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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-27 · 194 added, 240 removed, 279 unchanged (61% of the section changed)

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The following discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A.

Risk Factors.”

We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibody and cytokine therapeutics to treat patients with cancer and autoimmune diseases who have unmet medical needs.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission.

Historical results are not necessarily indicative of future results.

We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered antibody therapeutics to treat patients with cancer and other serious diseases, who have unmet medical needs.

We are advancing a broad portfolio of clinical-stage XmAb® drug candidates from our proprietary Fc technology platforms.

We also use our protein engineering capabilities to increase our understanding of protein structure and interactions and to design new Fc technologies and XmAb development candidates with improved properties.

In addition to engineering protein-target interactions, our approach to protein design includes engineering Fc domains, the part of an antibody that interacts with multiple segments of the immune system and controls antibody structure.

In addition to engineering protein-target interactions, our approach to protein design includes engineering Fc domains, the parts of antibodies that interact with multiple segments of the immune system and control antibody structure.

The Fc domain is constant and interchangeable among antibodies, and our engineered Fc domains can be readily substituted for natural Fc domains.

Our protein engineering capabilities and Fc technologies enable us and our partners to develop XmAb antibodies and biotherapeutic drug candidates with improved properties and function, which can provide innovative approaches to

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treating disease and potential clinical advantage over other treatment options.

For example, we developed an antibody scaffold to rapidly create novel bispecific antibodies that bind two different targets simultaneously, creating entirely new biological mechanisms.

Other applications of our Fc technologies enhance antibody performance by increasing immune inhibitory activity, improving cytotoxicity, extending circulating half-life and stabilizing novel protein structures, such as engineered cytokines.

Three medicines have been developed with our Fc technologies.

The medicines are marketed by our partners and, are generating royalty revenues for us, which partially offset our internal development costs.

Our protein engineering capabilities and Fc technologies enable us and our partners to develop XmAb antibodies and other types of biotherapeutic drug candidates with improved properties and functionality, which can provide innovative approaches to treating disease and potential clinical advantage over other treatment options.

For example, we developed an antibody scaffold to rapidly create novel multi-specific antibodies that bind two or more different targets simultaneously, creating entirely new biological mechanisms.

Other applications of our protein engineering technologies enhance antibody performance by increasing immune inhibitory activity, improving cytotoxicity, extending circulating half-life and

stabilizing novel protein structures, such as engineered cytokines.

Three marketed XmAb medicines have been developed with our protein engineering technologies.

Refer to Part I, Item 1, "XmAb Bispecific Technologies" and "Other XmAb Fc Technologies" in the description of our business included in this Annual Report on Form 10-K for a discussion of our core Fc technology platforms.

We are closely monitoring the COVID-19 pandemic and continue to evaluate its impact on all aspects of our business, including how it will affect our partners, collaborations, supply chains and research and development operations.

While the pandemic did not significantly disrupt our business during the year ended December 31, 2022, the evolving nature of the pandemic prevents us from reasonably predicting how the pandemic will affect our financial condition, results of operations and cash flows due to numerous uncertainties.

These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impacts and the direct and indirect economic effects of the pandemic and containment measures, among others.

Many states, including California, where we are headquartered and where our principal place of business is located, and cities therein have ongoing restrictions, rules and guidelines that affect the continued operation of businesses.

Other countries and states where we conduct manufacturing of our drug product, testing activities and clinical sites where patients are enrolled in our clinical trials have enacted similar restrictions that could affect our ability to conduct our drug candidate development and clinical operations.

Our primary vendor for manufacturing drug substance and drug product for our clinical programs is located in China which continues to be affected by the COVID-19 pandemic.

The potential impacts on our business, revenue, clinical studies and research and development activities of the COVID-19 pandemic include:

Our broad protein engineering capabilities and technologies are uniquely suited to provide us with opportunities to identify and enhance compounds that may target the novel coronavirus and potentially treat patients with COVID-19.

For example, in 2021 sotrovimab, an antibody that targets the SARS-CoV-2 virus, received an EUA from the FDA for the treatment of mild-to-moderate COVID-19 in high-risk adults and pediatric patients, and is made available by Vir and its partner GlaxoSmithKline Plc.

The FDA deauthorized sotrovimab in the first quarter 2022, but it is still approved in the European Union and other countries.

Sotrovimab incorporates our Xtend Fc technology for longer duration of action.

We are eligible to receive a mid-single digit percentage royalty on the net sales of sotrovimab.

We receive upfront payments, milestone payments and royalties from licensing our XmAb technologies and drug candidates.

The COVID-19 pandemic has not adversely affected the amount of revenue we generate from such partnerships and collaborations for the year ended December 31, 2022.

During the year, we received $198.7 million from our partnerships and collaborations including those with Vir, MorphoSys, Alexion, Astellas and Janssen.

Our ability to earn revenue from these and other partnerships is dependent on the ability of our partners to generate sales from products, such as sotrovimab, Ultomiris®, and Monjuvi®, the ability of our partners to advance our partnered programs through regulatory approval, and the ability of our partners to advance our partnered programs into later stages of development, which would entitle us to potential milestone payments.

If the COVID-19 pandemic adversely affects the sales or clinical, development and regulatory progress of partnered programs, the amount of future revenue we could earn would be adversely affected.

• Clinical studies:

We are currently enrolling patients into multiple trials evaluating our drug candidates, and our partner Genentech is enrolling patients in multiple Phase 1 studies of XmAb306 (also known as RG6323), our co-development program with Genentech.

Many partners are also enrolling patients in clinical trials with drug candidates that incorporate one or more of our XmAb technologies.

Although the pandemic has not materially affected the development of our clinical programs for the year ended December 31, 2022, some of our clinical programs temporarily experienced slower patient enrollment, and the initiations of new studies for certain programs have been delayed as a result of the COVID-19 pandemic.

These delays have not broadly affected the status of our portfolio programs and have been limited to specific trials and specific sites.

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clinical sites have delayed starting new clinical trials and others have postponed enrollment to address the pandemic.

• Research, development, and administrative activities:

We have implemented environmental, health and safety procedures for all employees and have also offered reimbursement of costs incurred and time off to employees to receive vaccinations that have been authorized.

We believe we provide a safe and healthy environment for our onsite employees who have been able to continue research operations, following an initial period of reduced onsite activities while new policies and procedures were developed and implemented.

As of December 31, 2022, these activities have continued without interruption from the pandemic.

Our development activities include initiating a Phase 1 study of XmAb662, our reduced-potency engineered IL12 cytokine candidate, and completing IND-enabling activities for XmAb541, our CLDN6 x CD3 2+1 bispecific antibody candidate.

Several other bispecific antibody and cytokine programs are in earlier stages of development.

Certain manufacturing and supply companies have indicated supply chain issues and shortages of research and manufacturing supply materials.

The development timelines for additional early-stage programs and ongoing clinical programs could be affected if the supply shortages and delays continue for an extended period.

Advancements in Our Clinical Portfolio of XmAb Bispecific Antibodies and Cytokine Candidates

Strategic Portfolio Prioritization

We are focused on developing targeted T cell-engaging bispecific antibodies, which we believe hold great potential for the treatment of patients with solid tumors, and beginning in the third quarter of 2023, we began aligning our portfolio to prioritize these programs, which include XmAb819 (ENPP3 x CD3), XmAb808 (B7-H3 x CD28) and XmAb541 (CLDN6 x CD3).

