What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-02-27 · 364 added, 329 removed, 798 unchanged (46% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets

Statements of Comprehensive Income (Loss)

Statements of Stockholders’ Equity

Statements of Cash Flows

Notes to Financial Statements

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Cons olidated Balance Sheets

Consolidated Statements of Income (Loss)

C onsolidated Statements of Co mprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

To the Stockholders and the Board of Directors of Xencor, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Xencor, Inc.

(the Company) as of December 31, 2022 and 2021, the related statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the financial statements (collectively, the financial statements).

We have audited the accompanying consolidated balance sheets of Xencor, Inc.

and its subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition Allocated to Research Services

As described in Note 10 to the financial statements, the Company is recognizing revenue allocated to research services over time.

For research services revenue recognized over time, management utilizes the input method to measure progress toward the complete satisfaction of the performance obligations based upon the research hours incurred to date as a percentage of the total estimated research hours.

We identified revenue recognition for this contract as a critical audit matter.

The principal consideration for our determination that revenue recognition for research services was a critical audit matter is that the measure of progress towards completion utilizes assumptions for future hours to complete the performance obligations, and those assumptions have significant estimation uncertainty.

A significant change in the assumptions could affect the amount of revenue recognized in an accounting period.

Given these factors, the related audit effort in evaluating management’s judgments in determining the revenue recognition allocated to research services required significant audit effort and a high degree of auditor judgment and subjectivity to perform our audit procedures and evaluate the audit evidence obtained.

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The communication of critical audit matter did not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Judgement and Complexity of Accounting for the Sale of Future Royalty Streams

As described in Note 11 to the financial statements, the Company evaluated the up-front payment received from the sale of the Ultomiris (Alexion) Agreement classified as deferred revenue and evaluated the up-front payment received from the sale of the Monjuvi (Morphosys) Agreement classified as debt under ASC 470.

When the sale of future revenue is accounted for as debt, the company continues to recognize revenue based on the terms of the contract with the licensee.

When the sale is accounted for as deferred revenue, the company recognizes revenue using the units of revenue method.

We identified the related audit effort in evaluating management’s judgements in determining the factors that would indicate whether the transaction should be recorded as debt or deferred revenue as a critical audit matter.

The principal consideration for our determination that the judgement and complexity of accounting for the sale of future royalty streams under the Ultomiris and Monjuvi agreements was a critical audit matter is that the related audit effort in evaluating management’s judgements in determining the factors that would indicate whether the transaction should be recorded as debt or deferred revenue required significant audit effort and a high degree of auditor judgment and subjectivity to perform our audit procedures and evaluate the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included testing the effectiveness of controls relating to revenue recognition, including controls over management’s process for recognizing revenue over time.

Our procedures included, among others (i) obtaining information regarding the nature and extent of progress from the Company’s research team conducting the research activities;

(ii) obtaining an understanding for significant changes in budgeted to actual hours;

(iii) evaluating the progress towards completion of contracts based on hours incurred, and testing the appropriateness of the timing and amount of revenue recognized;

and (iv) assessing management’s sensitivity analyses over the significant assumptions to evaluate the impact of changes in estimated hours to complete that would result from changes in the underlying assumptions;

and (v) assessing management’s estimates based on updated information available after December 31, 2022.

Our procedures included, among others (i) obtaining an understanding of the relevant controls related to the evaluation of the classification of up front payments and tested such controls for design and operating effectiveness (ii) obtaining information regarding the nature and extent of the Royalty Purchase Agreement;

(iii) obtaining an understanding detailing the transaction and accounting treatment;

and (iv) assessing management’s classification under both agreements, including utilization of a subject matter expert.

/s/ RSM US LLP

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February 28, 2024

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Opinion on Internal Control Over Financial Reporting

We have audited Xencor, Inc.’s (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Opinion on the Internal Control Over Financial Reporting

We have audited Xencor, Inc.

and its subsidiary (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2022 and 2021, the related statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, of the Company and our report, dated February 24, 2023, expressed an unqualified opinion.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements) of the Company and our report dated February 28, 2024 expressed an unqualified opinion.

Basis for Opinion

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February 28, 2024

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Balance Sheets

Consolidated Balance Sheets

(in thousands, except share and per share data)

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Patents, licenses, and other intangible assets, net 18,663 18,500

Restricted cash 380 —

Marketable debt securities - long term 145,512 3,826

Equity securities 64,210 54,383

Notes receivable - long term — 5,000

Right of use asset 33,995 34,419

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Accrued expenses 23,564 18,728

Income tax payable 5,782 —

Lease liabilities 3,435 4,708

Deferred revenue — 30,320

Deferred income 31,682 —

Total current liabilities 84,709 63,844

Lease liabilities, net of current portion 59,025 54,926

Deferred income, net of current portion 125,183 —

Debt, net of current portion 14,642 —

Total liabilities 283,559 118,770

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Accumulated deficit ( 464,372 ) ( 338,285 )

Total stockholders’ equity attributable to Xencor, Inc.

668,796 727,496

Non-controlling interest 337 —

Total stockholders' equity 669,133 727,496

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See accompanying notes to the financial statements.

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Statements of Comprehensive Income (Loss)

Consolidated Statements of Income (Loss)

(in thousands, except share and per share data)

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Interest income, net 18,626 4,817 849

Other income (expense), net ( 286 ) ( 1,274 ) 95

Gain on equity securities, net 23,434 39,289 105

Other expense, net ( 31 ) ( 286 ) ( 1,274 )

Gain (loss) on equity securities, net ( 395 ) 23,434 39,289

Total other income, net 18,200 27,965 38,864

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Net income (loss) ( 126,250 ) ( 55,181 ) 82,631

Other comprehensive income (loss)

Net unrealized loss on marketable securities available-for-sale ( 5,442 ) ( 1,584 ) ( 1,087 )

Comprehensive income (loss) $ ( 60,623 ) $ 81,047 $ ( 70,420 )

Net income (loss) per share attributable to common stockholders:

Net loss attributable to non-controlling interest ( 163 ) — —

Net income (loss) attributable to Xencor, Inc.

$ ( 126,087 ) $ ( 55,181 ) $ 82,631

Net income (loss) per common share attributable to Xencor, Inc.:

Basic $ ( 2.08 ) $ ( 0.93 ) $ 1.42

Diluted $ ( 2.08 ) $ ( 0.93 ) $ 1.37

Weighted average shares used to compute net income (loss) per share attributable to common stockholders:

Weighted average common shares used to compute net income (loss) per share attributable to Xencor, Inc.

Basic 60,503,283 59,652,461 58,379,641

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See accompanying notes to the financial statements.

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Statements of Stockholders’ Equity

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Year ended December 31,

2023 2022 2021

Net income (loss) $ ( 126,250 ) $ ( 55,181 ) $ 82,631

Other comprehensive income (loss):

Net unrealized gain (loss) on marketable debt securities available-for-sale 8,243 ( 5,442 ) ( 1,584 )

Comprehensive income (loss) ( 118,007 ) ( 60,623 ) 81,047

Comprehensive income (loss) attributable non-controlling interest ( 163 ) — —

Comprehensive income (loss) attributable to Xencor, Inc.

$ ( 117,844 ) $ ( 60,623 ) $ 81,047

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

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Income (Loss) Accumulated

Deficit Total

Deficit Non-Controlling Interest Total

Stockholders’

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Balance, December 31, 2020 57,873,444 $ 580 $ 937,525 $ 74 $ ( 365,735 ) — $ 572,444

Sale of common stock 748,062 7 28,913 — — — 28,920

Issuance of common stock upon exercise of stock awards 520,240 5 12,276 — — — 12,281

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Issuance of restricted stock units 151,555 2 ( 2 ) — —

Comprehensive income — — — ( 1,087 ) ( 69,333 ) ( 70,420 )

Comprehensive income (loss) — — — ( 1,584 ) 82,631 — 81,047

Stock-based compensation — — 36,975 — — — 36,975

Balance, December 31, 2021 59,355,558 595 1,017,523 ( 1,510 ) ( 283,104 ) — 733,504

Sale of common stock 748,062 7 28,913 — — 28,920

Issuance of common stock upon exercise of stock awards 195,485 2 3,608 — — — 3,610

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Issuance of restricted stock units 341,073 3 ( 3 ) — — — —

Comprehensive income — — — ( 1,584 ) 82,631 81,047

Comprehensive loss — — — ( 5,442 ) ( 55,181 ) — ( 60,623 )

Stock-based compensation — — 48,913 — — — 48,913

Balance, December 31, 2022 59,997,713 601 1,072,132 ( 6,952 ) ( 338,285 ) — 727,496

Sale of common stock — — —

Issuance of common stock upon exercise of stock awards 344,383 3 3,409 — — — 3,412

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Issuance of restricted stock units 558,066 6 ( 6 ) — — — —

Comprehensive income — — — ( 5,442 ) ( 55,181 ) ( 60,623 )

Contribution from non-controlling interest owners — — — — — 500 500

Comprehensive income (loss) — — — 8,243 ( 126,087 ) ( 163 ) ( 118,007 )

Stock-based compensation — — 53,755 — — — 53,755

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See accompanying notes to the financial statements.

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Statements of Cash Flows

Consolidated Statements of Cash Flows

(in thousands)

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Cash flows from operating activities

Net income (loss) $ ( 55,181 ) $ 82,631 $ ( 69,333 )

Consolidated net income (loss) $ ( 126,250 ) $ ( 55,181 ) $ 82,631

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

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Loss on disposal of assets 1,379 145 462

Gain on sale of marketable securities available-for-sale — — ( 153 )

Equity received in connection with license agreement ( 10,000 ) ( 5,397 ) ( 22,379 )

Equity received in connection with sale of financial assets — — ( 3,300 )

Cash redemption of equity received in connection with license agreement — — 5,390

Change in fair value of equity securities 395 ( 23,434 ) ( 20,988 )

Equity securities impairment — 138 762

Noncash interest expense 681 — —

Changes in operating assets and liabilities:

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Income tax 5,782 — —

Contract asset and deposits — 12,059 ( 12,401 )

Accounts payable 3,826 ( 3,913 ) 5,047

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Deferred revenue ( 30,320 ) ( 6,974 ) ( 55,321 )

Deferred income 156,865 — —

Net cash provided by (used in) operating activities 85,111 24,485 ( 16,853 )

Cash flows from investing activities

Proceeds from sale and maturities of marketable securities available-for-sale 306,607 485,152 757,617

Proceeds from sale and maturities of marketable debt securities available-for-sale 693,090 306,607 485,152

Proceeds from sale of property and equipment 1 — 19

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Exercise of stock options — — ( 842 )

Net cash provided by (used in) investing activities ( 119,725 ) ( 46,249 ) 100,192

Net cash used in investing activities ( 111,065 ) ( 119,725 ) ( 46,249 )

Cash flows from financing activities

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Proceeds from issuance of common stock — — 28,920

Proceeds from sale of future royalties 20,293 — —

Proceeds from non-controlling interest 500 — —

Net cash provided by financing activities 26,182 5,702 43,038

Net (decrease) increase in cash and cash equivalents ( 89,538 ) ( 20,064 ) 113,232

Cash and cash equivalents, beginning of year 143,480 163,544 50,312

Cash and cash equivalents, end of year $ 53,942 $ 143,480 $ 163,544

Net increase (decrease) in cash, cash equivalents, and restricted cash 228 ( 89,538 ) ( 20,064 )

Cash, cash equivalents, and restricted cash, beginning of year 53,942 143,480 163,544

Cash, cash equivalents, and restricted cash, end of year $ 54,170 $ 53,942 $ 143,480

Supplemental disclosures of cash flow information

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See accompanying notes to the financial statements.

