well as the absolute cell count time course traces.

If I could add, the variability really comes from baseline because the baseline can be so low that it has a huge effect on the fold increase. We've tried to be very transparent and present the fold increase, the absolute increase, and the ratio to conventional T cells so people can compare cleanly.

And just to be clear, the ratio is really nice because there is no dividing by a low baseline number. You're dividing the Tregs by the conventional T cells. I think that's why the ratio readout is the cleanest way to look at the data.

Got it. Thank you. Congrats again on the update.

One moment for our next question. And our next question comes from David Dai with SMBC.

Great. Thanks for taking my questions and congrats on the update. So one question on the XmAb819 in renal cell carcinoma. I understand we will see the initial look at the data in the Phase 1 trial data at SITC next week — or this week, maybe you could help us assess some expectations ahead of that readout? What kind of efficacy bar should we be looking at here?

I just want to set expectations. We just started enrolling patients over the summer.

I think you're mistaken. We've never guided that we would have XmAb819 clinical efficacy data this year at all.

Yeah. There is a trials-in-progress abstract at SITC though, which describes the trial design, not efficacy data.

Thank you. Got it. Okay. That's helpful. I just wanted to get some clarification there. And then just another question on the 564 data. The safety looks fantastic so far in the healthy volunteers. Maybe just share some insights in terms of whether any difference between the healthy volunteers versus immune-dysregulated patients could factor into any kind of differential safety profile we're seeing in patients? Any thoughts on that?

It's hard to say; normal volunteers are very different. Of course, but we're going to see more in the psoriasis patients and AD patients.

I will say from the limited competitor data presented for other CD25-directed IL-2s that are designed differently, that limited competitor data didn't show any new safety signals in patients either.

Got it. That's very helpful. Thank you, guys.

And one moment for our next question. And our next question comes from Gregory Renza with RBC Capital Markets.

Hi. This is Yin Lon for Greg. Congrats on the data, and thanks for taking our questions. Maybe just a follow-up on 564. Just wondering how does the Inflation Reduction Act factor into your thinking around indication selection for this program as well as the impact on market opportunity?

Sure. So one, I'll note that XmAb564 is a biologic drug. So it has a longer time on market prior to being subject to Medicare negotiations. I would say that we're going to chase what we think is going to have the biggest patient impact and try to help establish a new class of drug with a new mechanism of action. I don't think the Inflation Reduction Act is really entering into our thinking at this point much at all.

Great. Helpful. Thank you.

I think we lost you. Next question please.

And our next question will come from Charles Zhu with Guggenheim Securities.

Hey, guys. Thanks for taking the questions. I had a quick one on the blood eosinophils, not sure it was addressed earlier, but how should we think about — it still seems early and extremely mild and transient, but how should we think about what this could look like as you go into multi-ascending dose cohorts? And how does it benchmark so far relative to some of the other CD25 programs out there? Thank you.

From what I know about the other CD25 programs, I don't know that we have a lot of detailed public comparisons. In the limited ways they've reported it, others have also reported transient increases with very limited clinical consequences. We didn't see any clinical significance here. We're going to continue to monitor closely, keep track of clinical signs and symptoms and do the lab work and follow it as we go into the multi-dose study.

Got it. Great. And maybe one question on IL-12. It looks like you guys are starting up the Phase 1 next year. How should we think about the potential similarities and the differences in the IL-12 program relative to what you guys went through on IL-15? Thank you.

Yeah, absolutely. So first of all, XmAb662 is an IL-12 Fc. We followed the same general principle that we used for XmAb306 and XmAb564, and that was to reduce potency significantly, roughly 100-fold for IL-12. In our preclinical studies, we saw what we expect for potency-reduced cytokine: better tolerability, the ability to dose higher, and improvements in half-life in non-human primates because of that potency reduction. Most importantly, what impressed me in non-human primates was that we had much better control of the pharmacodynamic response as we dosed from low dose to higher doses with the potency-reduced version. I think that bodes well for getting through dose escalation in our Phase 1 study. In terms of MOA differences, IL-12 tends to promote cytotoxicity and interferon-gamma responses from NK cells and T cells, whereas IL-15 has a strong effect on proliferation, particularly of the NK population.