We have also narrowed the clinical development plan for our dual checkpoint inhibitor, vudalimab (PD-1 x CTLA-4), in treating patients with advanced prostate and non-small lung cell cancers.

In the first half of 2024, we plan to conclude the Phase 1 studies evaluating our XmAb564 and XmAb662 cytokines and pause further development of both programs, pending review of data emerging from competitive programs.

We also have implemented measures to align resources with our strategic plan for a focused pipeline and to strengthen our financial position.

In November 2023, we entered into a royalty transaction with OMERS Life Sciences, through which we received $215.0 million for selling portions of financial interests on sales of marketed XmAb medicines.

In the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement.

Our cost-sharing obligations will continue to June 1, 2024, and Genentech will be responsible for all development thereafter.

To align our internal resources with our focused development pipeline and current plans, we have implemented reductions in our workforce, which have impacted approximately 10% of positions at the company.

As of December 31, 2023, we had $697.4 million in cash, cash equivalents and marketable debt securities, and based on our current plans and projections, we estimate this will provide necessary funding into 2027.

Advancements in Our Clinical Portfolio of XmAb Drug Candidates

Our modular XmAb bispecific technology and protein engineering capabilities enable us to rapidly advance multiple drug candidates into clinical development.

We and our partners are currently enrolling Phase 1 or Phase 2 studies for seven wholly owned or co-development candidates to treat patients with many different types of cancer and autoimmune diseases, and an eighth, to be developed for patients with advanced solid tumors, is planned to enter clinical development in mid-2023.

We and our partners are currently enrolling Phase 1 or Phase 2 studies for ten wholly owned or co-development candidates to treat patients with many different types of cancer and autoimmune diseases, and an eleventh, to be developed for patients with advanced ovarian cancer and other solid tumors, is planned to enter clinical development in the first half of 2024.

Vudalimab (PD-1 x CTLA-4) :

Vudalimab is a bispecific antibody that targets PD-1 and CTLA-4, two immune checkpoint receptors, to selectively activate the tumor microenvironment, and it is being developed for patients with metastatic castration-resistant prostate cancer (mCRPC) and other solid tumor types.

Data from a Phase 1 study that enrolled heavily pretreated patients with multiple solid tumor types indicated that vudalimab was generally well-tolerated with encouraging clinical activity.

We are conducting a Phase 2 study of vudalimab in patients with mCRPC, as a monotherapy or in combination with chemotherapy or a PARP inhibitor depending on the tumor's molecular subtype, as these patients represent a high unmet medical need.

Early data from the safety run-in portion of the study were presented at the Annual Meeting of the Society for Immunotherapy of Cancer (SITC) in November 2022.

Clinical activity, including multiple prostate-specific antigen (PSA) reductions of more than 50% from baseline (PSA50) had been observed in three of nine patients.

A patient with an 89% reduction in PSA from baseline experienced a partial response at week 18 and was continuing on treatment.

Review of safety data guided us to revise the chemotherapy dosing regimens in the combination cohorts in the study.

Dosing of vudalimab was unchanged.

We are also conducting a second Phase 2 study in patients with advanced gynecologic malignancies, and the study includes a cohort to evaluate vudalimab in patients with clinically-defined high-risk mCRPC.

XmAb104 (PD-1 x ICOS):

XmAb104 is a bispecific antibody that targets PD-1, an immune checkpoint receptor, and ICOS, an immune co-stimulatory receptor, to selectively activate the tumor microenvironment.

We reported initial dose-escalation data from the Phase 1 study at the American Society of Clinical Oncology in June 2022.

XmAb104 was well tolerated and exhibited a distinct safety profile compared to other clinical-stage ICOS programs.

Anti-tumor activity was observed in patients, and biomarker activity was consistent with engagement with T cells.

We are evaluating XmAb104 as a monotherapy and in combination with ipilimumab, in the expansion portion of a Phase 1 clinical study for the treatment of patients with advanced solid tumors.

XmAb564 (IL2-Fc Cytokine):

XmAb564 is a wholly owned, monovalent, interleukin-2 Fc (IL-2-Fc) fusion protein, engineered to selectively activate and expand regulatory T cells (Tregs) for the potential treatment of patients with autoimmune diseases.

XmAb564 is engineered with reduced binding affinity for IL-2's beta receptor and increased binding affinity for its alpha receptor.

In preclinical studies, XmAb564 was well-tolerated, promoted the selective and sustained expansion of Tregs and exhibited a favorable pharmacokinetic profile.

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In November 2022, we presented data from a randomized, double-blind, placebo-controlled Phase 1a study to evaluate the safety and tolerability of a single dose of XmAb564 administered subcutaneously in healthy volunteers.

The study enrolled 48 subjects, with six dose-level cohorts each randomizing six subjects to XmAb564 and two subjects to placebo.

The study demonstrated that a single dose of XmAb564 is well tolerated and generates a durable, dose-dependent and selective expansion of Tregs.

In the highest dose cohort (0.065 mg/kg;

Cohort 6), a 117-fold mean peak expansion over baseline in CD25bright cells was observed, with an 8-fold expansion in the bulk Treg population.

The ratio of Tregs to conventional T cells also increased significantly in a dose-dependent manner.

At day 21, both CD25bright and total Treg counts remained markedly elevated, potentially supporting a multi-week dosing profile.

All adverse events (AEs) were either Grade 1 or 2 and resolved without intervention.

Injection site reaction was the most reported AE.

In the fourth quarter of 2022, we dosed the first patient in a newly initiated Phase 1b, multiple-ascending dose study of XmAb564 in patients with atopic dermatitis and psoriasis.

We are conducting a Phase 2 study of vudalimab in patients with mCRPC, as a monotherapy or in combination with chemotherapy for patients with aggressive variant prostate cancer, as these patients represent a high unmet medical need.

We are also conducting a second Phase 2 study in patients with clinically-defined high-risk mCRPC.

As previously disclosed, in the fourth quarter of 2023, cohorts for patients with advanced gynecologic malignancies were closed to enrollment, and we do not intend further development in advanced gynecologic malignancies.

In the mCRPC cohort, vudalimab monotherapy has been generally well tolerated and associated with response to treatment in multiple patients who have visceral or lymph node metastases.

As of a data cutoff of February 7, 2024, 14 patients with clinically defined high-risk mCRPC have been enrolled into the vudalimab monotherapy cohort for treatment.

Vudalimab has been administered every 3 weeks at a 1000 mg (<80 kg) or 1200 mg (> 80 kg) flat dose.

As of the data cutoff, 3 of 12 evaluable patients have a confirmed partial response per RECIST 1.1 guidelines, and 1 patient has an unconfirmed partial response.

Of the evaluable patients, 3 patients have experienced greater than 90% reductions in prostate specific antigen (PSA) from baseline.

Treatment emergent adverse events have led to dose modifications for 8 patients and treatment discontinuation for 2 patients.

One Grade 5 adverse event of autoimmune hepatitis was deemed treatment related;

there have been no known

additional cases of Grade 5 autoimmune hepatitis among three clinical studies of vudalimab with more than 230 patients treated.

In the fourth quarter of 2023, we dosed the first patient in a Phase 1b/2 study evaluating vudalimab as a first-line treatment in patients with locally advanced or metastatic non-small cell lung cancer.

XmAb819 (ENPP3 x CD3):

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With two tumor-antigen binding domains and one T-cell binding domain, our XmAb 2+1 format enables antibodies to bind more avidly to, and selectively kill, tumor cells with higher antigen density, potentially sparing normal cells.