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Summary of Significant Accounting Policies

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Our engineered Fc domains, the XmAb technology, can increase antibody immune inhibition, improve cytotoxicity, extend half-life and most recently are used to create bispecific antibodies and cytokines.

Our operations are based in Monrovia, California and San Diego, California.

Basis of Presentation

The Company’s financial statements as of December 31, 2022, 2021, and 2020 and for the years then ended have been prepared in accordance with accounting principles generally accepted in the United States (U.S.).

Our operations are based in Pasadena, California and San Diego, California.

Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of Xencor, Inc.

and its subsidiary Gale Therapeutics Inc., which was incorporated in December 2023.

Since we own less than 100% of Gale, the Company records net loss attributable to non-controlling interests in its consolidated statements of income (loss) equal to the percentage of the economic or ownership interests retained in Gale by the non-controlling party.

The Company’s consolidated financial statements as of December 31, 2023, 2022, and 2021 and for the years then ended have been prepared in accordance with accounting principles generally accepted in the United States (U.S.).

Use of Estimates

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The Company does not anticipate that the standard will have a significant impact on its financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures , which is effective for fiscal years beginning on and after December 15, 2024, and interim periods within those fiscal years.

The standard provides more transparency about income tax information through improvements to income tax

disclosures primarily related to the rate reconciliation and income taxes paid information.The Company does not anticipate that the standard will have a significant impact on its financial statements.

Variable Interest Entity

A Variable Interest Entity (VIE) is a legal entity that, by design, 1) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, 2) has equity investors that lack the power to direct the entity's activities, 3) has investors with limited obligation to absorb expected losses, or 4) has investors who do not have the right to receive the residual returns of the entity.

The primary beneficiary of a VIE is the party with the controlling financial interest and has the power to direct the activities of the VIE that most significantly impact the entity's economic performance and has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE that could be potentially significant to the VIE.

On December 19, 2023 we entered into the Gale License and Gale Services Agreements.

See Note 10 , We consolidated Gale's financial statements in which we have direct controlling financial interest based on the VIE model.

We consider all the facts and circumstances, including our role in establishing Gale and our ongoing rights and responsibilities to assess where we have the power to direct the activities of Gale.

In general, the parties that make the most significant decisions affecting the VIE and have the right to remove those decision-makers unilaterally or by majority vote are deemed to have the power to direct the activities of a VIE.

At Gale's inception, we determined whether we were the primary beneficiary and if Gale should be consolidated based on facts and circumstances.

Under the rules of determining whether an entity is a VIE, we determined that Gale is a VIE and we are the primary beneficiary.

Liability Related to the Sale of Future Royalties

We record a liability related to the sale of future Monjuvi royalties as debt, amortized under the effective interest rate method over the estimated life of the Monjuvi Royalty Sale Agreement.

See Note 11 .

The amortization of the liability related to the sale of future royalties is based on our current estimate of future royalty payments.

Royalty revenue will be recognized as earned, and the payments made will be a reduction of the liability when paid.

Non-Cash Interest Expense on the Liability Related to the Sale of Future Royalties

The total expected royalty payments less the net proceeds received will be recorded as non-cash interest expense over the life of the liability.

Interest is imputed on the unamortized portion using the effective interest method and expense is recorded based on the timing of the payments received over the term of the Monjuvi Royalty Sale Agreement.

The actual interest rate will be affected by the timing of royalty payments made and changes in the forecasted revenue.

Deferred Income Related to the Sale of Future Royalties

We record a liability related to the sale of future Ultomiris royalties as deferred income, amortized under the units-of-revenue method by computing a ratio of the proceeds received to the total expected payments over the term of the Ultomiris Royalty Sale Agreement.

See Note 11 .

The amortization of the liability related to the sale of future royalties is based on our current estimate of future royalty payments.

Royalty revenue will be recognized as earned and the payments made will be a reduction of the liability when paid.

Revenue Recognition

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The terms of our license, research and development, and collaboration agreements generally include non-refundable upfront payments, research funding, co-development payments and reimbursements, license fees, and milestone and other contingent payments to us for the achievement of defined collaboration objectives and certain clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products.

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The terms of our licensing agreements include non-refundable upfront fees, annual licensing fees, and contractual payment obligations for the achievement of pre-defined preclinical, clinical, regulatory and sales-based events by our partners.

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We recognize deferred revenue as revenue in future periods when the applicable revenue recognition criteria have been met.

The total amounts reported as deferred revenue were $ 30.3 million and $ 37.3 million at December 31, 2022 and 2021, respectively.

There was no deferred revenue reported at December 31, 2023.

The total amount reported as deferred revenue was $ 30.3 million at December 31, 2022.

Accounts Receivable

Accounts receivable primarily consists of royalty and milestone revenues receivable from our license and collaboration agreements, as well as receivables arising from cost-sharing development activities.

We did not record an allowance for doubtful accounts at December 31, 2022 or 2021, as we expect to collect all receivables within the terms, which are generally between 30 and 60 days.

Pursuant to the Ultomiris and Monjuvi Royalty Sale Agreements, a portion of the proceeds we received from the purchasers related to the sale of accounts receivable on royalty and milestone revenue earned at September 30, 2023.

Payments for these receivables were paid directly to the purchasers prior to the year-ended December 31, 2023.

We did not record an allowance for doubtful accounts at December 31, 2023 or 2022 due to an immaterial allowance as a result of our evaluation of credit risk under ASC 326.

We expect to collect all receivables within the terms, which are generally between 30 and 60 days.

Research and Development Expenses

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We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.

Restricted Cash

As of December 31, 2023, we had an outstanding letter of credit (LOC) collateralized by a money market account of $ 0.4 million, to the benefit of the landlord related to the Company’s San Diego facility lease.

The terms of the lease provide that the amount of the LOC will be reduced on a ratable basis over the term of the lease.

The original amount of the LOC was classified as long-term restricted cash as of December 31, 2023.

Marketable Debt and Equity Securities

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There were no impairment losses or recoveries recorded for the years ended in December 31, 2023 and 2022, respectively.

Accrued interest on

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marketable debt securities is included in marketable securities’ carrying value.

Accrued interest on marketable debt securities is included in marketable securities’ carrying value.

Accrued interest was $ 2.3 million and $ 1.3 million at December 31, 2023 and 2022, respectively.

Each reporting period, the Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if each security’s fair value has declined below its amortized cost basis.

During the years ended December 31, 2022 and 2021, the Company recorded an unrealized loss of $ 5.4 million and $ 1.6 million, respectively, in its portfolio of marketable debt securities.

The unrealized losses were due to the changing interest rate environment and are not due to changes in the credit quality of the underlying securities.

The unrealized losses were recorded in other comprehensive income (loss) for the years then ended.

During the years ended December 31, 2023 and 2022, the Company recorded an unrealized gain of $ 8.2 million and an unrealized loss of $ 5.4 million, respectively, in its portfolio of marketable debt securities.

The unrealized loss was due to the changing interest rate environment and is not due to changes in the credit quality of the underlying securities.

The unrealized gain and loss were recorded in other comprehensive income (loss) for the years then ended.

The Company receives equity securities in connection with certain licensing transactions with its partners.

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The Company also has investments in equity securities without a readily determinable fair value, where the Company elects the measurement alternative to record at their initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

During the years ended December 31, 2022 and 2021, the Company recorded an impairment charge of $ 0.1 million and $ 0.8 million, respectively, in connection with equity securities without a readily determinable fair value.

During the years ended December 31, 2022 and 2021, the Company recorded a net gain of $ 23.4 million and $ 39.3 million, respectively, in connection with its equity investments.

The Company did not record an impairment charge for the year ended December 31, 2023.

During the year ended December 31, 2022, the Company recorded an impairment charge of $ 0.1 million in connection with equity securities without a readily determinable fair value.

During the years ended December 31, 2023 and 2022, the Company recorded a net loss of $ 0.4 million and net gain of $ 23.4 million, respectively, in connection with its equity investments.

Concentrations of Risk

Cash, cash equivalents, and marketable debt securities are financial instruments that potentially subject the Company to concentrations of risk.

Cash, cash equivalents, restricted cash, and marketable debt securities are financial instruments that potentially subject the Company to concentrations of risk.

We invest our cash in corporate debt securities and U.S.

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These guidelines are periodically reviewed to take advantage of trends in yields and interest rates.

Cash and cash equivalents are maintained at financial institutions, and at times, balances may exceed federally insured limits.

Cash, cash equivalents, and restricted cash are maintained at financial institutions, and at times, balances may exceed federally insured limits.

We have never experienced any losses related to these balances.

Amounts on deposit in excess of federally insured limits at December 31, 2023 and 2022 approximated $ 53.8 million and $ 53.6 million, respectively.

We have payables with two service providers that represent 45 % of our total payables and with four service providers that represented 64 % of our total payables at December 31, 2022 and 2021, respectively.

We rely on five critical suppliers for the manufacture of our drug product for use in our clinical trials.

We have payables with two service providers that represent 38 % of our total payables and with two service providers that represented 45 % of our total payables at December 31, 2023 and 2022, respectively.

We rely on six critical suppliers for the manufacture of our drug product for use in our clinical trials.

While we believe that there are alternative vendors available, a change in manufacturing vendors could cause a delay in the availability of drug product and result in a delay of conducting and completing our clinical trials.

No other vendor accounted for more than 10% of total payables at December 31, 2023 or 2022.

We have receivables with four service providers that represent 91 % of our total receivables and with two service providers that represent 84 % of our total receivables at December 31, 2022 and 2021, respectively.

The receivables are related to royalty revenues from our licensing and collaboration agreements.

We have receivables with three customers and service providers that represent 76 % of our total receivables and with four customers and service providers that represent 91 % of our total receivables at December 31, 2023 and 2022,

respectively.

The receivables are related to cost share reimbursement and royalty revenues from our licensing and collaboration agreements.

No other customer accounted for more than 10% of total receivables at December 31, 2023 or 2022.

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ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosure about fair value measurements.

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hierarchy ranks the quality of reliable inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

The ASC 820 hierarchy ranks the quality of reliable inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1— Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets or liabilities.