Great. Thank you.

And our next question comes from Peter Lawson with Barclays.

Great. Thanks for taking my questions. Just a quick clarification question initially, on vudalimab. Do we get initial efficacy data this year? And what's the bar for success? At what point do you think you have enough data to make a good comparison to additional data sets out there?

While we will report efficacy data for the patients that we're reporting on in the safety run-in, to the extent they've had their efficacy assessments, these are relatively small numbers. We've guided a couple handfuls as we go through the safety run-in period. So I don't think that's going to give you a quantitative read on competitive positioning versus the standard-of-care chemo regimens. We'll guide more on timing later, but certainly nothing definitive this year.

Got you. And then when do we see combination data for vudalimab?

The combination safety run-in data is going to be reported this year for the handfuls of patients we've been treating, and that's the study that's furthest along relative to the monotherapy arms. So it will be about the combination with chemo, platinum, taxane, or PARP as appropriate to the molecular subtype.

Got you. But we have enough of those patients to start telling the story or is that still limited?

We have a few patients, enough to report early safety and any observed efficacy events, but not large enough to make definitive comparative claims. The poster will focus mostly on safety and early signals.

Thank you. And then for plamotamab, the triplet data, what's the timing around that data set? And what do you need to see to find a position in that crowded space?

We haven't guided on precise timing for triplet or pivotal data. I will say without going into specific numbers, the bar for efficacy there is meaningful; that's why we pursued a triplet regimen with two distinct mechanisms and different targets. But we're going to be setting a high bar because we only want to pursue something if there's real potential. We'll guide on timing as we progress.

Got you. Would that go to a no-go decision in late '23?

We'll guide on those milestone decisions as we approach them. We haven't chosen our formal guidance statements on that timeline yet.

Got it. Okay. Thanks for taking the questions. I appreciate it.

One moment for our next question. And our next question comes from Zhiqiang Shu with Berenberg.

Great. Thanks for taking the question. First one on 564 around dose. First, in your single ascending dose study you only saw grade one and two adverse events and no dose-limiting toxicities. Have you considered going even higher to explore potentially greater Treg expansion? And second, when you look at fold changes, it looks like the highest dose has the most significant upregulation of Treg. Is there any mechanistic explanation for this?

So first, on the single ascending dose in healthy volunteers, we're not going to go to higher doses in SAD cohorts because of the healthy volunteer population limits. However, in our multiple ascending dose study in patients, we have the option to explore higher doses because the risk-benefit profile is different in patients. With regard to the fold changes, as we discussed, normalizing each individual against their baseline can lead to large variability if baseline numbers are very low. We think that there is a clear dose-dependent trend when you look at absolute cell counts and the Treg/Tcon ratio. As John noted, the in vitro dose response curve predicted an inflection and now at the top two doses you're seeing concentrations that climb up that curve, which explains the observed uplift.

I'll add that Slide 14 with the peak ratios is the cleanest look at the data. The ratios are not subject to division by low baselines, and there we see statistically significant increases in Tregs across doses.

Okay. Great. And then the second question is around the competitive field. Some of the larger pharma companies have IL-2 assets in autoimmune early in development. How do you plan to compete as a small biotech? Are you looking for a partnership to accelerate?

We're not actively seeking a partner right now. We have the plan to build value in this program ourselves. If a partnership opportunity arises that would materially accelerate development and broaden access, we'll consider it, but we won't partner just for the sake of partnering.

Great. Thank you.

One moment for our next question. And our next question comes from Ted Tenthoff with Piper Sandler.

Great. Thanks. Quick follow-up on IL-15: what kind of expectation should we have for updates from you and Roche?

We'll certainly update on new studies as they are announced. Roche is actively working on that program, and I would not be surprised to see new study announcements from them soon. We don't have guidance on Roche data timing as that's their discretion.

Fair enough. Thanks guys.

I would now like to turn it over to Bassil for closing comments.

Great. Thank you so much, and thanks to everybody for joining us today and spending the time on the call and going through our new data update. We really look forward to updating you again in the near future. Thanks, and have a great evening.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.