In 2022 we initiated a Phase 1 study to evaluate XmAb819 in patients with advanced RCC.

We are conducting a Phase 1 study evaluating XmAb819 in patients with advanced clear cell RCC.

XmAb808 (B7-H3 x CD28):

XmAb808 is a tumor-selective, co-stimulatory XmAb 2+1 bispecific antibody designed to bind to the broadly expressed tumor antigen B7-H3 and selectively to the CD28 T-cell co-receptor, only when bound to tumor cells.

In the fourth quarter of 2022, we dosed the first patient in a Phase 1 study to evaluate XmAb808 in combination with pembrolizumab in patients with advanced solid tumors.

We are conducting a Phase 1 study of XmAb808 in combination with pembrolizumab in patients with advanced solid tumors.

XmAb541 (CLDN6 x CD3):

XmAb541 is a bispecific antibody that targets Claudin-6 (CLDN6) and CD3.

CLDN6 is a tumor-associated antigen in ovarian cancer and other solid tumors.

The XmAb 2+1 multivalent format used in XmAb541 enables greater selectivity for CLDN6 over similar Claudin family members, such as CLDN9, CLDN3 and CLDN4.

The investigational new drug (IND) application for XmAb541 has been allowed to proceed by the FDA, and we plan to initiate a Phase 1 study in the first half of 2024.

XmAb564 (IL2-Fc Cytokine):

XmAb564 is a wholly owned, monovalent, interleukin-2 Fc (IL-2-Fc) fusion protein engineered to selectively activate and expand regulatory T cells (Tregs) for the potential treatment of patients with autoimmune diseases.

XmAb564 is engineered with reduced binding affinity for IL-2's beta receptor and increased binding affinity for its alpha receptor.

Results from a Phase 1a clinical study of XmAb564, presented at the European Congress of Rheumatology (EULAR) in May 2023, indicate a single dose of XmAb564, administered subcutaneously in healthy volunteers, was well tolerated and generated durable, dose-dependent and selective expansion of Tregs.

We have been conducting a randomized, double-blind, placebo-controlled Phase 1b clinical study to evaluate the safety and tolerability of multiple ascending doses of XmAb564, administered subcutaneously in patients with atopic dermatitis or psoriasis.

We plan to conclude the Phase 1b study in the first half of 2024 and pause further development of XmAb564 until after assessment of future data from competitor programs in this class and review of safety and biomarker data in the Phase 1b study.

XmAb662 (IL12-Fc Cytokine):

XmAb662 is a potency-reduced interleukin-12 Fc (IL12-Fc) fusion protein engineered to increase anti-tumor activity and immunogenicity in the tumor microenvironment by promoting high levels of interferon gamma secretion from T cells and NK cells.

In preclinical testing, Xencor’s engineered IL12-Fc fusions demonstrated an improved pharmacokinetic profile and therapeutic window compared to a native IL12-Fc fusion, with superior exposure, a more gradual dose response and more sustained interferon gamma response.

XmAb662 demonstrated significant anti-tumor activity, along with increases in NK cells, T cells, serum IP-10 and interferon gamma, which were further enhanced when combined with an anti-PD-1 antibody.

We have been conducting a Phase 1 study to evaluate XmAb662 in patients with advanced solid tumors.

We plan to conclude the Phase 1 study in the first half of 2024 and pause further development of XmAb662 until after assessment of future data from competitor programs in this class and review of safety and biomarker data in the Phase 1 study.

Co-development Programs

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Plamotamab is a bispecific antibody that targets CD20, an antigen on B-cell tumors, and CD3, an activating receptor on T cells.

In October 2021, we entered a global collaboration and license agreement with Janssen Biotech, Inc.

(Janssen), to advance plamotamab and XmAb CD28 bispecific antibody combinations for the treatment of patients with B-cell malignancies, which expands our strategy to develop multiple highly active chemotherapy-free regimens across B-cell cancers.

Janssen received worldwide exclusive development and commercial rights, and we will collaborate with Janssen on further clinical development of plamotamab, with us paying 20% of costs.

In October 2021, we entered a global collaboration and license agreement with Janssen Biotech, Inc., a Johnson & Johnson company, to advance plamotamab and XmAb CD28 bispecific antibody combinations for the treatment of patients with B-cell malignancies, which expands our strategy to develop multiple highly active chemotherapy-free regimens across B-cell cancers.

J&J received worldwide exclusive development and commercial rights, and we will collaborate with Janssen on further clinical development of plamotamab, with us paying 20% of costs.

Under the collaboration, we will develop B-cell targeted CD28 bispecific antibodies to selectively enhance T-cell cytotoxic activity in combination with plamotamab.

At the ASH Annual Meeting in December 2022, we presented additional safety and anti-tumor activity data from expansion cohorts in the Phase 1 study of plamotamab in patients with relapsed or refractory non-Hodgkin lymphoma (NHL).

The results indicated that plamotamab monotherapy was well tolerated and demonstrated encouraging clinical activity in heavily pretreated patients at the recommended intravenous Phase 2 dose.

In the fourth quarter of 2022, we began dosing patients in the study with subcutaneously administered plamotamab.

XmAb306/RG6323 (IL15/IL15Rα-Fc Cytokine) :

XmAb306 is a reduced-potency IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we are co-developing this program in collaboration with Genentech, a member of the Roche Group.

We share in 45 percent of worldwide development and commercialization costs for XmAb306 and will receive a share of net profits or net losses from product sales at the same percentage rate.

We retain the right to perform clinical studies with XmAb306, as well as with other collaboration programs developed in combination with other therapeutic agents, subject to certain restrictions and at our sole expense.

Genentech is conducting a Phase 1 study of XmAb306 as a single agent and in combination with atezolizumab in patients with advanced solid tumors.

In 2022, Genentech initiated two additional Phase 1 studies, evaluating XmAb306 in patients with relapsed/refractory multiple myeloma, either in combination with daratumumab (anti-CD38 antibody) or in combination with cevostamab (FcRH5 x CD3 bispecific antibody).

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In a Phase 1 study, intravenous plamotamab monotherapy was well tolerated and demonstrated encouraging clinical activity in heavily pretreated patients at the recommended intravenous Phase 2 dose.

In the fourth quarter of 2023, we completed enrolling patients in subcutaneous dose escalation cohorts of this study.

Efbalropendekin alfa (IL15/IL15Rα-Fc Cytokine) :

Efbalropendekin alfa (XmAb306) is a reduced-potency IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we are co-developing this program in collaboration with Genentech, a member of the Roche Group.

Genentech is conducting a Phase 1 study of efbalropendekin as a single agent and in combination with atezolizumab in patients with advanced solid tumors and is also conducting Phase 1 studies, evaluating efbalropendekin in patients with relapsed/refractory multiple myeloma, either in combination with daratumumab (anti-CD38 antibody) or in combination with cevostamab (FcRH5 x CD3 bispecific antibody).

In the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement.

Pursuant to the terms of the amended agreement with Genentech, effective June 1, 2024, Genentech will assume sole responsibility over all clinical, regulatory and commercial activities.

We will be eligible for up to $600.0 million in milestones and tiered royalties on approved sales from low double-digit to mid-teen percentages range.

Advancements Expanding XmAb Bispecific Platforms

We conduct further research into the function and application of antibody Fc domains in order to expand the scope of our XmAb technology platforms and identify additional XmAb drug candidates.