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December 31, 2023

Fair Value Level 1 Level 2 Level 3

Fair Value Level 1 Level 2

Money Market Funds in Cash and Cash Equivalents $ 25,520 $ 25,520 $ —

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December 31, 2022

Fair Value Level 1 Level 2 Level 3

Fair Value Level 1 Level 2

Money Market Funds in Cash and Cash Equivalents $ 40,967 $ 40,967 $ —

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lease term, whichever is less

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Patents, Licenses, and Other Intangible Assets

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Amortization expense for patents, licenses, and other intangible assets was $ 1.3 million, $ 1.4 million, and $ 1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Future amortization expense for patent, licenses, and other intangible assets recorded as of December 31, 2022, and for which amortization has commenced, is as follows:

Future amortization expense for patents, licenses, and other intangible assets recorded as of December 31, 2023, and for which amortization has commenced, is as follows:

(in thousands)

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As of December 31, 2023, the Company has $ 9.7 million of intangible assets which are in-process and have not been placed in service, and accordingly amortization on these assets has not commenced.

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Long-Lived Assets

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corporate statutory tax rate from 35% to 21%, eliminated the corporate Alternative Minimum Tax (AMT) system, and made changes to the carryforward of net operating losses beginning on January 1, 2018.

The TCJA changed the income tax treatment of research and development expenses requiring such costs to be capitalized and amortized over several years beginning effective January 1, 2022.

The tax reform also provided for a refund of unused AMT carryforwards for years beginning after December 31, 2017.

We received an income tax refund during the year ended December 31, 2020 of $ 0.8 million each year related to our federal AMT carryforwards.

The TCJA changed the income tax treatment of research and development expenses requiring such costs to be capitalized and amortized over several years beginning

effective January 1, 2022.

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

Stock-Based Compensation

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Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents.

Diluted net income (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period.

Potentially dilutive securities consisting of stock issuable pursuant to outstanding options and restricted stock units

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(RSUs), and stock issuable pursuant to the 2013 Employee Stock Purchase Plan (ESPP) are not included in the per common share calculation in periods when the inclusion of such shares would have an anti-dilutive effect.

Basic and diluted net income (loss) per common share is computed as follows:

Basic net income (loss) per common share is computed by dividing the net income or loss by the weighted-average number of common shares outstanding during the period.

Potentially dilutive securities were included in the diluted net income per common share calculation for 2021.

Basic net income (loss) per common share attributable to Xencor is computed by dividing the net income (loss) attributable to Xencor by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents.

Diluted net income (loss) per common share attributable to Xencor is computed by dividing the net income (loss) attributable to Xencor by the weighted-average number of common stock equivalents outstanding for the period.

Potentially dilutive securities consisting of stock issuable pursuant to outstanding options and restricted stock units (RSUs), and stock issuable pursuant to the 2013 Employee Stock Purchase Plan (ESPP) are not included in the per common share calculation in periods when the inclusion of such shares would have an anti-dilutive effect.

Basic and diluted net income (loss) per common share attributable to Xencor is computed as follows:

Basic net income (loss) per common share is computed by dividing the net income or loss attributable to Xencor by the weighted-average number of common shares outstanding during the period.

Potentially dilutive securities were included in the calculation of diluted net income per common share attributable to Xencor for 2021.

In 2023 and 2022, we excluded all options and awards from the calculations because we reported net losses in the period, and the inclusion of such shares would have had an antidilutive effect.

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(in thousands, except share and per share data)

Net income (loss) attributable to common stockholders for basic net income (loss) per share $ ( 55,181 ) $ 82,631 $ ( 69,333 )

Net income (loss) attributable to Xencor, Inc.

$ ( 126,087 ) $ ( 55,181 ) $ 82,631

Weighted-average common shares outstanding 60,503,283 59,652,461 58,379,641

Basic net income (loss) per common share $ ( 0.93 ) $ 1.42 $ ( 1.21 )

Net income (loss) attributable to common stockholders for diluted net income (loss) per share $ ( 55,181 ) $ 82,631 $ ( 69,333 )

Basic net income (loss) per common share attributable to Xencor, Inc.

$ ( 2.08 ) $ ( 0.93 ) $ 1.42

Net income (loss) attributable to Xencor, Inc.

$ ( 126,087 ) $ ( 55,181 ) $ 82,631

Weighted average number of common shares outstanding used in computing basic net income (loss) per common share 60,503,283 59,652,461 58,379,641

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Weighted-average number of common shares outstanding used in computing diluted net income (loss) per common share 60,503,283 59,652,461 60,495,455

Diluted net income (loss) per common share $ ( 0.93 ) $ 1.37 $ ( 1.21 )

Diluted net income (loss) per common share attributable to Xencor, Inc.

$ ( 2.08 ) $ ( 0.93 ) $ 1.37

For the years ended December 31, 2023 and 2022, all outstanding potentially dilutive securities were excluded from the calculation as the effect of including such securities would have been anti-dilutive.

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There were no material reclassifications out of accumulated other comprehensive loss during the year ended December 31, 2023.

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Marketable Debt and Equity Securities

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$ 641,935 $ 643,236

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The unrealized losses on available-for-sale investments and their related fair values as of December 31, 2023 and 2022 are as follows:

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$ 42,210 $ 42,431

The Company also has investments in equity securities without a readily determinable fair value.

The Company also has an investment in an equity security without a readily determinable fair value.

The Company elects the measurement alternative to record these investments at their initial cost and evaluates such investments at each reporting period for evidence of impairment or observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

During the year ended December 31, 2022, the Company recorded an impairment charge of $ 0.1 million related to the Astria preferred stock.

During the year ended December 31, 2022, the Company recorded an impairment

charge of $ 0.1 million related to the Astria preferred stock.

Equity securities without a readily determinable fair value and their carrying values (in thousands) as of December 31, 2023 and 2022 are as follows:

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$ 64,210 $ 54,383

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In 2018, the Company received equity shares in Quellis Biosciences, Inc.

(Quellis) in connection with a licensing transaction.

In 2021, Quellis merged into Catabasis Pharmaceuticals, Inc.

(Catabasis), and the Company received common and preferred stock in Catabasis in exchange for its Quellis equity.

In June 2021, shares of the Catabasis preferred stock were exchanged for shares of Catabasis common stock;

the shares of the Catabasis common stock have a readily determinable fair value.

In September 2021, Catabasis changed its name to Astria Therapeutics, Inc.

In 2018, the Company received common and preferred stock in Astria (formerly Quellis Biosciences, Inc.) in connection with a licensing transaction.

In January 2023, the Company exchanged its preferred shares for additional shares of common stock in Astria.

The common stock has a readily determinable fair value, and difference in the fair value of the common stock and the carrying value of the preferred stock has been recorded as a gain in equity securities for the year ended December 31, 2023.

The Company accounts for the shares in Astria common stock at their fair value each reporting period and the adjustment in the fair value of the Astria common stock has been recorded in unrealized gain (loss) on equity securities for the year ended December 31, 2023.

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(INmune) and an option to acquire additional shares of INmune’s common stock in connection with a licensing transaction.

The Company received a second option to acquire additional shares of INmune common stock in connection with a designee appointed by us serving on the board of directors of INmune.

The Company originally recorded its investment at cost pursuant to ASC 323, Investments – Equity Method and Joint Ventures .

In June 2021, the Company entered into an Option Cancellation Agreement with INmune and received $ 15.0 million in proceeds and an additional shares of INmune common stock in exchange for the initial option.

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The shares of Viridian common stock are classified as equity securities with a readily determinable fair value and the adjustment in the fair value of the shares of Viridian common stock was recorded in gain (loss) on equity securities for the year ended at December 31, 2023.

In 2020, the Company received an equity interest in Zenas BioPharma Limited (Zenas), in connection with the Zenas Agreement (defined below).

In 2020, the Company received an equity interest in Zenas BioPharma (Cayman) Limited (Zenas), in connection with the Zenas Agreement (defined below).

The Company elected the measurement alternative to carry the Zenas equity at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or a similar investment of the same issuer.

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In 2022, the convertible note and accrued interest through the conversion date were exchanged for equity shares in Zenas.

We recognized an unrealized gain of $ 21.9 million from the warrant exchange and the conversion of the promissory note.

During 2022, the Company recognized an unrealized gain of $ 21.9 million from the warrant exchange and the conversion of the promissory note.

In 2023, Zenas initiated a Phase 3 trial and we received a milestone of additional equity in Zenas with a fair value of $ 10.0 million.

The Company recorded the additional equity at its fair value.

During the year ended December 31, 2023, there was no impairment related to this investment.

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Year Ended December 31,

Net gains recognized on equity securities $ 23,434 $ 39,289

2023 2022 2021

Net (losses) gains recognized on equity securities $ ( 395 ) $ 23,434 $ 39,289

net gains recognized on equity securities redeemed — — 18,301

Unrealized gain (losses) recognized on equity securities $ 23,434 $ 20,988

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Unrealized (losses) gain recognized on equity securities $ ( 395 ) $ 23,434 $ 20,988

Sale of Additional Common Stock

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Our effective tax rate differs from the statutory federal income tax rate, primarily as a result of the changes in valuation allowance.

The provision for income taxes for the year ended December 31, 2022 was $ 0.7 million.There was no provision for taxes for the years ended December 31, 2021 and December 31, 2020.

The provision for current federal income taxes for the years ended December 31, 2023 and 2022 were $ 5.8 million and $ 0.7 million, respectively.

There was no provision for taxes for the years ended December 31, 2021.

There is no state income tax provision for the years ended December 31, 2023, 2022 and 2021, respectively.

A reconciliation of the federal statutory income tax to our effective income tax is as follows (in thousands):

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Income tax provision $ 5,811 $ 673 $ —

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The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2023 and 2022 is presented below (in thousands):

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Research credits 53,198 54,825

Unrealized loss on securities 1,573 327

Unrealized (gain) loss on securities ( 278 ) 1,573

Capitalized lease assets 6,161 5,564

Accrued compensation 18,172 14,484

Deferred revenue 34,405 3,225

Capitalized research and development costs 45,783 21,338

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Patent costs ( 2,218 ) ( 2,885 )

Deferred revenue 3,225 ( 3,508 )

Licensing costs ( 136 ) ( 124 )

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The Tax Cuts and Jobs Act of 2017 (TCJA) was enacted in December 2017 and made substantial changes in the U.S.

One of the changes was elimination of the AMT tax system for corporations and allowance of an income tax refund for AMT tax credit carryforwards.

We have received an income tax refund of $ 0.8 million for the year ended December 31, 2020 for U.S.

AMT credit carryforwards.

The other significant change made by the TCJA requires research and development costs incurred after December 31, 2021 to be capitalized and amortized over several years.

We have recorded a deferred asset as of December 31, 2022 for such capitalized research and development costs.

We have net deferred tax assets relating primarily to net operating loss carryforwards and research and development tax credit carryforwards.

The significant changes made by the TCJA include a reduction in the maximum corporate income tax rate and the requirement that research and development costs incurred after December 31, 2021 to be capitalized and amortized over several years.