We use the modularity of our XmAb bispecific Fc technology to build bispecific antibodies and cytokines in a variety of formats, such as T cell engaging bispecific antibodies of a mixed valency format, the XmAb 2+1 bispecific antibody.

We use the modularity of our XmAb bispecific Fc technology to build antibody-based therapeutics in a variety of formats, such as T cell engaging bispecific antibodies of a mixed valency format, the XmAb 2+1 bispecific antibody.

XmAb 2+1 bispecific antibodies may preferentially kill tumor cells with high target expression, which may be especially beneficial in designing antibodies that target solid tumors.

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Four clinical-stage programs utilize our XmAb 2+1 format:

XmAb819, XmAb808, AMG 509 and ASP2138.

We are currently completing IND-enabling activities for an additional XmAb 2+1 bispecific antibody candidate, XmAb541 (Claudin-6 x CD3), which we are developing for patients with ovarian cancer.

We plan to submit an IND application for XmAb541 in 2023.

XmAb819, XmAb808, xaluritamig and ASP2138.

We plan to initiate a Phase 1 study for an additional XmAb 2+1 bispecific antibody candidate, XmAb541 (CLDN6 x CD3), which we are developing for patients with ovarian cancer and other solid tumors, in the first half of 2024.

Additionally, we have engineered CD28 bispecific antibodies to provide conditional CD28 co-stimulation of T cells, activating them when bound to tumor cells.

Targeted CD28 bispecific antibodies may provide conditional co-stimulation of T cells, for example, to T cells recognizing neoantigens or in concert with CD3 T-cell engaging bispecific antibodies.

In addition to our first clinical-stage CD28 program, XmAb808, our CD28 platform is the subject of two collaborations with Janssen.

The first collaboration was announced in 2020 and involves our research efforts to create and characterize CD28 bispecific antibody candidates against a prostate tumor target specified by Janssen.

In November 2021, we completed our research efforts under the collaboration.

Janssen selected a CD28 bispecific for further development, and we received a $5.0 million milestone payment.

The second Janssen collaboration was announced in October 2021 and includes conducting research activities with Janssen to create and characterize CD28 bispecific antibody candidates against B-cell targets during a two-year period, with Janssen having an exclusive worldwide license to develop selected molecules from the research activities and also selected molecules in combination with plamotamab and other agents, such as other CD3 bispecific antibodies.

In January 2023, Janssen selected a CD28 candidate that we developed under the second collaboration for further development.

In November 2022, we presented emerging preclinical data from early-stage programs that highlighted several of our platform technologies at the Annual Meeting of the Society for Immunotherapy of Cancer, with poster presentations with data from our IL18-Fc cytokine program, LAG3-targeted IL15-Fc cytokine program, PDL1 x PDL2 x CD28 trispecific antibody program, and bispecific NK cell engager platform.

In addition to our first clinical-stage CD28 program, XmAb808, our CD28 platform is the subject of two collaborations with J&J.

JNJ-9401 and JNJ-1493 are clinical-stage XmAb bispecific antibodies that J&J is developing in prostate cancer and B-cell malignancies, respectively, and both entered clinical development during the fourth quarter of 2023.

In April 2023, we presented emerging data from research-stage engineered CD28 bispecific antibodies targeting the solid tumor antigens CEACAM5, ENPP3, mesothelin, STEAP1 and Trop-2 in a poster at the American Association for Cancer Research (AACR) Annual Meeting.

In November 2023, we presented emerging data from research-stage programs that highlighted several of our platform technologies at the Annual Meeting of the Society for Immunotherapy of Cancer, with poster presentations with data from IL18-Fc and PD1 x IL18-Fc cytokine programs and data from our multi-specific NK cell engager platform.

Progress Across Partnerships

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The FDA approved Monjuvi® (tafasitamab-cxix) under accelerated approval in July 2020.

Monjuvi is a humanized Fc-modified CD19 targeting immunotherapy indicated in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise specified, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem cell transplant (ASCT).

Monjuvi is a CD19-directed cytolytic antibody indicated in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise specified, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem cell transplant (ASCT).

This indication is approved under accelerated approval based on overall response rate.

Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial(s).

In August 2021, the European Commission granted conditional marketing authorization for Minjuvi® (tafasitamab) in combination with lenalidomide, followed by tafasitamab monotherapy, for the treatment of adult patients with relapsed or refractory diffuse

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large B-cell lymphoma (DLBCL) who are not eligible for autologous stem cell transplantation (ASCT).

Tafasitamab was created and initially developed by us.

Tafasitamab is co-marketed by Incyte and MorphoSys under the brand name Monjuvi in the U.S.

and is marketed by Incyte under the brand name Minjuvi in Europe and Canada.

Tafasitamab is marketed by Incyte Corporation under the brand name Monjuvi in the U.S.

and under the brand name Minjuvi in Europe and Canada.

Incyte has exclusive commercialization rights to tafasitamab outside the U.S.

Monjuvi® and Minjuvi® are registered trademarks of MorphoSys AG.

Monjuvi® and Minjuvi® are registered trademarks of Incyte.

In February 2024, Incyte acquired exclusive global development and commercialization rights to tafasitamab.

In November 2023, we entered into a royalty purchase agreement (Monjuvi Royalty Sale Agreement) with OCM Life Sciences Portfolio LP (OMERS).

Under the terms of the Monjuvi Royalty Sale Agreement, we received $22.5 million upon closing in exchange for royalties earned from our MorphoSys license after July 1, 2023.

The aggregate Monjuvi royalties to be received by OMERS have a fixed cap of 130% of the purchase price after which the royalties revert to us.

In 2023, we recognized royalty revenue of $8.7 million on net sales of Monjuvi.

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We are eligible to receive up to $470.0 million based on the achievement of certain clinical development, regulatory and commercial milestones and are eligible to receive tiered, mid-single digit to mid-teen percent royalties upon commercialization of obexelimab, dependent on geography.

In January 2023, Zenas initiated a Phase 3 study of obexelimab in an autoimmune disease.

In January 2023, Zenas initiated a Phase 3 study of obexelimab in patients with immunoglobulin G4-related disease (IgG4-RD) and dosed the second patient in the study in April 2023, and we received additional preferred stock in Zenas as a development milestone in the second quarter of 2023.

The additional preferred stock has a fair market value of $10.0 million, and we recorded the milestone payment as revenue for the nine months ended September 30, 2023.

In 2023, Zenas also initiated a Phase 2 study of obexelimab in patients with warm autoimmune hemolytic anemia (wAIHA).

Novel Bispecific Antibody Collaborations

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Our partners provide an antibody or a tumor-associated antigen, and we conduct limited research and development to create potential bispecific antibody candidates for further development and commercialization by our partners.

In November 2020, we entered an agreement with Janssen, focused on the discovery of XmAb bispecific antibodies against CD28, an immune co-stimulatory receptor on T cells, and an undisclosed prostate tumor target, for the potential treatment of patients with prostate cancer.

Additionally, we have a right to access select, predefined agents from Janssen’s portfolio of clinical-stage drug candidates and commercialized medicines to evaluate potential combination therapies in prostate cancer with agents in our own pipeline, subject to some limitations.

Janssen has the same right with our portfolio to evaluate potential combination therapies in prostate cancer, as well.

The ability to study combinations of therapies from both companies’ prostate cancer portfolios leverages our broad clinical pipeline and Janssen's leading prostate cancer therapeutics portfolio.

In 2021, we received a $5.0 million milestone payment related to our first agreement with Janssen, which selected an XmAb CD28 bispecific antibody candidate for further development.

Other XmAb bispecific antibodies being developed by our partners include Amgen's AMG 509, a STEAP1 x CD3 XmAb 2+1 bispecific antibody, which is being evaluated in a Phase 1 study for patients with prostate cancer;

Astellas’ ASP2138, a CLDN18.2 x CD3 bispecific antibody, which is in Phase 1 studies to treat patients with gastric/GEJ adenocarcinomas and pancreatic adenocarcinoma and an undisclosed bispecific antibody candidate being developed by Novartis, which is also in Phase 1 development.

Xaluritamig (AMG 509) is a STEAP1 x CD3 2+1 bispecific antibody that our partner Amgen is advancing for the treatment of patients with prostate cancer.

The XmAb 2+1 multivalent format enables higher binding capability for STEAP1 expressing cells.

Amgen is currently completing enrollment in a Phase 1 study of xaluritamig in patients with mCRPC.

In October 2023 at the European Society for Medical Oncology (ESMO) Congress, encouraging interim clinical results from the study were presented during an oral proffered paper session, which we believe validates the potential of the XmAb 2+1 format.

In November 2020, we entered an agreement with J&J, focused on the discovery of XmAb bispecific antibodies against CD28, an immune co-stimulatory receptor on T cells, and PSMA, a prostate tumor target, for the potential treatment of patients with prostate cancer.

Additionally, we have a right to access select, predefined agents from J&J’s

portfolio of clinical-stage drug candidates and commercialized medicines to evaluate potential combination therapies in prostate cancer with agents in our own pipeline, subject to some limitations.

J&J has the same right with our portfolio to evaluate potential combination therapies in prostate cancer, as well.

The ability to study combinations of therapies from both companies’ prostate cancer portfolios leverages our broad clinical pipeline and J&J's prostate cancer therapeutics portfolio.

In the third quarter of 2023, J&J submitted an IND for JNJ-9401, a PSMA x CD28 bispecific antibody developed under the collaboration, and we received a $7.5 million development milestone.

In the fourth quarter of 2023, J&J dosed the first patient in a Phase 1 study of JNJ-9401, and we received a $10.0 million development milestone.

In October 2021, we entered into a second collaboration agreement with J&J to create and characterize CD28 bispecific antibody candidates against B-cell targets.

In the first quarter of 2023, J&J selected a bispecific CD28 candidate under the agreement for further development, and we received a $5.0 million research milestone.

In the third quarter of 2023, J&J submitted a CTA for JNJ-1493, a CD20 x CD28 bispecific antibody developed under the collaboration, and we received a $7.5 million development milestone.

In the fourth quarter of 2023, J&J began dosing patients in a Phase 1 study of JNJ-1493 and selected two additional CD28 bispecific antibody candidates under the agreement, and we received a $10.0 million development milestone and $7.5 million in research milestones.

Other XmAb bispecific antibodies being developed by our partners include Astellas’ ASP2138, a CLDN18.2 x CD3 XmAb 2+1 bispecific antibody, which is in Phase 1 studies to treat patients with gastric/GEJ adenocarcinomas and pancreatic adenocarcinoma and an undisclosed candidate being developed by Novartis, which is also in Phase 1 development.

Technology License Agreements

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Alexion’s Ultomiris® uses Xtend Fc technology for longer half-life.

Ultomiris has received marketing authorizations from regulatory agencies in the U.S.

and multiple global markets for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH) and for patients with atypical hemolytic uremic syndrome (aHUS).

Alexion is also evaluating Ultomiris in a broad late-stage development program across many indications in neurology and nephrology.

In April 2022, Ultomiris was approved by the FDA for the treatment of adult patients with generalized myasthenia gravis (gMG) who are anti-acetylcholine receptor (AChR) positive.

In 2022, we earned $29.4 million in royalties from Alexion.

In August 2019, we provided Vir a non-exclusive license to our Xtend Fc technology for two targets in infectious disease.

Vir has advanced two programs under this agreement.

In the second quarter of 2021, Vir announced plans to

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initiate a Phase 2 trial of VIR-3434 in combination with an siRNA drug candidate as a potential treatment for patients with chronic hepatitis B virus infection, and we earned $0.5 million for the development milestone.

In March 2020, we entered a second agreement with Vir Biotechnology, Inc., under which Vir has non-exclusive access to our Xtend Fc technology to extend the half-life of novel antibodies being investigated as potential treatments for patients with COVID-19.

In May 2021, the FDA granted EUA to sotrovimab for the treatment of mild-to-moderate COVID-19 in high-risk adults and pediatric patients.

In December 2021, the EU granted a temporary authorization for sotrovimab, and several other countries have also provided temporary or conditional authorizations for its use.

Ultomiris has received marketing authorizations in global markets for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), for certain patients with atypical hemolytic uremic syndrome (aHUS) and for certain patients with generalized myasthenia gravis (gMG).

Alexion is also evaluating Ultomiris in a broad development program across additional hematology and neurology indications.

In May 2023, Ultomiris was approved in the EU and Japan for the treatment of certain adult patients with neuromyelitis optica spectrum disorder (NMOSD).

In November 2023, we entered into a royalty purchase agreement (Ultomiris Royalty Sale Agreement) with OMERS.

Under the terms of the Ultomiris Royalty Sale Agreement, we received $192.5 million upon closing in exchange for a portion of royalties and the milestone earned from our Alexion license after July 1, 2023.

In 2023, we earned $38.6 million in royalties and a $20.0 million sales milestone from Alexion.

In January 2020, we entered into a Technology License Agreement with Gilead Sciences, Inc.

(Gilead) in which we provided Gilead an exclusive license to our Cytotoxic Fc and Xtend Fc technologies for antibody candidates.

In the third quarter, Gilead initiated a Phase 2 study including two antibody candidates developed with our Fc technologies, teropavimab and zinlirvimab, and we received $6.0 million in milestones.

In August 2020, we entered into a Technology License Agreement with Omeros Corporation (Omeros) in which we provided Omeros a non-exclusive license to our Xtend Fc technology.

In the third quarter of 2023, Omeros initiated a Phase 2 study of OMS906, which incorporates Xtend Fc technology, and we received a $5.0 million milestone.

In March 2020, we entered a second agreement with Vir Biotechnology, Inc., under which Vir has non-exclusive access to our Xtend Fc technology to extend the half-life of novel antibodies Vir investigated as potential treatments for patients with COVID-19.

In May 2021, the FDA granted EUA to sotrovimab for the early treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg) with positive results of direct severe SARS-CoV-2 viral testing, and at high risk for progression to severe COVID-19, including hospitalization or death.

Sotrovimab has also obtained emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®) for early treatment of COVID-19 in more than 30 countries.

In March 2022, the FDA deauthorized sotrovimab’s use in all U.S.

regions due to increases in the proportion of COVID-19 cases caused by non-susceptible new variants.

As the SARS-CoV-2 virus has mutated, our royalty revenue from the sales of sotrovimab has diminished significantly.

In 2023, we earned $2.2 million in royalties from Vir.

In December 2021, we entered into an agreement with Viridian Therapeutics, inc.

(Viridian) for a non-exclusive license to certain antibody libraries developed by us.