We have recorded a deferred asset for each year ended December 31, 2023 and 2022, respectively.

for such capitalized research and development costs.

We have net deferred tax assets relating primarily to capitalized research and development costs, net operating loss carryforwards and research and development tax credit carryforwards.

Due to the uncertainty surrounding the realization of the benefits of our deferred tax assets in future tax periods, we have placed a valuation allowance against our deferred tax assets at December 31, 2023 and 2022.

The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company’s net deferred income tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative losses that have resulted over the years.

The Company’s net deferred income tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable

income and cumulative losses that have resulted over the years.

During the year ended December 31, 2023, the valuation allowance increased by $ 43.1 million.

The Company’s tax years starting in 2019 through 2022 remain open to potential examination by the U.S.

and state taxing authorities due to carryforwards of net operating losses.

and state taxing authorities due to carryforwards of net operating losses and income tax credits.

As of December 31, 2023, we had cumulative net operating loss carryforwards for federal and state income tax purposes of $ 54.2 million and $ 158.8 million, respectively, and available tax credit carryforwards of approximately $ 33.6 million for federal income tax purposes and $ 24.8 million for state income tax purposes, which can be carried forward to offset future taxable income, if any.

The federal net operating loss carryforwards consist of $ 59.0 million of losses incurred prior to January 1, 2018, which are subject to carryforward limitations and $ 43.4 million of losses incurred after January 1, 2018, which may be carried forward indefinitely.

All of the federal net operating loss carryforwards were incurred prior to January 1, 2018, which are subject to carryforward limitations.

To the extent allowed by law, taxing authorities may examine prior periods where net operating losses were carried forwards and were claimed and offset against current year taxable income, and make adjustments up to the amount of the net operating loss carryforward amount.

Our federal net operating loss carryforwards expire starting in 2027, state net operating loss carryforwards expire starting in 2035, and federal tax credit carryforwards begin to expire in 2034.

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As a result of these changes, certain of our net operating loss and tax credit carryforwards may expire before we can use them.

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Stock-Based Compensation

Our Board of Directors and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan).

In October 2013, our Board of Directors approved the 2013 Equity Incentive Plan (the 2013 Plan), and in November 2013, our stockholders approved the 2013 Plan.

In 2013 , our Board of Directors and our stockholders approved the 2013 Equity Incentive Plan (the 2013 Plan).

The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other stock awards.

The 2013 Plan became effective as of December 2, 2013, the date of the pricing of the Company’s initial public offering.

As of December 2, 2013, we suspended the 2010 Plan, and no additional awards may be granted under the 2010 Plan.

Any shares of common stock covered by awards granted under the 2010 Plan that terminate after December 2, 2013 by expiration, forfeiture, cancellation, or other means without the issuance of such shares will be added to the 2013 Plan reserve.

As of December 31, 2022, the total number of shares of common stock available for issuance under the 2013 Plan was 14,792,799 .

Unless otherwise determined by the Board, beginning January 1, 2014, and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Plan will automatically increase annually on January 1 by 4 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year.

On January 1, 2022, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,374,222 shares, which is included in the number of shares available for issuance above.

As of December 31, 2022, a total of 14,535,306 options have been granted under the 2013 Plan.

As of December 31, 2022, the Company has awarded 1,999,817 RSUs to certain employees pursuant to the 2013 Plan.

The 2013 Plan had a ten-year term and would expire on December 3, 2023.

In June 2023, the Board and shareholders approved the 2023 Equity Incentive Plan (the 2023 Plan), which became effective as of June 14, 2023.

We suspended the 2013 Plan, and no additional award may be granted under the 2013 Plan.

The 2023 Plan reserve consists of 3,000,000 shares and the remaining available shares from the 2013 Plan as of the effective date of the 2023 Plan.

In addition, any shares of common stock covered by awards granted under the 2013 Plan that terminate on or after June 14, 2023 by expiration, forfeiture, cancellation, or other means without the issuance of such shares will be added to the 2023 Plan reserve.

The 2013 Plan provided for an automatic increase in the number of shares annually on January 1 by 4 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year.

On January 1, 2023, pursuant to approval by the Board, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,399,908 shares.

The 2023 Plan does not include a provision for an automatic increase in shares, also known as an Evergreen provision.

As of December 31, 2023, the total number of shares of common stock available for issuance under the 2023 Plan was 19,434,971 , which includes 16,932,548 shares of common stock that were available for issuance under the Prior Plans as of the effective date of the 2023 Plan.

As of December 31, 2023, a total of 16,616,038 options have been granted under the 2013 Plan and 2023 Plan.

As of December 31, 2023, the Company has awarded 2,994,168 RSUs to certain employees pursuant to the 2013 Plan and 2023 Plan.

Vesting of these awards will be annually over equal installments, either a two or three-year vesting period, and is contingent on continued employment terms.

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Under the ESPP our employees may elect to have between 1 - 15 % of their compensation withheld to purchase shares of the Company’s common stock at a discount.

The ESPP had an initial two-year term that includes four six-month purchase periods, and employee withholding amounts may be used to purchase Company stock during each six-month purchase period.

The initial two-year term ended in December 2015 and pursuant to the provisions of the ESPP, the second two-year term began automatically upon the end of the initial term.

The ESPP had an initial two-year term that included four six-month purchase periods, and employee withholding amounts could be used to purchase Company stock during each six-month purchase period.

The initial two-year term ended in December 2015 and, pursuant to the provisions of the ESPP, subsequent two-year terms began automatically upon the end of the previous term.

The total number of shares that can be purchased with the withholding amounts are based on the lower of 85 % of the Company’s common stock price at the initial offering date or 85 % of the Company’s stock price at each purchase date.

As of December 31, 2023, the total number of shares of common stock available for issuance under the ESPP is 1,041,340 .

Unless otherwise determined by our Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock.

Under the 2013 ESPP, the total number shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock.

Pursuant to approval by our board, the total number of shares of common stock available for issuance under the ESPP was increased by 599,977 shares on January 1, 2023.

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$ 53,755 $ 48,913 $ 36,975

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(in thousands) 2023 2022 2021

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(3) The total intrinsic value of stock options exercised was $ 4.8 million, $ 1.6 million, and $ 9.2 million for the years ended December 31, 2023, 2022 and 2021 respectively.

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We estimated the fair value of employee and non-employee awards using the Black-Scholes valuation model.

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We have not paid dividends and did not have any dividend payout at December 31, 2023.

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The following table summarizes RSU activity for the years ended December 31, 2023:

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The remaining unamortized compensation expense will be recognized over the next 1.90 years.

The Company leases office and laboratory space in Monrovia, California under two separate leases that expire in January 2023 and December 2025, respectively with an option to renew for an additional five years at then market rates.

The Company has assessed that it is unlikely to exercise the lease term extension option.

For the year ended December 31, 2022, ROU assets obtained in exchange for new operating lease liabilities are $ 0.3 million.

The Company leases additional office space in San Diego, California through August 2022, with an option to extend for an additional five years .

In May 2022, the Company entered into an amendment to the lease to extend the lease term through December 31, 2023.

The Company has assessed that it is unlikely to exercise the option to extend the lease term.

The Company leases office and laboratory space in Monrovia, California under two separate leases;

one lease expired in January 2023, and a second lease will expire in December 2025.

The second lease includes an option to renew

for an additional five years at then market rates.

The initial lease expired in January 2023, and the Company has assessed that it is unlikely to exercise the lease term extension option for the second lease that will expire in December 2025.

For the year ended December 31, 2023, there were no ROU assets obtained in exchange for new operating lease liabilities.

The Company leases additional office space in San Diego, California under a lease that expired December 31, 2023.

In August 2023, the Company entered into a Sublease Agreement for office space in San Diego, California.

The term of the Sublease Agreement begins in September 2023 and ends in December 2027.

For the year ended December 31, 2023, ROU assets obtained in exchange for new operating lease liabilities were $ 2.5 million.

In connection with the Sublease Agreement, the Company provided a $ 0.4 million Letter of Credit (LOC) to the landlord.

The Letter of Credit will decline ratably over the term of the lease.

In connection with the LOC, Company entered into a Cash Collateral Agreement for $ 0.4 million, which is classified as restricted cash in the Consolidated Balance Sheets.

In June 2021, the Company entered into an 18 -month lease for office space in Monrovia, California.

The lease began August 1, 2021 and terminated January 31, 2023.

ROU assets obtained in exchange for new operating lease liabilities are $ 0.3 million

In June 2021, the Company entered into an Agreement of Lease (the Halstead Lease) relating to 129,543 rentable square feet, for laboratory and office space, in Pasadena, California, where the Company intends to move its corporate headquarters in the first quarter of 2023.

The term of the Halstead Lease will become effective in two phases.

The first phase commences on July 14, 2021 and encompasses 83,083 square feet while the second phase commences no later than July 1, 2025 and encompasses an additional 46,460 square feet.

For the year ended December 31, 2023, there were no ROU assets obtained in exchange for new operating lease liabilities.

In June 2021, the Company entered into an Agreement of Lease (the Halstead Lease) relating to 129,543 rentable square feet, for laboratory and office space, in Pasadena, California.

The term of the Halstead Lease became effective in two phases.

The first phase commenced on July 14, 2021 and encompasses 83,083 square feet while the second phase commences no later than July 1, 2025 and encompasses an additional 46,460 square feet.

The term of the Halstead Lease is 13 years from the first phase commencement date.

The Company received delivery of the first phase premises on July 1, 2021 and is scheduled to complete construction of office, laboratory, and related improvements in the second half of 2022.

The Company received delivery of the first phase premises on July 1, 2021 and completed construction of office, laboratory, and related improvements in 2023.

The Company placed the new facility into service in February 2023.

The Halstead Lease provides the Company with improvement allowances of up to $ 17.0 million and $ 3.3 million in connection with the Phase 1 and Phase 2 building improvements, respectively.

The initial base monthly rent is $ 386,336 , or $ 4.65 per square foot, and

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includes increases of three percent annually.

The initial base monthly rent is $ 386,336 , or $ 4.65 per square foot, and includes increases of three percent annually.

The Company will also be responsible for its proportionate share of operating expenses, tax expense, and utility costs.

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The Company is eligible to receive total tenant allowance under the lease for the phase 1 space of $ 22.0 million and the initial base rent is increased to $ 416,246 , or $ 5.01 per square foot.

For the year ended December 31, 2021, ROU assets obtained in exchange for new operating lease liabilities are $ 29.7 million.

The Company received delivery of the second phase premises on December 1, 2022.

For the year ended December 31, 2022, ROU assets obtained in exchange for new operating lease liabilities are $ 15.3 million.

The second phase premises was made available on December 1, 2022.

For the year ended December 31, 2023, there were no ROU assets obtained in exchange for new operating lease liabilities.