Under the agreement, Viridian received a one-year research license to review the antibodies and the right to select up to three antibodies for further development.

Viridian is responsible for all further development of the selected antibodies.

We received shares of Viridian common stock valued at $7.5 million as an upfront payment and are eligible to receive development, regulatory and sales milestones in addition to royalties on net sales of approved products under the agreement.

Strategic Collaborations

We enter into strategic collaborations where we can create synergies between our partners' strengths and assets and our own protein engineering capabilities, Fc technologies and XmAb drug candidates.

Through these arrangements we seek to create new drug candidates, investigate novel combination therapies and potentially identify additional indications for our portfolio of XmAb drug candidates.

In 2020, we entered into an agreement with Atreca, Inc.

to research, develop and commercialize novel CD3 bispecific antibody candidates as potential therapeutics in oncology.

During a three-year research term, Atreca will provide antibodies against novel tumor targets through its discovery platform from which we will engineer XmAb bispecific antibodies that bind to the CD3 receptor on T cells.

The two companies will share research costs equally during the research term.

In January 2023, we and Atreca selected an antibody from the collaboration for development.

We and Atreca will share development costs with Atreca conducting development activities for the bispecific candidate.

In January 2023, we and Atreca selected an antibody candidate from the collaboration to advance into development.

The University of Texas MD Andersen Cancer Center

In September 2020, we entered into an agreement with MD Andersen, in which we will provide funding over a five year period and MD Andersen will collaborate to design and execute additional clinical studies with our portfolio of XmAb drug candidates, including novel bispecific antibody and cytokine candidates.

We own all rights to the programs and results generated from these studies.

MD Andersen is currently conducting studies with our vudalimab drug candidate.

Caris Life Sciences

In July 2022, we entered into an agreement with Caris Life Sciences (Caris), under which Caris will apply its proprietary end-to-end discovery platform to identify novel targets for XmAb bispecific antibody drug candidates for the treatment of patients with cancer.

We received exclusive options to research, develop and commercialize products directed against up to three targets.

Caris received an upfront payment and will be eligible to receive licensing fees, discovery, development, regulatory and sales-based milestones and royalty payments on net sales of each product commercialized by us and future rights for molecular profiling and companion diagnostics for drug candidates developed under the collaboration.

In December 2022, we entered into a second agreement with Caris.

The second agreement increased the number of targets that Caris will provide and also the tumor types that are being evaluated.

We paid Caris an upfront payment, and Caris is eligible for additional licensing fees, milestones and royalty payments on net sales of each product commercialized by us.

In December 2020, we entered into an agreement with Viridian Therapeutics, Inc., (Viridian) in which we provided Viridian a non-exclusive license to our Xtend Fc technology and an exclusive license to apply our Xtend Fc technology to antibodies targeting IGF-1R.

We received common stock in Viridian as an upfront payment.

Xtend Fc technology was not applied to Viridian antibodies, and in 2023 the agreement was terminated.

In December 2021, we entered into a second agreement with Viridian for a non-exclusive license to certain antibody libraries developed by us, for which the term has ended.

We received additional common stock in Viridian as an upfront payment.

Under the agreement, Viridian received a one-year research license to review the antibodies and the agreement expired in 2023.

Refer to Part IV, Item 15, Note 10, "Collaboration and Licensing Agreements" of the notes to our financial statements included in this Annual Report on Form 10-K for a description of the key terms of our arrangements.

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Financial Operations Overview

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Revenue recognized from our collaboration and product licensing agreements includes non-refundable upfront payments, milestone payments and royalties on net sales of approved products while revenue from our technology licensing agreements includes upfront payments, option payments to obtain commercial licenses, milestone payments and royalties on net sales of approved products.

Since our inception through December 31, 2022, we have generated $985.3 million in revenues under the various product development partnership and technology license arrangements.

Since our inception through December 31, 2023, we have generated $1.2 billion in revenues under the various product development partnership and technology license arrangements.

Several of our product development partnership and technology license agreements provide us the opportunity to earn future milestone payments, royalties on product sales and option exercise payments.

In 2023, we sold a portion of the rights to received royalties under our MorphoSys and Alexion arrangements for $215.0 million.

Summary of Collaboration and Licensing Revenue by Partner

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Astellas — 5.0

Genentech — 2.5

Janssen 77.8 7.0

MorphoSys 8.7 7.8

Novartis — 43.1

Vir 2.2 115.4

Viridian — 7.5

Total $ 168.3 $ 164.6

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We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received.

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and manage preclinical studies and clinical trials on our behalf based on the actual time and expenses incurred by them.

We estimate contract manufacturing, preclinical study and clinical trial expenses based on the services performed pursuant to the contracts with manufacturing, research institutions and clinical research organizations that manufacture and conduct and manage preclinical studies and clinical trials on our behalf based on the actual time and expenses incurred by them.

We accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement.

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We allocate research management, overhead, commonly used laboratory supplies and equipment, and facility costs based on the percentage of time of full-time research personnel efforts on each program.

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The following is a comparison of research and development expenses for the years ended December 31, 2023 and 2022 (in millions):

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CD3 programs:

Vibecotamab* (1)

Tidutamab (2)

Plamotamab* $ 16.5 $ 19.8

XmAb819 (ENPP3 x CD3) 18.2 10.5

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XmAb808 (B7H3 x CD3) 16.7 17.7

Tumor microenvironment (TME) activator programs:

Vudalimab (XmAb717) 22.8 25.6

Tumor micro environment (TME) activator programs:

Vudalimab 44.2 22.8

XmAb104 24.2 21.3

Total TME activator programs 52.8 53.2

Total TME activators programs 68.4 44.1

Subtotal bispecific programs 140.2 99.2

Cytokine programs:

XmAb662 IL-12 15.5 5.9

XmAb306/RG6323* 13.2 15.3

XmAb143-IL18 5.7 —

XmAb306/RG6323 programs* 14.1 13.2

XmAb564 24.1 17.2

XmAb662 (IL-12-Fc) 12.8 15.5

Total cytokine programs 51.0 45.9

Subtotal bispecific programs 174.5 170.0

Other, research and early stage programs 51.7 30.8

Wind down costs of terminated programs (1)

Total research and development expenses $ 253.6 $ 199.6

*Includes net payments to, and reimbursements from, our partners pursuant to agreements that include cost-sharing arrangements.

(1) Represents wind down costs of the program:

Novartis and the Company stopped development of the vibecotomab program in 2021.

(2) Represents wind down costs of the program;

the Company stopped development of the tidutamab program in the second quarter of 2022.

(3) Represents wind down costs of the program;

the Company stopped development of the XmAb841 program in the second quarter of 2022.

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*Includes net reimbursements to and from our partners pursuant to agreements that include cost-sharing arrangements.

(1) Research and development expenses include wind down costs of programs that terminated in prior periods including the vibecotamab, tidutamab, and XmAb841 programs.

General and Administrative Expenses

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Other Income, Net

For the year ended December 31, 2022, other income, net, consists primarily of unrealized gain on equity securities during the year, while for the year ended December 31, 2021, other income, net, consists primarily of unrealized and realized gains on equity securities during the year.

For the year ended December 31, 2023, other income, net, consists primarily of interest income from marketable debt securities during the year, while for the year ended December 31, 2022, other income, net, consists primarily of unrealized gains on equity securities during the year.

Critical Accounting Policies, Significant Judgments, and Estimates

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We record the initial equity at its fair value and mark the value to market quarterly for publicly traded securities and review for impairment for equity that is not publicly traded on a national exchange.

Sale of Future Royalties

In November 2023, we entered into the sale of a portion of our royalties due us under the Alexion Agreement (the Ultomiris Royalty Sale Agreement) and a portion of our royalties due us under the MorphoSys Agreement (the Monjuvi Royalty Sale Agreement) and received upfront proceeds of $192.5 million and $22.5 million, respectively.

We evaluated the Ultomiris Royalty Sale Agreement under Accounting Standards Codification (ASC) 470 - Deb t (ASC 470) and determined that the upfront payment should be accounted for as deferred income as none of the criteria for classification as debt had been met.

We apply the "unit-of-revenue" method of recognizing income in the consolidated statements of income (loss) and such amounts are included in royalty revenue.

For the three months ended December 31, 2023, we recorded $6.2 million of non-cash royalty revenue related to the royalty sale.

We evaluated the Monjuvi Royalty Sale Agreement under ASC 470 and determined that the upfront payment should be accounted for as a liability in the consolidated balance sheet.

The upfront proceeds will be amortized using the effective interest rate method over the estimated life of the related expected royalty stream.

The liability and related interest expense are based on our current estimates of future royalties to be paid over the life of the agreement.

We will periodically assess the expected royalty payments and to the extent the future estimates or timing of such payments are materially different than the previous estimates, we will prospectively recognize related interest expense.

Royalty revenue will be recognized as earned on net sales of Monjuvi/Minjuvi and payments made to the purchaser will be a reduction to the liability when paid.

For the three months ended December 31, 2023, we recorded $2.1 million of non-cash royalty revenue related to the royalty sale.

For further discussion, refer to N ote 11 - Sale of Future R oyalties in the accompanying notes to the consolidated financial statements included in Part II, Item 8 .

Cons olidated Financial Statements and Supplementary Data .

Capitalized Intellectual Property Costs

We capitalize and amortize third-party intellectual property costs such as amounts paid to outside patent counsel for filing, prosecuting and obtaining patents for our internally developed technologies and product candidates, to the extent such patents are deemed to have probable future economic benefit.

We also capitalize amounts paid to third parties for licenses that we acquire for intellectual property or for research and development purposes where the technology has

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alternative uses.

We also capitalize amounts paid to third parties for licenses that we acquire for intellectual property or for research and development purposes where the technology has alternative uses.

The net capitalized patents, licenses, and other intangible assets as of December 31, 2023 and 2022 were $18.7 million and $18.5 million, respectively.

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Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period.

Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when

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the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that such tax rate changes are enacted.

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We recorded net deferred tax assets of $158.1 million as of December 31, 2023, which was fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits.

The deferred tax assets are primarily comprised of deferred revenue, federal and state tax net operating loss (NOL) carryforwards and research and development tax credit carryforwards.

The deferred tax assets are primarily comprised of deferred revenue, capitalized research and development expenses, federal and state tax net operating loss (NOL) carryforwards and research and development tax credit carryforwards.

As of December 31, 2023, we had cumulative net operating loss carryforwards for federal income tax purposes of approximately $54.2 million;

$59.0 million of such losses were incurred prior to December 31, 2017 and $43.4 million were incurred in the years ending on or after December 31, 2018.

all of such losses were incurred prior to December 31, 2017.

We also had available tax credit carryforwards of $33.6 million for federal tax purposes.

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state net operating loss carryforwards expire starting in 2035;

and federal tax credit carryforwards begin to expire starting in 2034.

We recorded an income tax expense of $0.7 million for the year ended December 31, 2022.

No income tax expense or benefit was recorded for the year ended December 31, 2021.

and federal tax credit carryforwards expire starting in 2034.

We recorded a federal income tax expense of $5.8 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively.

Valuation of Stock-Based Compensation

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• Expected Dividend Yield —We have never declared or paid dividends and have no plans to do so in the foreseeable future.

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• Risk-Free Interest Rate —This is the U.S.

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Milestone 88.5 5.5 83.0

Licensing — 80.8 (80.8)

Royalties 49.5 152.1 (102.6)

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Income tax expense 5.8 0.7 5.1

Net income (loss) $ (55.2) $ 82.6 $ (137.8)

Research collaboration revenues in 2022 are primarily revenue recognized under our second Janssen agreement, while research collaboration revenues in 2021 are primarily revenue recognized under our first Janssen agreement and our Novartis agreement.

Milestone payments decreased by $15.5 million in 2022 from 2021 amounts primarily due to milestones received from Astellas in 2022, compared to milestones received from MorphoSys, Janssen and Novartis in 2021.

Licensing revenues decreased in 2022 from the amounts reported for the same period in 2021.

Licensing revenue in 2021 primarily consists of revenues recognized from the second Janssen agreement and Zenas.

Increased royalty revenues for 2022 are primarily due to additional revenue recognized from our Vir agreement over 2021 royalty amounts.

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(126.3) (55.2) (71.1)

Net loss attributable to non-controlling interest

(0.2) — (0.2)

Net loss attributable to Xencor, Inc.

$ (126.1) $ (55.2) $ (70.9)

Research collaboration revenues in 2023 and 2022 are primarily revenue recognized under our second Janssen agreement.

Milestone payments increased by $83.0 million in 2023 from 2022 amounts primarily due to milestones received from Alexion, Gilead, J&J, Omeros, and Zenas in 2023, compared to milestones received from Astellas in 2022.

Royalty revenues for 2023 are lower than royalty revenues in 2022 primarily due to a decrease in royalty revenue from Vir.

Research and Development Expenses

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CD3 programs:

Vibecotamab* (1)

$ 4.0 $ 8.3 $ (4.3)

19.8 33.2 (13.4)

Tidutamab (2)

11.0 15.3 (4.3)

Plamotamab* $ 16.5 $ 19.8 $ (3.3)

XmAb819 (ENPP3 x CD3) 18.2 10.5 7.7

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XmAb808 (B7H3 x CD3) 16.7 17.7 (1.0)

Tumor microenvironment (TME) activator programs:

Vudalimab (XmAb717) 22.8 25.6 (2.8)

Tumor micro environment (TME) activator programs:

Vudalimab 44.2 22.8 21.4

XmAb104 24.2 21.3 2.9

8.7 12.2 (3.5)

Total TME activator programs 52.8 53.2 (0.4)

Total TME activators programs 68.4 44.1 24.3

Subtotal bispecific programs 140.2 99.2 41.0

Cytokine programs:

XmAb662 IL-12 15.5 5.9 9.6

XmAb306/RG6323* 13.2 15.3 (2.1)

XmAb143-IL18 5.7 — 5.7

XmAb306/RG6323 programs* 14.1 13.2 0.9

XmAb564 24.1 17.2 6.9

XmAb662 (IL-12-Fc) 12.8 15.5 (2.7)

Total cytokine programs 51.0 45.9 5.1

Subtotal bispecific programs 174.5 170.0 4.5

Other, research and early stage programs 51.7 30.8 20.9

Wind down costs of terminated programs (1)

10.7 23.7 (13.0)

Total research and development expenses $ 253.6 $ 199.6 $ 54.0

*Includes net reimbursements from our partners pursuant to agreements that include cost-sharing arrangements.

(1) Represents wind down costs of the program;

Novartis and the Company stopped development of the vibecotomab program in 2021.