The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

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—operating leases 8.9 % 8.9 % 5.8 %

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Commitments and Contingencies

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The revenue reported for each agreement has been adjusted to reflect the adoption of ASC 606 for each period presented.

Aimmune Therapeutics, Inc.

In 2020, the Company entered into a License, Development and Commercialization Agreement (the Aimmune Agreement) with Aimmune Therapeutics, Inc.

(Aimmune) pursuant to which the Company granted Aimmune an exclusive worldwide license to XmAb7195, which was renamed AIMab7195.

The Company received an upfront payment and is eligible to receive development, regulatory and, sales and tiered royalties on net sales of approved products from high-single to mid-teen percentage range.

No revenue was recognized for the year ended December 31, 2022 and 2021.

There is no deferred revenue as of December 31, 2022 or 2021 related to this agreement.

Alexion Pharmaceuticals, Inc.

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Alexion exercised its rights to include our technology in ALXN1210, which is now marketed as Ultomiris.

The Company is eligible to receive contractual milestones for certain commercial achievements, and the Company is also entitled to receive royalties based on a percentage of net sales of such products sold by Alexion, its affiliates, or its sub licensees, which percentage is in the low single digits.

The Company is eligible to receive royalties based on a percentage of net sales of such products sold by Alexion, its affiliates, or its sub licensees, which percentage is in the low single digits.

Alexion’s royalty obligations continue on a product-by-product and country-by-country basis until the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country.

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In 2020, Alexion completed certain regulatory submissions for Ultomiris, and the Company received a total of $ 10.0 million in milestone payments.

During 2020, the Company also recorded royalty revenue of $ 16.2 million in connection with reported net sales of Ultomiris by Alexion.

In 2021, the Company recorded royalty revenue of $ 22.2 million on net sales.

In 2022, the Company recorded royalty revenue of $ 29.4 million on net sales.

In 2022 and 2021, the Company recorded royalty revenue of $ 29.4 million and $ 22.2 million, respectively in connection with reported net sales of Ultomiris by Alexion.

In 2023, Alexion completed certain sales milestones for Ultomiris, and the Company received a milestone payment of $ 20.0 million and recorded royalty revenue of $ 38.6 million on net sales.

On November 3, 2023, the Company entered into the Ultomiris Royalty Sale Agreement with OMERS, in which OMERS acquired the rights to certain royalties associated with the existing license relating to Ultomiris in exchange for an upfront payment of $ 192.5 million.

Included in the proceeds is $ 29.5 million of accounts receivable the Company sold for royalties and milestone receivable recorded at September 30, 2023.

For the year ended December 31, 2023, the Company earned and recognized $ 38.6 million in royalty revenue, $ 6.2 million of which was non-cash royalty revenue under the Ultomiris Royalty Sale Agreement

The total revenue recognized under this arrangement was $ 58.6 million, $ 29.4 million, and $ 22.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2022, there is a receivable of $ 14.8 million , and there is no deferred revenue related to this agreement.

In September 2015, the Company entered into a research and license agreement (the Amgen Agreement) with Amgen Inc.

(Amgen) to develop and commercialize bispecific antibody product candidates using the Company’s proprietary XmAb® bispecific Fc technology.

Amgen has advanced one of the discovery programs, now AMG509, into clinical development.

The Company is eligible to receive future development, regulatory and sales milestones in total for the program and is eligible to receive royalties on any global net sales of products.

No revenue was recognized for the year ended December 31, 2022, 2021, or 2020.

As of December 31, 2022, there was no deferred revenue related to the arrangement.

As of December 31, 2023, there is no receivable and no deferred revenue related to this agreement.

Astellas Pharma Inc.

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Astellas advanced the candidate into Phase 1 studies in 2022 and we received a $ 5.0 million milestone.

The Company recognized $ 2.5 million of revenue in 2020, and $ 5.0 million of revenue in 2022 under the agreement.

No revenue was recognized for the year ended December 31, 2023 or 2021.The Company recognized $ 5.0 million of revenue for the year ended December 31, 2022 under the agreement.

There is no deferred revenue as of December 31, 2023.

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The Company is also eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

In January 2021, Quellis merged into Catabasis, and the Company received common stock and preferred stock of Catabasis in exchange for its equity in Quellis.

In January 2021, Quellis merged into Astria (formerly Catabasis), and the Company received common stock and preferred stock of Aastria in exchange for its equity in Quellis.

The Company recognized an increase in the fair value of its equity interest for the exchange of shares, which was recorded as unrealized gain for the three months ended March 31, 2021.

In June 2021, a portion of the Company’s preferred stock in Catabasis was converted to common stock, which was recorded at its fair value as of June 30, 2021.

The remaining Catabasis preferred stock is carried at its original cost and is reviewed for impairment or other changes at each reporting period.

In September 2021, Catabasis changed its name to Astria.

The Company recorded an impairment charge of $ 0.1 million for its investment in Astria preferred stock for the year ended December 31, 2022.

The Company recognized unrealized gain of $ 6.1 million and $ 4.5 million related to its equity interest in Astria for the years ended December 31, 2022 and 2021, respectively.

In June 2021, a portion of the Company’s preferred stock in Astria was converted to common stock.

The remaining Astria preferred stock was converted to common stock in 2023.

The Company recorded an impairment charge of $ 0.1 million and $ 0.8 million for its investment in Astria preferred stock for the year ended December 31, 2022 and 2021, respectively.

The Company recognized unrealized (loss) gain of $( 4.3 ) million, $ 6.1 million, and $ 4.5 million related to its equity interest in Astria for the years ended December 31, 2023, 2022, and 2021 respectively.

There is no deferred revenue as of December 31, 2023 related to this agreement.

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Genentech, Inc., and F.

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Hoffman-La Roche Ltd (collectively, Genentech) for the development and commercialization of novel IL-15 collaboration products (Collaboration Products), including XmAb306, the Company’s IL-15/IL15Rα-Fc candidate.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306 and Genentech and Xencor will jointly collaborate on worldwide development of XmAb306.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306 and we share in 45 % of development and commercialization costs of Collaboration Products, and we are eligible to share in 45 % of net profits and losses from the sale of approved products.

However, 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 are eligible to receive up to $ 600.0 million in milestones, including $ 115.0 million in development milestones, $ 185.0 million in regulatory milestones and $ 300.0 million in sales-based milestones and tiered royalties ranging from low double-digit to mid-teens percentages.

The Company determined that the transaction price of the Genentech Agreement at inception was $ 120.0 million consisting of the upfront payment, and allocated the transaction price to each of the separate performance obligations using the relative standalone selling price with $ 111.7 million allocated to the license to XmAb306, $ 4.1 million allocated to the additional program and $ 4.2 million allocated to the research services.

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The research term expired in the first half of 2021, and the balance in deferred revenue related to the Genentech Agreement was recognized as the Company is no longer required to render services.

No revenue was recognized for the year ended December 31, 2022.

For the years ended December 31, 2021 and 2020, we recognized $ 2.5 million and $ 3.5 million of income, respectively, from the Genentech Agreement.

As of December 31, 2022, there was a $ 0.2 million receivable related to cost-sharing development activities during the fourth quarter of 2022.

No revenue was recognized for the years ended December 31, 2023, and 2022.

For the year ended December 31, 2021, we recognized $ 2.5 million of income from the Genentech Agreement.

As of December 31, 2023, there was a $ 3.3

million payable related to cost-sharing development activities during the fourth quarter of 2023.

There is no deferred revenue as of December 31, 2023.

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In addition, the Company is eligible to receive royalties in the low-single digit percentage range on net sales of approved products.

In the second quarter of 2020, Gilead exercised options on three additional antibody compounds, and in April 2020, we received a total of $ 7.5 million in payment of the three options.

No revenue was recognized for the year ended December 31, 2022 and 2021.

The Company recognized $ 13.5 million of revenue related to the Gilead Agreement for the year ended December 31, 2020.

The Company recognized $ 6.0 million in milestone revenue for the year ended December 31, 2023.

No revenue was recognized for the years ended December 31, 2022 and 2021.

There is no deferred revenue as of December 31, 2023 related to this agreement.

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The Company initially recorded its equity interest in INmune, including its option to acquire additional INmune shares, at cost pursuant to ASC 323.

In June 2021, the Company entered into the First Amendment to License Agreement (the Amended INmune Agreement) and an Option Cancellation Agreement (the Option Agreement) with INmune.

The Amended INmune

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Agreement modified certain diligence provisions in the INmune Agreement with no change in total consideration or performance obligations.

The Option Agreement provided for the sale of the initial option to INmune for the total consideration of $ 18.3 million which includes $ 15.0 million in cash and additional shares of INmune common stock.

In June 2021, the Company entered into the First Amendment to License Agreement (the Amended INmune Agreement) and an Option Cancellation Agreement (the Option Agreement) with INmune.The Option Agreement provided for the sale of the initial option to INmune for the total consideration of $ 18.3 million which includes $ 15.0 million in cash and additional shares of INmune common stock.

The Company recorded a realized gain of $ 18.3 million according to ASC 860, Transfer and Servicing , and recorded the additional shares of INmune common stock according to ASC 321, Investments – Equity Securities .

During the three months ended June 30, 2021, the Company determined that it should no longer record its investment in INmune under the equity method and recorded its investment in INmune pursuant to ASC 321.

The Company adjusted the carrying value of this investment by recognizing an unrealized gain of $ 27.8 million as other income for the three months ended June 30, 2021.

In September 2021, the Company exercised its second to purchase additional shares of INmune common stock for $ 0.8 million.

The Company recognized an unrealized gain of $ 2.0 million, which consists of $ 1.1 million of fair value of the option and $ 0.9 million gain on the purchase, as other income for the three months ended September 30, 2021.

During 2021, the Company determined that it should no longer record its investment in INmune under the equity method and recorded its investment in INmune pursuant to ASC 321.

The Company adjusted the carrying value of this investment by recognizing an unrealized gain of $ 27.8 million as other income during 2021.

During 2021, the Company exercised its second to purchase additional shares of INmune common stock for $ 0.8 million, and the Company recognized an unrealized gain of $ 2.0 million, which consists of $ 1.1 million of fair value of the option and $ 0.9 million gain on the purchase.

For the year ended December 31, 2023, the Company recorded $ 9.3 million of unrealized gain related to its investment in INmune.

For the year ended December 31, 2022, the Company recorded $ 7.3 million of unrealized loss related to its investment in INmune.

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No revenue was recognized for the years ended December 31, 2023, 2022, or 2021.

At the inception of the INmune Agreement in 2017, INmune was a related party as a result of the Company's significant influence with respect to its investment in INmune, as determined under ASC 323.

The Company did not have any amounts due to or from INmune at December 31, 2022 or 2021.

At June 30, 2021, the Company determined that it no longer has a significant influence in INmune and that INmune is no longer a related party.

Janssen Biotech, Inc.

Janssen Agreement

In November 2020, the Company entered into a Collaboration and License Agreement (the Janssen Agreement) with Janssen Biotech, Inc.

(Janssen) pursuant to which Xencor and Janssen conducted research and development activities to discover novel CD28 bispecific antibodies for the treatment of prostate cancer.

Janssen and Xencor will conducted joint research activities to discover XmAb bispecific antibodies against CD28 and against an undisclosed prostate tumor-target with Janssen maintaining exclusive worldwide rights to develop and commercialize Licensed Products identified from the research activities.

Under the Janssen Agreement, the Company will conduct research activities and apply its bispecific Fc technology to antibodies targeting prostate cancer provided by Janssen.

Janssen Biotech, Inc., a Johnson & Johnson company

J&J Agreement

In November 2020, the Company entered into a Collaboration and License Agreement (the J&J Agreement) with Janssen Biotech, Inc., a Johnson & Johnson company, pursuant to which Xencor and J&J conducted research and development activities to discover novel CD28 bispecific antibodies for the treatment of prostate cancer.

Xencor together with J&J conducted joint research activities to discover XmAb bispecific antibodies against CD28 and against an

undisclosed prostate tumor-target with J&J maintaining exclusive worldwide rights to develop and commercialize Licensed Products identified from the research activities.

Under the J&J Agreement, the Company conducted research activities and apply its bispecific Fc technology to antibodies targeting prostate cancer provided by J&J.

Upon completion of the research activities Janssen will have a candidate selection option to advance an identified candidate for development and commercialization.

The activities will be conducted under a research plan agreed to by both parties.

Janssen will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate.

Pursuant to the Janssen Agreement, the Company received an upfront payment and is eligible to receive development, regulatory and, sales milestones.

J&J will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate.

Pursuant to the J&J Agreement, the Company received an upfront payment and is eligible to receive development, regulatory and, sales milestones.

If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages.

Pursuant to the Janssen Agreement, upon development of a bispecific candidate by Janssen through proof of concept, we have the right to opt-in to fund 20 % of development costs and to perform 30 % of detailing efforts in the U.S.

Pursuant to the J&J Agreement, upon development of a bispecific candidate by J&J through proof of concept, we have the right to opt-in to fund 20 % of development costs and to perform 30 % of detailing efforts in the U.S.

If we exercise this right, we will be eligible to receive tiered royalties in the low-double digit to mid-teen percentage range.

The Company allocated the transaction price to the single performance obligation, delivery of CD28 bispecific antibodies to Janssen.

The Company recognized the $ 50.0 million transaction price as it satisfied its performance obligation to deliver CD28 bispecific antibodies to Janssen.

The Company recognized revenue related to the performance obligation over the expected period of time to complete and deliver the CD28 bispecific antibodies to Janssen using the expected input method which considers an estimate of the Company’s efforts to complete the research activities outlined in the Janssen Agreement.

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In November 2021, the Company completed its performance obligations under the research activities and delivered CD28 bispecific antibodies to Janssen.

In December 2021, Janssen selected a bispecific CD28 candidate for further development, and we received a milestone of $ 5.0 million.

For the year ended December 31, 2021 the Company recognized as revenue the $ 50.0 million transaction price in connection with the completion of the research activities and the $ 5.0 million milestone for selection of an antibody candidate by Janssen.

No revenue was recognized under this agreement in 2022.

Second Janssen Agreement

On October 1, 2021, the Company entered into a second Collaboration and License Agreement (the Second Janssen Agreement) with Janssen pursuant to which the Company granted Janssen an exclusive worldwide license to develop, manufacture, and commercialize plamotamab, the Company’s CD20 x CD3 development candidate, and pursuant to which Xencor and Janssen will conduct research and development activities to discover novel CD28 bispecific antibodies.

The parties will conduct joint research activities for up to a two-year period to discover XmAb bispecific antibodies against CD28 and undisclosed B cell tumor-targets with Janssen receiving exclusive worldwide rights, subject to certain Xencor opt-in rights, to develop, manufacture and commercialize pharmaceutical products that contain one or more of such discovered antibodies (CD28 Licensed Antibodies).

The Company allocated the transaction price to the single performance obligation, delivery of CD28 bispecific antibodies to J&J.

The Company recognized the $ 50.0 million transaction price as it satisfied its performance obligation to deliver CD28 bispecific antibodies to J&J.

The Company recognized revenue related to the performance obligation over the expected period of time to complete and deliver the CD28 bispecific antibodies to J&J using the expected input method which considers an estimate of the Company’s efforts to complete the research activities outlined in the J&J Agreement.

In November 2021, the Company completed its performance obligations under the research activities and delivered CD28 bispecific antibodies to J&J.

In December 2021, J&J selected a bispecific CD28 candidate for further development, and we received a milestone of $ 5.0 million.

No revenue was recognized under this agreement for the year ended December 31, 2022.

In 2023, J&J completed filing of regulatory submission for a CD28 candidate and initiated Phase 1 clinical trial, and the Company received $ 17.5 million in milestone payments.

For the year ended December 31, 2023, the Company recognized $ 17.5 million in milestones under the J&J Agreement.

There is no deferred revenue related to the Agreement at December 31, 2023.

Second J&J Agreement

On October 1, 2021, the Company entered into a second Collaboration and License Agreement (the Second J&J Agreement) with J&J pursuant to which the Company granted J&J an exclusive worldwide license to develop, manufacture, and commercialize plamotamab, the Company’s CD20 x CD3 development candidate, and pursuant to which Xencor and J&J will conduct research and development activities to discover novel CD28 bispecific antibodies.

The parties will conduct joint research activities for up to a two-year period to discover XmAb bispecific antibodies against CD28 and undisclosed B cell tumor-targets with J&J receiving exclusive worldwide rights, subject to certain Xencor opt-in rights, to develop, manufacture and commercialize pharmaceutical products that contain one or more of such discovered antibodies (CD28 Licensed Antibodies).

The Agreement became effective on November 5, 2021.

Pursuant to the Second Janssen Agreement, the Company received an upfront payment of $ 100.0 million and is eligible to receive up to $ 1,187.5 million in milestones which include $ 289.4 million in development milestones, $ 378.1 million in regulatory milestones and $ 520.0 million in sales milestones.

Pursuant to the Second J&J Agreement, the Company received an upfront payment of $ 100.0 million and is eligible to receive up to $ 1,187.5 million in milestones which include $ 289.4 million in development milestones, $ 378.1 million in regulatory milestones and $ 520.0 million in sales milestones.

Under the terms of the Stock Purchase Agreement, Johnson & Johnson Innovation, JJDC, Inc.

1 unchanged sentence

The Company issued JJDC 748,062 shares of its common stock which had a fair market value of $ 28.9 million when the shares were transferred.

The Company will collaborate with Janssen on further clinical development of plamotamab with Janssen and share development costs with Janssen paying 80 % and the Company paying 20 % of certain development costs.

The Company is generally responsible for conducting research activities under the Second Janssen Agreement, and Janssen is generally responsible for all development, manufacturing, and commercialization activities for CD28 Licensed Antibodies that are advanced.

Under the Second Janssen Agreement, the Company granted Janssen an exclusive worldwide right to its plamotamab program and the Company will conduct research activities and apply its CD28 bispecific Fc technology to antibodies targeting B-cells.

Upon completion of the research activities Janssen will have options to advance up to four identified candidates for development and commercialization.

The Company will collaborate with J&J on further clinical development of plamotamab with J&J and share development costs with J&J paying 80 % and the Company paying 20 % of certain development costs.

The Company is generally responsible for conducting research activities under the Second J&J Agreement, and J&J is generally responsible for all development, manufacturing, and commercialization activities for CD28 Licensed Antibodies that are advanced.

Under the Second J&J Agreement, the Company granted J&J an exclusive worldwide right to its plamotamab program and the Company will conduct research activities and apply its CD28 bispecific Fc technology to antibodies targeting B-cells.

Upon completion of the research activities J&J will have options to advance up to four identified candidates for development and commercialization.

The activities will be conducted under a research plan agreed to by both parties.

Janssen will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate.

J&J will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate.

If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages.

The Company evaluated the Second Janssen Agreement under the provisions of ASC 606.

We have determined that Janssen is a customer for purposes of the delivery of specific performance obligations under the Second Janssen Agreement and applied the provisions of ASC 606 to the transaction.

The Company evaluated the Second J&J Agreement under the provisions of ASC 606.

We have determined that J&J is a customer for purposes of the delivery of specific performance obligations under the Second Janssen Agreement and applied the provisions of ASC 606 to the transaction.

The Company identified the following performance obligations under the Second Janssen Agreement:

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(ii) research services during a two-year period to create up to four CD28 bispecific candidates targeting B-cell antigens.

The Company determined that the license and the research services are separate performance obligations because they are capable of being distinct and are distinct in the context of the Second Janssen Agreement.

The license to plamotamab has standalone functionality as Janssen has exclusive worldwide rights to the program, including the right to sublicense to third parties.

Janssen has significant experience and capabilities in developing and commercializing drug candidates similar to plamotamab, and Janssen is capable of performing these activities without the Company’s involvement.

Upon the transfer of the license of plamotamab and the related data and materials, Janssen could develop and

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commercialize plamotamab without further assistance from the Company.

The Company determined that the research services for potential CD28 candidates was a separate standalone performance obligation.

The Second Janssen Agreement provides an outline of an integrated research plan for the programs to be conducted by the two companies, and the research activities are separate and distinct from the license to plamotamab.

The Company determined the standalone selling price of the license to be $ 58.5 million using the adjusted market assessment approach considering similar collaboration and license agreements and transactions.

The standalone selling price for the research services to be performed during the research term was determined to be $ 37.6 million using the market approach which was derived from the Company’s experience and information from providing similar research services.

The Company determined that the transaction price of the Second Janssen Agreement at inception was $ 96.1 million consisting of the $ 100.0 million upfront payment reduced by the $ 3.9 million discount on the proceeds received from the sale of Company common stock to Janssen.

The Company determined that the transaction price of the Second J&J Agreement at inception was $ 96.1 million consisting of the $ 100.0 million upfront payment reduced by the $ 3.9 million discount on the proceeds received from the sale of Company common stock to J&J.

The potential milestones are not included in the transaction price as these are contingent on future events and the Company would not recognize these in revenue until it is not probable that these would not result in significant reversal of revenue amounts in future periods.

1 unchanged sentence

The Company allocated the transaction price to each of the separate performance obligations using the relative standalone selling price with $ 58.5 million allocated to the license to the plamotamab program and $ 37.6 million allocated to the research services.

The Company recognized the $ 58.5 million allocated to the license when it satisfied its performance obligation and transferred the license to Janssen in November 2021.

The license was transferred upon the effective date of the Second Janssen Agreement and when the Company subsequently transferred certain data related to the program to Janssen.

The Company recognized the $ 58.5 million allocated to the license when it satisfied its performance obligation and transferred the license to J&J in November 2021.

The $ 37.6 million allocated to the research services is being recognized over a period of time through the end of the research term that services are rendered as we determine that the input method is the appropriate approach to recognize income for such services.

A total of $ 7.0 million and $ 0.3 million of revenue related to the research services was recognized in each of the years ended December 31, 2022 and December 31, 2021, respectively.

The Company recognized $ 7.0 million and $ 113.8 million of revenue related to the two Janssen agreements for the years ended December 31, 2022 and 2021, respectively.

No revenue was recognized under this arrangement for the year ended December 31, 2020.

There is $ 30.3 million in deferred revenue as of December 31, 2022 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Second Janssen Agreement.

The Company completed its performance obligations under the research agreement in December 2023.

During 2023, J&J exercised its options on three CD28 candidates developed under the collaboration, and it completed regulatory submissions for a selected candidate and initiated a Phase 1 study for it.

During the year ended December 31, 2023, we received $ 30.0 million in milestone revenue and recognized $ 30.3 million in revenue related to completion of the research services.

A total of $ 30.3 million, $ 7.0 million, and $ 0.3 million of revenue related to the research services was recognized in each of the years ended December 31, 2023, 2022, and 2021, respectively.

The Company recognized $ 77.8 million, $ 7.0 million, and $ 113.8 million of revenue related to the two J&J agreements for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was a $ 2.9 million receivable related to cost-sharing development activities during the fourth quarter of 2023.

There is no in deferred revenue as of December 31, 2023 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Second J&J Agreement.

MorphoSys AG/Incyte Corporation

In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys), which was subsequently amended in March 2012 and in 2020.

1 unchanged sentence

If certain developmental, regulatory, and sales milestones are achieved, the Company is eligible to receive future milestone payments and royalties.

The Company recognized a total of $ 7.8 million of royalty revenue on net sales of Monjuvi for the year ended December 31, 2022.

The Company recognized a total of $ 12.5 million of milestone revenue related to clinical studies and royalties of $ 5.9 million on net sales of Monjuvi for the year ended December 31, 2021.

There was $ 39.0 million of revenue recognized under this arrangement for the year ended December 31, 2020.

On November 3, 2023, the Company entered into the Monjuvi Royalty Sale Agreement with OMERS, pursuant to which OMERS acquired the rights to certain royalties earned after July 1, 2023 associated with the existing license relating to Monjuvi in exchange for an upfront payment of $ 22.5 million.

The upfront payment included $ 2.2 million of accounts receivable we recorded as a royalty receivable at September 30, 2023.

The payment for the receivable was received by OMERS.

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

The Company recognized a total of $ 8.7 million and $ 7.8 million of royalty revenue on net sales of Monjuvi for the years ended December 31, 2023 and 2022.

Of the $ 8.7 million royalty revenue earned in 2023, $ 2.1 million was non-cash royalty revenue from the Monjuvi Royalty Sale Agreement.The Company recognized a total of $ 12.5 million of milestone revenue related to clinical studies and royalties of $ 5.9 million on net sales of Monjuvi for the year ended December 31, 2021.

As of December 31, 2023, the Company has no deferred revenue related to this agreement and has recorded a receivable of $ 2.1 million for royalties due.

1 unchanged sentence

In June 2016, the Company entered into a Collaboration and License Agreement (Novartis Agreement) with Novartis Institutes for BioMedical Research, Inc.

(Novartis), to develop and commercialize bispecific and other Fc

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engineered antibody drug candidates using the Company’s proprietary XmAb technologies and drug candidates.

(Novartis), to develop and commercialize bispecific and other Fc engineered antibody drug candidates using the Company’s proprietary XmAb technologies and drug candidates.

Pursuant to the Novartis Agreement:

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• The Company will provide Novartis with a non-exclusive license to certain of its Fc technologies to apply against up to ten targets identified by Novartis.

In August 2021, Novartis notified the Company it was terminating its rights with respect to the vibecotamab program, which will be effective in February 2022.

In August 2021, Novartis notified the Company it was terminating its rights with respect to the vibecotamab program, which became effective in February 2022.

Under the Novartis Agreement, Novartis is responsible for its share of vibecotamab development costs through August 2022.

7 unchanged sentences

During the year ended December 31, 2021, Novartis advanced the Fc candidate into development and initiated clinical studies and the Company recognized $ 3.0 million of revenue related to the milestones.

During the year ended December 31, 2021, the Company recognized $ 43.1 million of revenue.

No revenue was recognized during the years ended December 31, 2023 and 2022.

There was a $ 0.03 million receivable and no deferred revenue as of December 31, 2022 related to the arrangement.

During the year ended December 31, 2021, the Company recognized $ 43.1 million of revenue.

There is no receivable and no deferred revenue as of December 31, 2023 related to the arrangement.

Omeros Corporation

3 unchanged sentences

In addition, the Company is eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

There was no revenue recognized for the year ended December 31, 2022 and 2021.

During 2023, Omeros advanced a candidate that incorporates the Company's Xtend Fc technology into a Phase 2 study, and the Company received a $ 5.0 million milestone.

The Company recognized $ 5.0 million of revenue related to the Omeros Agreement for the year ended December 31, 2023.

There was no revenue recognized for the years ended December 31, 2022 and 2021.

There is no deferred revenue as of December 31, 2023 related to this agreement.

Vir Biotechnology, Inc.

In 2019, the Company entered into a Patent License Agreement (the Vir Agreement) with Vir Biotechnology (Vir) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up to two targets.

Under the terms of the Vir Agreement, the Company received a total of $ 2.0 million in upfront and milestone payments and is eligible to receive additional milestones of $ 154.0 million which include $ 4.0 million of development milestones, $ 30.0 million of regulatory milestones and $ 120.0 million of sales milestones.

In addition, the Company is eligible to receive royalties on the net sales of approved products in the low-single digits.

Vir initiated a Phase 1 study with a licensed antibody in 2019, and in the second quarter of 2020, it initiated a Phase 1 study with a second licensed antibody.

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In March 2020, the Company entered into a second Patent License Agreement (the Second Vir Agreement) with Vir pursuant to which the Company provided a non-exclusive license to its Xtend technology to extend the half-life of novel antibodies Vir is investigating as potential treatments for patients with COVID-19.

Under the terms of the Second Vir Agreement, Vir is responsible for all research, development, regulatory and commercial activities for the antibody, and the Company is eligible to receive royalties on the net sales of approved products in the mid-single digit percentage range.

Vir and its marketing partner, GSK, began recording sales for sotrovimab beginning in June 2021.

In 2022 and 2021, we recognized royalty revenue of $ 114.9 million and $ 52.2 million , respectively related to this agreement.

In February 2021, the Company entered into the Vir Amendment No.

1 to the Vir Agreement and the Vir Amendment No.

1 to the Second Vir Agreement (collectively, the Vir Amendments), in each case, pursuant to which the Company provided a non-exclusive license to additional Fc technology for the targets previously identified in the Vir Agreement and the Second Vir Agreement, respectively.

If Vir incorporates additional Fc technologies in the identified targets, the Company is eligible to receive additional royalties on net sales of approved products from low to mid-single digit range.

The Company determined that the Second Vir Agreement and the Vir Amendments were modifications of the original Vir Agreement, and that the transfer of the license occurred at inception of the Vir Agreement.

The total consideration under the arrangement did not change with the Second Vir Agreement or the Amendments as the Company will potentially receive additional royalty revenue which is variable consideration and is not included in the transaction price.

In 2019, the Company entered into a Patent License Agreement (the Vir Agreement) with Vir Biotechnology, Inc.

(Vir) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up to two targets.

In March 2020, the Company entered into a second Patent License Agreement (the Second Vir Agreement) with Vir pursuant to which the Company provided a non-exclusive license to its Xtend technology to extend the half-life of novel antibodies Vir developed as potential treatments for patients with COVID-19.

In 2023, 2022, and 2021, we recognized royalty revenue of $ 2.2 million, $ 114.9 million, and $ 52.2 million , respectively related to this agreement.

In June 2021, Vir announced its plan to initiate a Phase 2 study for VIR-3434 and subsequently completed dosing of the first patient in such study in July 2021.

The Company recorded a $ 0.5 million contract asset in connection with this milestone event, and the payment was received in August 2021.

In October 2022, Vir completed dosing of the first patient in Phase 2 study for VIR-2482, and the Company recorded $ 0.5 million revenue in connection with this milestone event.

The Company recognized $ 2.2 million , $ 115.4 million, and $ 52.7 million of revenues related to the agreement for the years ended December 31, 2023, 2022, and 2021, respectively.

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(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.

Viridian is responsible for all development and commercialization activities.

We received an upfront payment of shares of Viridian common stock valued at $ 6.0 million and are eligible to receive development, regulatory and sales milestones.

We received an upfront payment of shares of Viridian common stock originally valued at $ 6.0 million and are eligible to receive development, regulatory and sales milestones.

We are also eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

The Company allocated $ 6.0 million of the transaction price to the licenses to the Xtend Fc technology and recognized income for the licenses at inception of the arrangement when Viridian began benefiting access to it.

During 2023, Viridian terminated the license agreement.

In December 2021, we entered into a second Technology License Agreement (Second Viridian Agreement) with Viridian for a non-exclusive license to certain antibody libraries developed by us.

Under the Second Viridian 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 an upfront payment shares of Viridian common stock valued at $ 7.5 million and are eligible to receive up to $ 24.8 million in milestones, which include $ 1.8 million in development milestones, $ 3.0 million in regulatory milestones and $ 20.0 million in sales milestones in addition to royalties on net sales of approved products under the Second Viridian Agreement.

Under the Second Viridian Agreement,

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

We received an upfront payment shares of Viridian common stock originally valued at $ 7.5 million and are eligible to receive up to $ 24.8 million in milestones, which include $ 1.8 million in development milestones, $ 3.0 million in regulatory milestones and $ 20.0 million in sales milestones in addition to royalties on net sales of approved products under the Second Viridian Agreement.

The Company evaluated the Second Viridian Agreement under the revenue recognition standard ASC 606 and identified the following performance obligation that it deemed to be distinct at the inception of the contract:

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The Company considered the license as functional intellectual property as Viridian has the right to use the materials and license at the time that the Company transfers such rights.

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The total transaction price is $ 7.5 million, which includes the upfront payment of Viridian common stock at their fair value at the date of the Agreement.

2 unchanged sentences

The Company allocated $ 7.5 million of the transaction price to the licenses to the antibody libraries and recognized income for the licenses at inception of the arrangement when Viridian received the materials and began accessing them.

No revenue related to the Viridian Agreement was recognized for the year ended December 31, 2022.

The Company recognized $ 7.5 million and $ 6.0 million of revenue related to the Viridian Agreement for the years ended December 31, 2021 and 2020, respectively.

In 2023, the research term under the second Viridian license expired.

No revenue related to the Viridian Agreement was recognized for the years ended December 31, 2023 and 2022.

The Company recognized $ 7.5 million of revenue related to the Viridian Agreement for the year ended December 31, 2021.

There is no deferred revenue as of December 31, 2023 related to this agreement.

Zenas BioPharma Limited

In November 2020, the Company entered into a License Agreement (Zenas Agreement) with Zenas BioPharma Limited (Zenas) pursuant to which the Company granted Zenas exclusive worldwide rights to develop and commercialize to three preclinical-stage Fc-engineered drug candidates:

Zenas BioPharma, Inc.

In November 2020, the Company entered into a License Agreement (Zenas Agreement) with Zenas BioPharma (Cayman) Limited, now Zenas BioPharma, Inc., (Zenas) pursuant to which the Company granted Zenas exclusive worldwide rights to develop and commercialize three preclinical-stage Fc-engineered drug candidates:

XmAb6755, Xpro9523, and XmAb10171.

Under the Zenas Agreement, Zenas will be responsible for all further development and commercialization activities for XmAb6755, Xpro9523, and XmAb10171.

The Company received a 15 % equity interest in Zenas with a fair value of $ 16.1 million, and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

Under the Zenas Agreement, Zenas received exclusive worldwide rights to manufacture, develop and commercialize XmAb6755, Xpro9523, and XmAb10171.

Zenas also received the rights to all data, information, and research materials related to the three preclinical stage programs.

The Company evaluated the Zenas Agreement under the revenue recognition standard ASC 606 and identified the following performance obligations that it deemed to be distinct at the inception of the contract:

• exclusive license to the XmAb6755, Xpro9523, and XmAb10171 drug candidates;

• rights to material, data, and information that the Company had accumulated in connection with conducting preclinical activities for each of the three programs and intellectual property filings and information.

The Company considered the licenses as functional intellectual property as Zenas has the right to use each of XmAb6755, Xpro9523 and XmAb10171 at the time that the Company transfers such rights.

The rights to the preclinical programs’ data are not considered to be separate from the license to programs as Zenas cannot benefit from the license without the supporting data and documentation.

The total transaction price is $ 16.1 million, which includes the upfront payment of 15 % of the equity of Zenas at its fair value at the date of the Zenas Agreement.

The Zenas Agreement includes variable consideration for potential future royalties that were contingent on future success factors for the licensed programs.

The Company used the “most likely amount” method to determine the variable consideration.

None of the royalties were included in the transaction price.

The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

The Company determined the transaction price at inception of the Zenas Agreement and allocated it to the performance obligation, delivery of the XmAb6755, Xpro9523, and XmAb10171 licenses.

The Company completed delivery of its performance obligations in December 2020.

The licenses to XmAb6755, Xpro9523, and XmAb10171 were transferred to Zenas at inception of the Zenas Agreement, and the related research data and documentation was transferred to Zenas in December 2020.

The Company received an upfront payment in equity in Zenas with a fair value of $ 16.1 million and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

In November 2021, the Company entered into a second License Agreement (Second Zenas Agreement) with Zenas, in which we licensed the exclusive worldwide rights to develop and commercialize the Company’s obexelimab (XmAb5871) drug candidate.

Under the Second Zenas Agreement, Zenas will be responsible for all further development

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and commercialization activities for obexelimab.

The Company received a warrant to acquire additional equity in Zenas with a fair value of $ 14.9 million, and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

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

Zenas will have sole responsibility for advancing the research, development, regulatory and commercial activities of obexelimab worldwide.

The Company evaluated the Second Zenas Agreement under the revenue recognition standard ASC 606 and identified the following performance obligations that it deemed to be distinct at the inception of the contract:

• exclusive license to the obexelimab drug candidate;

• rights to material, data, and information that the Company had accumulated in connection with conducting clinical activities for the program and intellectual property filings and information.

The Company considered the license as functional intellectual property as Zenas has the right to use obexelimab at the time that the Company transfers such rights.

The rights to the obexelimab program data are not considered to be separate from the license to program as Zenas cannot benefit from the license without the supporting data and documentation.

The total transaction price is $ 14.9 million, which includes the upfront payment of a warrant to acquire up to 15 % of the equity of Zenas in connection with a future financing at its fair value at the date of the Second Zenas Agreement.

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As a result of the Zenas financing transaction, the estimated fair value of our investment in equity securities increased by $ 17.9 million.

This amount has been recorded in other income.

In 2022, this amount has been recorded in other income.

In 2023, Zenas initiated a Phase 3 study with obexelimab, and we received additional equity in Zenas as a milestone payment.

We recorded milestone revenue of $ 10.0 million, which is the fair value of the equity shares at the date of issuance.

No revenue was recognized for the year ended December 31, 2022.

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There is no deferred revenue as of December 31, 2023 related to this agreement.

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Technology License Agreement and Services Agreement with Gale Therapeutics Inc.

In the fourth quarter of 2023, the Company formed a subsidiary, Gale Therapuetics Inc.

(Gale), to develop novel drug candidates with its Fc technologies.

On December 19, 2023, the Company entered into the Gale License Agreement and the Gale Services Agreement with Gale.

Under the Gale License Agreement, Gale received an exclusive license to certain preclinical candidates and related Xencor technologies.

The Company also has an option on future compounds Gale will develop.

Under the Gale Services Agreement, the Company will provide research and development services as well as accounting and administrative support.

Pursuant to the Gale Agreement, the Company acquired a majority stake in Gale.

The Company is deemed to be the primary beneficiary of Gale, a VIE, and they are under common control;

therefore, the assets, liabilities and non-controlling interests of Gale are initially recorded at their previous carrying amounts, with no adjustment to current fair values and no gain or loss is recognized.

The value of the preclinical assets and technology had no value on Xencor's financial statements, and the license to Gale at inception had no carrying value.

The Company would not recognize license revenue related to the transfer for the year ended December 31, 2023.

Total charges under the Services Agreement during 2023 of $ 1.0 million have been eliminated in consolidation.

Revenue Earned

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2023 2022 2021

Aimmune $ — $ — $ 9.6

Alexion 58.6 29.4 22.2

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Remaining Performance Obligations and Deferred Revenue

The Company’s remaining performance obligation as of December 31, 2022 is conducting research activities pursuant to research plans under the Second Janssen Agreement.

As of December 31, 2022 and 2021, we have deferred revenue of $ 30.3 million and $ 37.3 million, respectively.

All of the deferred revenue was classified as short term as of December 31, 2022 and 2021, respectively, as the Company’s obligations to perform research services are due on demand when requested by Janssen under the Janssen Agreement.

There is no remaining performance obligation under the Company's arrangements as of December 31, 2023.

The Company's performance obligation as of December 31, 2022 was completing research activities pursuant to the Second J&J Agreement.

As of December 31, 2022, we have deferred revenue of $ 30.3 million.

All of the deferred revenue was classified as short term as of December 31, 2022, as the Company’s obligations to perform research services are due on demand when requested by J&J under the Second J&J Agreement.

Sale of Future Royalties

Ultomiris Royalty Sale Agreement

On November 3, 2023, the Company and OMERS entered into the Ultomiris Royalty Sale Agreement.

Pursuant to the Ultomiris Royalty Sale Agreement, OMERS acquired the rights to a portion of royalties and milestones earned after July 1, 2023 associated with the existing license relating to Ultomiris® (ravulizumab) in exchange for an upfront payment of $ 192.5 million.

Pursuant to the Ultomiris Royalty Sale Agreement and subject to the Company’s existing license with Alexion, OMERS has acquired the right to receive:

(i) 100 % of royalties payable on past and potential sales related to Ultomiris® that occur from July 1, 2023 through December 31, 2025;

(ii) up to $ 35.0 million annually in royalties on potential sales

related to Ultomiris® that occur from January 1, 2026 through December 31, 2028 with any royalties in excess of $ 35.0 million reverting to the Company;

(iii) up to $ 12.0 million annually in royalties on potential sales related to Ultomiris® that occur from and after January 1, 2029, with any royalties in excess of $ 12.0 million reverting to the Company;

and (iv) $ 18.0 million of a certain potential sales based milestone payment pursuant to the existing license with Alexion.

OMERS will pay an additional $ 12.0 million in 2024 to the Company if certain potential sales based milestones have been reached.

The Company determined that $ 29.5 million of the upfront payment is for a recorded receivable for royalties and a milestone earned in the third quarter of 2023 and $ 163.0 million is for the sale of future royalties.

The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be recorded as deferred income on the balance sheets as none of the criteria for classification as debt had been met in accordance with ASC 470.

The Company records the non-cash royalty revenue under the “units-of-revenue” method in the consolidated statements of income (loss).

For the year ended December 31, 2023, the Company recognized $ 6.2 million of non-cash royalty revenue.

Monjuvi Royalty Sale Agreement

On November 3, 2023, the Company and OMERS entered into the Monjuvi Royalty Sale Agreement.

Pursuant to the Monjuvi Royalty Sale Agreement, OMERS acquired the rights to a portion of royalties earned after July 1, 2023 associated with the existing license relating to Monjuvi®/Minjuvi® (tafasitamab-cxix) in exchange for an upfront payment of $ 22.5 million.

Pursuant to the Monjuvi Royalty Sale Agreement and subject to the Company’s existing license with MorphoSys, OMERS has acquired the right to receive up to $ 29.3 million in royalties earned after July 1, 2023 related to sales of Monjuvi®/Minjuvi®, with any royalties in excess of $ 29.3 million paid to OMERS reverting to the Company.

The Company determined that $ 2.2 million of the upfront payment is for a recorded receivable for royalties earned in the third quarter of 2023 and $ 20.3 million is from the sale of future royalties.

The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be classified as debt according to ASC 470.

As of December 31, 2023, the estimated effective rate under the agreement was 21.1 %.

The Company will reassess the estimate of total future royalty payment and prospectively adjust the imputed interest rate and related amortization if the estimate is materially different.

For the year ended December 31, 2023, the Company recognized $ 2.1 million of non-cash royalty revenue and $ 0.7 million of non-cash interest expense.

The following table shows the activity within debt for the year ended December 31, 2023 (in thousands):

December 31, 2023

Beginning balance of debt related to sale of future royalties $ —

Proceeds from sale of future royalties 20,293

Royalties paid to OMERS —

Non-cash interest expense recognized 681

Ending balance of debt related to sale of future royalties $ 20,974

Debt - short-term 6,332

Debt - long-term 14,642

Total debt $ 20,974

We have a 401(k) plan covering all full-time employees.

Employees may make pre-tax contributions up to the maximum allowable by the Internal Revenue Code.

Effective January 1, 2018, the Company contributes 100 % of the first 1 % of participating employees’ contribution and 50 % of the next 5 % of participating employees’ contribution, for a maximum of 3.5 % employer contribution.

Effective March 31, 2020, the Company contributes 100 % of the first 1 % of participating employees’ contribution and 50 % of the next 6 % of participating employees’ contribution, for a maximum of 4.0 % of employer contribution.

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Employer contributions made for the years ended December 31, 2023, 2022, and 2021 were $ 1.7 million, $ 1.4 million, and $ 1.1 million, respectively.

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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 8. Financial Statements and Supplementary Data