(2) Represents wind down costs of the program;

the Company stopped development of the tidutimab program in the second quarter of 2022.

(3) Represents wind down costs of the program;

the Company stopped development of the XmAb841 program in the second quarter 2022.

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Research and development expenses increased by $7.1 million in 2022 over 2021 amounts as we continue to expand our pipeline of bispecific antibody and cytokine candidates.

Increased research and development spending in 2022 was primarily driven by increased spending on our CD3, CD28 and cytokine programs including XmAb808 which we advanced into clinical studies in 2022, XmAb662 for which we completed IND-enabling activities in 2022 and have an open IND, and XmAb541 for which we are conducting IND-enabling activities.

*Includes net reimbursements to and from our partners pursuant to agreements that include cost-sharing arrangements.

(1) Research and development expenses include wind down costs of programs that terminated in prior periods including the vibecotamab, tidutamab, and XmAb841 programs.

Research and development expenses increased by $54.0 million in 2023 over 2022 amounts primarily due to increased spending on our bispecific development programs including XmAb541, vudalimab, and early research and development programs.

General and Administrative Expenses

General and administrative expenses increased by $8.7 million in 2022 over 2021 amounts primarily due to increases in general and administrative compensation costs, and additional spending on facilities and licensing fees.

General and administrative expenses increased by $5.9 million in 2023 over 2022 amounts primarily due to increases in general and administrative compensation costs and additional spending on professional fees.

Other Income, Net

Other income, net decreased by $10.8 million in 2022 from 2021 amounts.

We recognized an unrealized gain from remeasuring equity securities in connection with our licensing transactions.

In 2021, we realized gain from the sale of the INmune option offset by unrealized losses from the change in accounting estimate for equity securities in connection with our licensing transactions.

Other income, net decreased by $9.8 million in 2023 from 2022 amounts due to a net decrease in unrealized gain from equity securities, partially offset by an increase in interest income from our investment in marketable debt securities.

Liquidity and Capital Resources

Since our inception, our operations have been primarily financed through proceeds from public offering, private sales of our equity, and payments received under our collaboration and development partnerships and licensing arrangements.

Since our inception, our operations have been primarily financed through proceeds from public offerings, private sales of our equity, and payments received under our collaboration and development partnerships and licensing arrangements.

We have devoted our resources to funding research and development programs, including discovery research, preclinical and clinical development activities.

We have incurred substantial operating losses since our inception, and we expect to continue to incur operating losses into the foreseeable future as we advance the ongoing development of our bispecific antibody and cytokine product candidates, evaluate opportunities for the potential clinical development of our other preclinical programs, and continue our research efforts.

In November 2023, we entered into the Monjuvi Royalty Sale Agreement and Ultomiris Royalty Sale Agreement and received total proceeds from the transactions of $215.0 million.

For further discussion of the sale of future royalties, refer to Note 11 - Sale of Future R oyalties in the accompanying notes to the consolidated financial statements included in Part II, I tem 8 .

Consolidated Statements and Sup p lementary Data of this Annual Report on Form 10-K.

In 2023, we received a total of $111.7 million in milestone payments and royalties in connection with licensing of our technologies and products.

At December 31, 2022, we had $613.5 million of cash, cash equivalents, marketable debt securities, and receivables compared to $664.1 million at December 31, 2021.

At December 31, 2023, we had $697.4 million of cash, cash equivalents, and marketable debt securities compared to $584.5 million at December 31, 2022.

We expect to continue to receive additional payments from our collaborators for research and development services rendered, additional milestone, contingent payments, opt-in and royalty payments.

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We expect to continue our collaboration arrangements and will look for additional collaboration and licensing opportunities.

Although it is difficult to predict our funding requirements, based upon our current operating plan, we believe that our existing cash, cash equivalents and marketable securities, together with interest thereon and expected milestone and royalty payments will be sufficient to fund our operations through the end of 2025.

We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

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Operating Activities

Net cash provided by operating activities for the year ended December 31, 2022 reflects royalty payments received during the year in excess of operating expenses while net cash used in operating activities for the year ended December 31, 2021 reflects the operating expenses incurred during the year offset by upfront, milestone, and royalty payments received.

Net cash provided by operating activities for the year ended December 31, 2023 and 2022 reflects milestone and royalty payments, including sale of a portion of future royalties under the Ultomiris Royalty Sale Agreement in 2023, received during the year in excess of operating expenses.

Investing Activities

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We purchased $18.4 million and $38.5 million of capital equipment for the years ended December 31, 2023 and 2022, respectively.

We also purchased a $5.0 million convertible note for the year ended December 31, 2021.

We also converted a $5.0 million convertible note to equity investment for the year ended December 31, 2022.

Financing Activities

Net cash provided by financing activities during the years ended December 31, 2022 and 2021 consists primarily of cash from stock option exercises and the sales of shares under the Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities decreased during 2022 from amounts reported for 2021 primarily from proceeds received from issuance of common stock in connection with our Janssen collaboration in 2021.

Net cash provided by financing activities during the year ended December 31, 2023 consists primarily of cash from the sale of future royalties under the Monjuvi Royalty Sale Agreement.

Net cash provided by financing activities during the year ended December 31, 2022 consists primarily of cash from stock option exercises and the sales of shares under the Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities increased during 2023 from amounts reported for 2022 primarily from proceeds received from the sale of future royalties.

Contractual Obligations and Commitments

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We have also entered into agreements with third-party vendors which will require us to make future payments upon the delivery of goods and services in future periods.

In February 2018, we entered into a license agreement with BIO-TECHNE Corporation (BIO-TECHNE) for a non-exclusive license to a certain recombinant monoclonal antibody reactive with human programmed death protein, PD-1.

In April 2021, we entered into a license agreement with BIO-TECHNE Corporation (BIO-TECHNE) for a non-exclusive license to a certain recombinant monoclonal antibody reactive with human Claudin-6 protein (CLDN6).

This antibody is being developed in our XmAb541 program.

Under this license agreement, we may be required to make $30.6 million in additional contingent payments which include $1.8 million of clinical milestones, $4.8 million of regulatory milestones and milestones on the achievement of certain sales of $24.0 million, in addition to royalties upon commercial sales of products of 0.5%.

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In February 2016, we entered into a worldwide exclusive commercial license agreement with Selexis SA to develop and commercialize products produced from the Selexis cell line that was manufactured in connection with our plamotamab drug candidate.

In connection with the license, we may be required to make CHF 1.7 million in additional contingent obligations which include CHF 500,000 in development milestones, CHF 400,000 in regulatory milestones and CHF 800,000 in sales milestones, in addition to royalties upon commercial sales of products of less than 1%.

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CHF 800,000 in sales milestones, in addition to royalties upon commercial sales of products of less than 1%.

In 2022, we recorded a milestone of CHF 200,000 upon initiation of Phase 2.

In December 2017, we entered into worldwide exclusive commercial license agreements with Selexis to develop and commercialize products produced from the Selexis cell line that was manufactured for each of our bispecific antibody and cytokine drug candidates:

tidutamab, vudalimab, XmAb841, XmAb104, XmAb306, XmAb564 and XmAb819.

vudalimab, XmAb306, XmAb564 and XmAb819.

The terms for each agreement are identical and for each licensed cell line we may be required to make up to CHF 1.4 million in total development, regulatory and sales milestones which include CHF 425,000 in development milestones, CHF 340,000 in regulatory milestones and CHF 680,000 in sales milestones.

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis