Xencor Inc 10-K/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis together with our financial statements and related notes included elsewhere in this Form 10-K/A. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. Historical results are not necessarily indicative of future results. Overview We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered antibody therapeutics to treat patients with cancer and other serious diseases, who have unmet medical needs. We are advancing a broad portfolio of clinical-stage XmAb® drug candidates from our proprietary Fc technology platforms. We also use our protein engineering capabilities to increase our understanding of protein structure and interactions and to design new Fc technologies and XmAb development candidates with improved properties. In addition to engineering protein-target interactions, our approach to protein design includes engineering Fc domains, the parts of antibodies that interact with multiple segments of the immune system and control antibody structure. The Fc domain is constant and interchangeable among antibodies, and our engineered Fc domains can be readily substituted for natural Fc domains. Our protein engineering capabilities and Fc technologies enable us and our partners to develop XmAb antibodies and other types of biotherapeutic drug candidates with improved properties and functionality, which can provide innovative approaches to treating disease and potential clinical advantage over other treatment options. For example, we developed an antibody scaffold to rapidly create novel multi-specific antibodies that bind two or more different targets simultaneously, creating entirely new biological mechanisms. Other applications of our protein engineering technologies enhance antibody performance by increasing immune inhibitory activity, improving cytotoxicity, extending circulating half-life and stabilizing novel protein structures, such as engineered cytokines. Three marketed XmAb medicines have been developed with our protein engineering technologies. Refer to Part I, Item 1, "XmAb Bispecific Technologies" and "Other XmAb Fc Technologies" in the description of our business included in this Form 10-K/A for a discussion of our core Fc technology platforms. Strategic Portfolio Prioritization We are focused on developing targeted T cell-engaging bispecific antibodies, which we believe hold great potential for the treatment of patients with solid tumors, and beginning in the third quarter of 2023, we began aligning our 51 portfolio to prioritize these programs, which include XmAb819 (ENPP3 x CD3), XmAb808 (B7-H3 x CD28) and XmAb541 (CLDN6 x CD3). We have also narrowed the clinical development plan for our dual checkpoint inhibitor, vudalimab (PD-1 x CTLA-4), in treating patients with advanced prostate and non-small lung cell cancers. In the first half of 2024, we plan to conclude the Phase 1 studies evaluating our XmAb564 and XmAb662 cytokines and pause further development of both programs, pending review of data emerging from competitive programs. We also have implemented measures to align resources with our strategic plan for a focused pipeline and to strengthen our financial position. In November 2023, we entered into a royalty transaction with OMERS Life Sciences, through which we received $215.0 million for selling portions of financial interests on sales of marketed XmAb medicines. In the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement. Our cost-sharing obligations will continue to June 1, 2024, and Genentech will be responsible for all development thereafter. To align our internal resources with our focused development pipeline and current plans, we have implemented reductions in our workforce, which have impacted approximately 10% of positions at the company. As of December 31, 2023, we had $697.4 million in cash, cash equivalents and marketable debt securities, and based on our current plans and projections, we estimate this will provide necessary funding into 2027. Advancements in Our Clinical Portfolio of XmAb Drug Candidates Our modular XmAb bispecific technology and protein engineering capabilities enable us to rapidly advance multiple drug candidates into clinical development. We and our partners are currently enrolling Phase 1 or Phase 2 studies for ten wholly owned or co-development candidates to treat patients with many different types of cancer and autoimmune diseases, and an eleventh, to be developed for patients with advanced ovarian cancer and other solid tumors, is planned to enter clinical development in the first half of 2024. Vudalimab (PD-1 x CTLA-4) : Vudalimab is a bispecific antibody that targets PD-1 and CTLA-4, two immune checkpoint receptors, to selectively activate the tumor microenvironment, and it is being developed for patients with metastatic castration-resistant prostate cancer (mCRPC) and patients with locally advanced or metastatic non-small cell lung cancer. Data from a Phase 1 study that enrolled heavily pretreated patients with multiple solid tumor types indicated that vudalimab was generally well-tolerated with encouraging clinical activity. We are conducting a Phase 2 study of vudalimab in patients with mCRPC, as a monotherapy or in combination with chemotherapy for patients with aggressive variant prostate cancer, as these patients represent a high unmet medical need. We are also conducting a second Phase 2 study in patients with clinically-defined high-risk mCRPC. As previously disclosed, in the fourth quarter of 2023, cohorts for patients with advanced gynecologic malignancies were closed to enrollment, and we do not intend further development in advanced gynecologic malignancies. In the mCRPC cohort, vudalimab monotherapy has been generally well tolerated and associated with response to treatment in multiple patients who have visceral or lymph node metastases. As of a data cutoff of February 7, 2024, 14 patients with clinically defined high-risk mCRPC have been enrolled into the vudalimab monotherapy cohort for treatment. Vudalimab has been administered every 3 weeks at a 1000 mg (<80 kg) or 1200 mg (> 80 kg) flat dose. As of the data cutoff, 3 of 12 evaluable patients have a confirmed partial response per RECIST 1.1 guidelines, and 1 patient has an unconfirmed partial response. Of the evaluable patients, 3 patients have experienced greater than 90% reductions in prostate specific antigen (PSA) from baseline. Treatment emergent adverse events have led to dose modifications for 8 patients and treatment discontinuation for 2 patients. One Grade 5 adverse event of autoimmune hepatitis was deemed treatment related; there have been no known additional cases of Grade 5 autoimmune hepatitis among three clinical studies of vudalimab with more than 230 patients treated. In the fourth quarter of 2023, we dosed the first patient in a Phase 1b/2 study evaluating vudalimab as a first-line treatment in patients with locally advanced or metastatic non-small cell lung cancer. XmAb819 (ENPP3 x CD3): XmAb819 is a first-in-class, tumor-targeted, T-cell engaging XmAb 2+1 bispecific antibody in development for patients with renal cell carcinoma (RCC). XmAb819 engages the immune system and activates T cells for highly potent and targeted tumor cells expressing ENPP3, an antigen highly expressed on kidney cancers. ENPP3 is a differentially expressed target, with high level expression in RCC and low level expression on normal tissues. With two tumor-antigen binding domains and one T-cell binding domain, our XmAb 2+1 format enables antibodies 52 to bind more avidly to, and selectively kill, tumor cells with higher antigen density, potentially sparing normal cells. We are conducting a Phase 1 study evaluating XmAb819 in patients with advanced clear cell RCC. XmAb808 (B7-H3 x CD28): XmAb808 is a tumor-selective, co-stimulatory XmAb 2+1 bispecific antibody designed to bind to the broadly expressed tumor antigen B7-H3 and selectively to the CD28 T-cell co-receptor, only when bound to tumor cells. We are conducting a Phase 1 study of XmAb808 in combination with pembrolizumab in patients with advanced solid tumors. XmAb541 (CLDN6 x CD3): XmAb541 is a bispecific antibody that targets Claudin-6 (CLDN6) and CD3. CLDN6 is a tumor-associated antigen in ovarian cancer and other solid tumors. The XmAb 2+1 multivalent format used in XmAb541 enables greater selectivity for CLDN6 over similar Claudin family members, such as CLDN9, CLDN3 and CLDN4. The investigational new drug (IND) application for XmAb541 has been allowed to proceed by the FDA, and we plan to initiate a Phase 1 study in the first half of 2024. XmAb564 (IL2-Fc Cytokine): XmAb564 is a wholly owned, monovalent, interleukin-2 Fc (IL-2-Fc) fusion protein engineered to selectively activate and expand regulatory T cells (Tregs) for the potential treatment of patients with autoimmune diseases. XmAb564 is engineered with reduced binding affinity for IL-2's beta receptor and increased binding affinity for its alpha receptor. Results from a Phase 1a clinical study of XmAb564, presented at the European Congress of Rheumatology (EULAR) in May 2023, indicate a single dose of XmAb564, administered subcutaneously in healthy volunteers, was well tolerated and generated durable, dose-dependent and selective expansion of Tregs. We have been conducting a randomized, double-blind, placebo-controlled Phase 1b clinical study to evaluate the safety and tolerability of multiple ascending doses of XmAb564, administered subcutaneously in patients with atopic dermatitis or psoriasis. We plan to conclude the Phase 1b study in the first half of 2024 and pause further development of XmAb564 until after assessment of future data from competitor programs in this class and review of safety and biomarker data in the Phase 1b study. XmAb662 (IL12-Fc Cytokine): XmAb662 is a potency-reduced interleukin-12 Fc (IL12-Fc) fusion protein engineered to increase anti-tumor activity and immunogenicity in the tumor microenvironment by promoting high levels of interferon gamma secretion from T cells and NK cells. In preclinical testing, Xencor’s engineered IL12-Fc fusions demonstrated an improved pharmacokinetic profile and therapeutic window compared to a native IL12-Fc fusion, with superior exposure, a more gradual dose response and more sustained interferon gamma response. XmAb662 demonstrated significant anti-tumor activity, along with increases in NK cells, T cells, serum IP-10 and interferon gamma, which were further enhanced when combined with an anti-PD-1 antibody. We have been conducting a Phase 1 study to evaluate XmAb662 in patients with advanced solid tumors. We plan to conclude the Phase 1 study in the first half of 2024 and pause further development of XmAb662 until after assessment of future data from competitor programs in this class and review of safety and biomarker data in the Phase 1 study. Co-development Programs Plamotamab (CD20 x CD3): Plamotamab is a bispecific antibody that targets CD20, an antigen on B-cell tumors, and CD3, an activating receptor on T cells. In October 2021, we entered a global collaboration and license agreement with Janssen Biotech, Inc., a Johnson & Johnson company, to advance plamotamab and XmAb CD28 bispecific antibody combinations for the treatment of patients with B-cell malignancies, which expands our strategy to develop multiple highly active chemotherapy-free regimens across B-cell cancers. J&J received worldwide exclusive development and commercial rights, and we will collaborate with Janssen on further clinical development of plamotamab, with us paying 20% of costs. Under the collaboration, we will develop B-cell targeted CD28 bispecific antibodies to selectively enhance T-cell cytotoxic activity in combination with plamotamab. In a Phase 1 study, intravenous plamotamab monotherapy was well tolerated and demonstrated encouraging clinical activity in heavily pretreated patients at the recommended intravenous Phase 2 dose. In the fourth quarter of 2023, we completed enrolling patients in subcutaneous dose escalation cohorts of this study. Efbalropendekin alfa (IL15/IL15Rα-Fc Cytokine) : Efbalropendekin alfa (XmAb306) is a reduced-potency IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we are co-developing this program in collaboration with Genentech, a member of the Roche Group. Genentech is conducting a Phase 1 study of efbalropendekin as a single agent and in combination with atezolizumab in patients with advanced solid tumors and is also conducting Phase 1 studies, evaluating efbalropendekin in patients with relapsed/refractory multiple myeloma, either in combination with daratumumab (anti-CD38 antibody) or in combination with cevostamab (FcRH5 x CD3 bispecific 53 antibody). In the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement. Pursuant to the terms of the amended agreement with Genentech, effective June 1, 2024, Genentech will assume sole responsibility over all clinical, regulatory and commercial activities. We will be eligible for up to $600.0 million in milestones and tiered royalties on approved sales from low double-digit to mid-teen percentages range. Advancements Expanding XmAb Bispecific Platforms We conduct further research into the function and application of antibody Fc domains in order to expand the scope of our XmAb technology platforms and identify additional XmAb drug candidates. We use the modularity of our XmAb bispecific Fc technology to build antibody-based therapeutics in a variety of formats, such as T cell engaging bispecific antibodies of a mixed valency format, the XmAb 2+1 bispecific antibody. XmAb 2+1 bispecific antibodies may preferentially kill tumor cells with high target expression, which may be especially beneficial in designing antibodies that target solid tumors. This selectivity potentially empowers T cell engaging bispecifics (e.g., CD3, CD28) to address an expanded set of tumor antigens. Four clinical-stage programs utilize our XmAb 2+1 format: XmAb819, XmAb808, xaluritamig and ASP2138. We plan to initiate a Phase 1 study for an additional XmAb 2+1 bispecific antibody candidate, XmAb541 (CLDN6 x CD3), which we are developing for patients with ovarian cancer and other solid tumors, in the first half of 2024. Additionally, we have engineered CD28 bispecific antibodies to provide conditional CD28 co-stimulation of T cells, activating them when bound to tumor cells. Targeted CD28 bispecific antibodies may provide conditional co-stimulation of T cells, for example, to T cells recognizing neoantigens or in concert with CD3 T-cell engaging bispecific antibodies. In addition to our first clinical-stage CD28 program, XmAb808, our CD28 platform is the subject of two collaborations with J&J. JNJ-9401 and JNJ-1493 are clinical-stage XmAb bispecific antibodies that J&J is developing in prostate cancer and B-cell malignancies, respectively, and both entered clinical development during the fourth quarter of 2023. In April 2023, we presented emerging data from research-stage engineered CD28 bispecific antibodies targeting the solid tumor antigens CEACAM5, ENPP3, mesothelin, STEAP1 and Trop-2 in a poster at the American Association for Cancer Research (AACR) Annual Meeting. In November 2023, we presented emerging data from research-stage programs that highlighted several of our platform technologies at the Annual Meeting of the Society for Immunotherapy of Cancer, with poster presentations with data from IL18-Fc and PD1 x IL18-Fc cytokine programs and data from our multi-specific NK cell engager platform. Progress Across Partnerships A key part of our business strategy is to leverage our protein engineering capabilities, XmAb technologies and drug candidates with partnerships, collaborations and licenses. Through these arrangements we generate revenues in the form of upfront payments, milestone payments and royalties. For partnerships for our drug candidates, we aim to retain a major economic interest in the form of keeping major geographic commercial rights; profit-sharing; co-development options; and the right to conduct studies with drug candidates developed in the collaboration. The types of arrangements that we have entered with partners include product licenses, novel bispecific antibody collaborations, technology licensing agreements and strategic collaborations. Product Licenses Product licenses are arrangements in which we have internally developed drug candidates and, based on a strategic review, licensed partial or full rights to third parties to continue development and potential commercialization. We seek partners that can provide infrastructure and resources to successfully develop our drug candidates, have a track record of successfully developing and commercializing medicines, or have a portfolio of development-stage candidates and commercialized medicines which could potentially be developed in rational combinations with our drug candidates. The FDA approved Monjuvi® (tafasitamab-cxix) under accelerated approval in July 2020. Monjuvi is a CD19-directed cytolytic antibody indicated in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise specified, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem cell transplant (ASCT). This indication is approved under 54 accelerated approval based on overall response rate. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial(s). In August 2021, the European Commission granted conditional marketing authorization for Minjuvi® (tafasitamab) in combination with lenalidomide, followed by tafasitamab monotherapy, for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) who are not eligible for autologous stem cell transplantation (ASCT). Tafasitamab was created and initially developed by us. Tafasitamab is marketed by Incyte Corporation under the brand name Monjuvi in the U.S. and under the brand name Minjuvi in Europe and Canada. Incyte has exclusive commercialization rights to tafasitamab outside the U.S. Monjuvi® and Minjuvi® are registered trademarks of Incyte. In February 2024, Incyte acquired exclusive global development and commercialization rights to tafasitamab. In November 2023, we entered into a royalty purchase agreement (Monjuvi Royalty Sale Agreement) with OCM Life Sciences Portfolio LP (OMERS). Under the terms of the Monjuvi Royalty Sale Agreement, we received $22.5 million upon closing in exchange for royalties earned from our MorphoSys license after July 1, 2023. The aggregate Monjuvi royalties to be received by OMERS have a fixed cap of 130% of the purchase price after which the royalties revert to us. In 2023, we recognized royalty revenue of $8.7 million on net sales of Monjuvi. In November 2021, we entered into an agreement with Zenas BioPharma (Cayman) Limited (Zenas), to which we licensed the exclusive worldwide rights to develop and commercialize obexelimab, a bifunctional antibody that targets CD19 with its variable domain and uses our XmAb Immune Inhibitor Fc Domain. Zenas issued a warrant giving us the right to acquire additional Zenas equity, such that our total equity in Zenas would be 15% of its fully diluted capitalization following the closing of Zenas’ next round of equity financing, subject to certain requirements. In November 2022, Zenas completed a financing transaction and we received additional shares in Zenas in exchange for the warrant. The total shares received increases our ownership in Zenas to 15% of the fully diluted shares outstanding. We are eligible to receive up to $470.0 million based on the achievement of certain clinical development, regulatory and commercial milestones and are eligible to receive tiered, mid-single digit to mid-teen percent royalties upon commercialization of obexelimab, dependent on geography. In January 2023, Zenas initiated a Phase 3 study of obexelimab in patients with immunoglobulin G4-related disease (IgG4-RD) and dosed the second patient in the study in April 2023, and we received additional preferred stock in Zenas as a development milestone in the second quarter of 2023. The additional preferred stock has a fair market value of $10.0 million, and we recorded the milestone payment as revenue for the nine months ended September 30, 2023. In 2023, Zenas also initiated a Phase 2 study of obexelimab in patients with warm autoimmune hemolytic anemia (wAIHA). Novel Bispecific Antibody Collaborations Novel bispecific antibody collaborations are arrangements in which our partner seeks to create a bispecific antibody using one or more of our XmAb bispecific technologies. Our partners provide an antibody or a tumor-associated antigen, and we conduct limited research and development to create potential bispecific antibody candidates for further development and commercialization by our partners. Xaluritamig (AMG 509) is a STEAP1 x CD3 2+1 bispecific antibody that our partner Amgen is advancing for the treatment of patients with prostate cancer. The XmAb 2+1 multivalent format enables higher binding capability for STEAP1 expressing cells. Amgen is currently completing enrollment in a Phase 1 study of xaluritamig in patients with mCRPC. In October 2023 at the European Society for Medical Oncology (ESMO) Congress, encouraging interim clinical results from the study were presented during an oral proffered paper session, which we believe validates the potential of the XmAb 2+1 format. In November 2020, we entered an agreement with J&J, focused on the discovery of XmAb bispecific antibodies against CD28, an immune co-stimulatory receptor on T cells, and PSMA, a prostate tumor target, for the potential treatment of patients with prostate cancer. Additionally, we have a right to access select, predefined agents from J&J’s portfolio of clinical-stage drug candidates and commercialized medicines to evaluate potential combination therapies in prostate cancer with agents in our own pipeline, subject to some limitations. J&J has the same right with our portfolio to evaluate potential combination therapies in prostate cancer, as well. The ability to study combinations of therapies from both companies’ prostate cancer portfolios leverages our broad clinical pipeline and J&J's prostate cancer therapeutics portfolio. In the third quarter of 2023, J&J submitted an IND for JNJ-9401, a PSMA x CD28 bispecific antibody developed under the collaboration, and we received a $7.5 million development milestone. In the fourth quarter of 2023, J&J dosed the first patient in a Phase 1 study of JNJ-9401, and we received a $10.0 million development milestone. In October 2021, we entered into a second collaboration agreement with J&J to create and characterize CD28 bispecific antibody candidates against B-cell targets. In the first quarter of 2023, J&J selected a bispecific CD28 candidate under the agreement for further development, and we received a $5.0 million research milestone. In the third quarter of 2023, J&J submitted a CTA for JNJ-1493, a CD20 x CD28 bispecific antibody developed under the collaboration, and we 55 received a $7.5 million development milestone. In the fourth quarter of 2023, J&J began dosing patients in a Phase 1 study of JNJ-1493 and selected two additional CD28 bispecific antibody candidates under the agreement, and we received a $10.0 million development milestone and $7.5 million in research milestones. Other XmAb bispecific antibodies being developed by our partners include Astellas’ ASP2138, a CLDN18.2 x CD3 XmAb 2+1 bispecific antibody, which is in Phase 1 studies to treat patients with gastric/GEJ adenocarcinomas and pancreatic adenocarcinoma and an undisclosed candidate being developed by Novartis, which is also in Phase 1 development. Technology License Agreements We enter into technology licensing agreements in which we license access to one or more of our XmAb Fc technologies on a restricted basis, typically to an XmAb Cytotoxic Fc Domain and/or the Xtend Fc Domain. Our partners are responsible for all research, development and commercialization activities of the drug candidates. The plug-and-play nature of XmAb technologies allows us to license access to our platforms with limited or no internal research and development activities. Alexion’s Ultomiris® uses Xtend Fc technology for longer half-life. Ultomiris has received marketing authorizations in global markets for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), for certain patients with atypical hemolytic uremic syndrome (aHUS) and for certain patients with generalized myasthenia gravis (gMG). Alexion is also evaluating Ultomiris in a broad development program across additional hematology and neurology indications. In May 2023, Ultomiris was approved in the EU and Japan for the treatment of certain adult patients with neuromyelitis optica spectrum disorder (NMOSD). In November 2023, we entered into a royalty purchase agreement (Ultomiris Royalty Sale Agreement) with OMERS. Under the terms of the Ultomiris Royalty Sale Agreement, we received $192.5 million upon closing in exchange for a portion of royalties and the milestone earned from our Alexion license after July 1, 2023. In 2023, we earned $44.9 million in royalties and a $20.0 million sales milestone from Alexion. In January 2020, we entered into a Technology License Agreement with Gilead Sciences, Inc. (Gilead) in which we provided Gilead an exclusive license to our Cytotoxic Fc and Xtend Fc technologies for antibody candidates. In the third quarter, Gilead initiated a Phase 2 study including two antibody candidates developed with our Fc technologies, teropavimab and zinlirvimab, and we received $6.0 million in milestones. In August 2020, we entered into a Technology License Agreement with Omeros Corporation (Omeros) in which we provided Omeros a non-exclusive license to our Xtend Fc technology. In the third quarter of 2023, Omeros initiated a Phase 2 study of OMS906, which incorporates Xtend Fc technology, and we received a $5.0 million milestone. In March 2020, we entered a second agreement with Vir Biotechnology, Inc., under which Vir has non-exclusive access to our Xtend Fc technology to extend the half-life of novel antibodies Vir investigated as potential treatments for patients with COVID-19. In May 2021, the FDA granted EUA to sotrovimab for the early treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg) with positive results of direct severe SARS-CoV-2 viral testing, and at high risk for progression to severe COVID-19, including hospitalization or death. Sotrovimab has also obtained emergency authorization, temporary authorization or marketing approval (under the brand name Xevudy®) for early treatment of COVID-19 in more than 30 countries. In March 2022, the FDA deauthorized sotrovimab’s use in all U.S. regions due to increases in the proportion of COVID-19 cases caused by non-susceptible new variants. As the SARS-CoV-2 virus has mutated, our royalty revenue from the sales of sotrovimab has diminished significantly. In 2023, we earned $2.2 million in royalties from Vir. In December 2020, we entered into an agreement with Viridian Therapeutics, Inc., (Viridian) in which we provided Viridian a non-exclusive license to our Xtend Fc technology and an exclusive license to apply our Xtend Fc technology to antibodies targeting IGF-1R. We received common stock in Viridian as an upfront payment. Xtend Fc technology was not applied to Viridian antibodies, and in 2023 the agreement was terminated. In December 2021, we entered into a second agreement with Viridian for a non-exclusive license to certain antibody libraries developed by us, for which the term has ended. We received additional common stock in Viridian as an upfront payment. Under the agreement, Viridian received a one-year research license to review the antibodies and the agreement expired in 2023. 56 Refer to Part IV, Item 15, Note 11, "Collaboration and Licensing Agreements" of the notes to our financial statements included in this Form 10-K/A for a description of the key terms of our arrangements. Financial Operations Overview Revenues Our revenues to date have been generated primarily from our collaboration agreements, our product licensing agreements, and our technology licensing agreements. Revenue recognized from our collaboration and product licensing agreements includes non-refundable upfront payments, milestone payments and royalties on net sales of approved products while revenue from our technology licensing agreements includes upfront payments, option payments to obtain commercial licenses, milestone payments and royalties on net sales of approved products. Since our inception through December 31, 2023, we have generated $1.2 billion in revenues under the various product development partnership and technology license arrangements. Several of our product development partnership and technology license agreements provide us the opportunity to earn future milestone payments, royalties on product sales and option exercise payments. In 2023, we sold a portion of the rights to received royalties under our MorphoSys and Alexion arrangements for $215.0 million. Summary of Collaboration and Licensing Revenue by Partner The following is a comparison of collaboration, product licensing, and technology licensing revenue for the years ended December 31, 2023 and 2022 (in millions): Year Ended December 31, 2023 2022 (As Restated) Alexion $ 64.9 $ 29.4 Astellas — 5.0 Gilead 6.0 — Janssen 77.8 7.0 MorphoSys 8.7 7.8 Omeros 5.0 — Vir 2.2 115.4 Zenas 10.0 — Total $ 174.6 $ 164.6 Research and Development Expenses The following is a comparison of research and development expenses for the years ended December 31, 2023 and 2022 (in millions): Year Ended December 31, 2023 2022 External research and development expenses $ 119.7 $ 89.0 Internal research and development expenses 99.4 79.0 Stock-based compensation 34.5 31.6 Total $ 253.6 $ 199.6 Internal research and development expenses consist primarily of salaries, benefits, related personnel costs, supplies, and allocated overhead including facility costs. External research and development expenses include preclinical testing costs, clinical trial costs and fees paid to external service providers. External service providers include CROs and contract manufacturing organizations (CMOs) to conduct clinical trials, manufacturing and process development, IND-enabling toxicology testing and formulation of clinical drug supplies. We expense research and development expenses as 57 incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received. We estimate contract manufacturing, preclinical study and clinical trial expenses based on the services performed pursuant to the contracts with manufacturing, research institutions and clinical research organizations that manufacture and conduct and manage preclinical studies and clinical trials on our behalf based on the actual time and expenses incurred by them. We accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly. Our estimates of clinical trial expense have fluctuated on a period-to-period basis due to changes in the stage of the clinical trials and patient enrollment levels. We expect to experience a continuing pattern of fluctuations in clinical trial expenses as current clinical trials are completed and as we initiate additional and later stage clinical trials. To date, we have not experienced significant differences between our periodic estimates of clinical trial expense and the actual costs incurred. We expect changes in future clinical trial expenses to be driven by changes in service provider costs and changes in clinical stage and patient enrollment. We expect that our future research and development expenses will increase overspending levels in recent years if we are successful in advancing our current clinical-stage drug candidates or any of our preclinical programs into later stages of clinical development. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We or our partners may never succeed in achieving marketing approval for any of our product candidates. Numerous factors may affect the probability of success for each product candidate, including preclinical data, clinical data, competition, manufacturing capability, approval by regulatory authorities and commercial viability. Our research and development operations are conducted such that design, management and evaluation of results of all of our research and development is performed internally, while the execution of certain phases of our research and development programs, such as toxicology studies in accordance with Good Laboratory Practices (GLP), and manufacturing in accordance with cGMP, is accomplished using CROs and CMOs. We account for research and development costs on a program-by-program basis except in the early stages of research and discovery, when costs are often devoted to identifying preclinical candidates and improving our discovery platform and technologies, which are not necessarily allocable to a specific development program. We assign costs for such activities to distinct projects for preclinical pipeline development and new technologies. We allocate research management, overhead, commonly used laboratory supplies and equipment, and facility costs based on the percentage of time of full-time research personnel efforts on each program. 58 The following is a comparison of research and development expenses for the years ended December 31, 2023 and 2022 (in millions): Year Ended December 31, 2023 2022 Product programs: Bispecific programs: CD3 programs: Plamotamab* $ 16.5 $ 19.8 XmAb819 (ENPP3 x CD3) 18.2 10.5 XmAb541 (CLDN6 X CD3) 20.4 7.1 Total CD3 programs 55.1 37.4 CD28 program: XmAb808 (B7H3 x CD3) 16.7 17.7 Tumor micro environment (TME) activator programs: Vudalimab 44.2 22.8 XmAb104 24.2 21.3 Total TME activators programs 68.4 44.1 Subtotal bispecific programs 140.2 99.2 Cytokine programs: XmAb306/RG6323 programs* 14.1 13.2 XmAb564 24.1 17.2 XmAb662 (IL-12-Fc) 12.8 15.5 Total cytokine programs 51.0 45.9 Other, research and early stage programs 51.7 30.8 Wind down costs of terminated programs (1) 10.7 23.7 Total research and development expenses $ 253.6 $ 199.6 *Includes net reimbursements to and from our partners pursuant to agreements that include cost-sharing arrangements. (1) Research and development expenses include wind down costs of programs that terminated in prior periods including the vibecotamab, tidutamab, and XmAb841 programs. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation related to our executive, finance, business development, and support functions. Other general and administrative expenses include intellectual property costs, facility costs, and professional fees for auditing, tax and legal services. 59 Other Income, Net For the year ended December 31, 2023, other income, net, consists primarily of interest income from marketable debt securities during the year, while for the year ended December 31, 2022, other income, net, consists primarily of unrealized gains on equity securities during the year. Critical Accounting Policies, Significant Judgments, and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of our financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our management believes judgment is involved in determining revenue recognition, interest expense under the royalty sale agreements, the fair value-based measurement of stock-based compensation, the fair value estimate of marketable securities, the capitalization and recoverability of intellectual property costs, valuation of deferred tax assets and accruals. Our management evaluates estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the financial statements. If our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity and financial condition. While our significant accounting policies are described in more detail in Note 1 to our financial statements included elsewhere in this Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements. Revenue Recognition We have, to date, earned revenue from research and development collaborations, which may include research and development services, licenses of our internally developed technologies, licenses of our internally developed drug candidates, or combinations of these. The terms of our license and research and development and collaboration agreements generally include non-refundable upfront payments, research funding, co-development 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. The terms of our licensing agreements include non-refundable upfront fees, contractual payment obligations for the achievement of pre-defined preclinical, clinical, regulatory and sales-based events by our partners. The licensing agreements also include royalties on sales of any commercialized products by our partners. In certain transactions for licensing of our technologies or our product candidates, we may receive an equity interest from our partners as full or partial consideration for an upfront payment due under the arrangement. We record the initial equity at its fair value and mark the value to market quarterly for publicly traded securities and review for impairment for equity that is not publicly traded on a national exchange. Sale of Future Royalties In November 2023, we entered into the sale of a portion of our royalties due us under the Alexion Agreement (the Ultomiris Royalty Sale Agreement) and a portion of our royalties due us under the MorphoSys Agreement (the Monjuvi Royalty Sale Agreement) and received upfront proceeds of $192.5 million and $22.5 million, respectively. We evaluated both the Ultomiris Royalty Sale Agreement and the Monjuvi Royalty Sale Agreement under Accounting Standards Codification (ASC) 470 - Deb t (ASC 470) and determined that the upfront payment should be accounted for as a liability in the consolidated balance sheet. The upfront proceeds will be amortized using the effective interest rate method over the estimated life of the related expected royalty stream. The liability and related interest expense are based on our current estimates of future royalties to be paid over the life of the agreement. We will periodically assess the expected royalty payments and to the extent the future estimates or timing of such payments are materially different than the previous estimates, we will prospectively recognize related interest expense. Royalty revenue will be recognized as 60 earned on net sales of Ultomiris and Monjuvi/Minjuvi and payments made to the purchaser will be a reduction to the liability when paid. For the three months ended December 31, 2023, we recorded $14.6 million of non-cash royalty revenue related to the royalty sales. For further discussion, refer to Note 12 - Sale of Future Royalties in the accompanying notes to the consolidated financial statements included in Part II, Item 8. Consolidated Financial Statements and Supplementary Data . Capitalized Intellectual Property Costs We capitalize and amortize third-party intellectual property costs such as amounts paid to outside patent counsel for filing, prosecuting and obtaining patents for our internally developed technologies and product candidates, to the extent such patents are deemed to have probable future economic benefit. We also capitalize amounts paid to third parties for licenses that we acquire for intellectual property or for research and development purposes where the technology has alternative uses. The net capitalized patents, licenses, and other intangible assets as of December 31, 2023 and 2022 were $18.7 million and $18.5 million, respectively. We believe that these costs should be capitalized as the intellectual property portfolio creates the underlying property right to our technologies and product candidates and supports the upfront payments, licensing fees, milestone payments and royalties made by our collaboration partners for licensing our technologies and product candidates. We begin amortization of capitalized patent costs during the period that we obtain a patent relating to the capitalized cost over the shorter of the patent life or the estimated economic useful life. Capitalized licensing costs are amortized beginning in the period that access to the license or technology is available and is amortized over the shorter of the license term or the estimated economic useful life of the licensed asset. Such amortization is recorded as general and administrative expenses. On a regular basis we review the capitalized intellectual property portfolio and determine if there have been changes in the scientific or patent landscape that leads us to decide to abandon an in-process patent application or abandon a previously issued patent. While we confer with outside patent counsel, the decision to continue prosecuting certain patent claims or abandon other claims are made by us based on our judgment and existing knowledge of our technology, current U.S. and foreign patent authority rulings and expected rulings, and scientific advances and patent filings by competitors operating in our technology or drug development field. We record an expense for the write-off of capitalized intangible assets in the period that the decision to abandon a claim or license is made. We also review the carrying value of capitalized licensing costs on a regular basis to determine if there have been any changes to the useful life or estimated amortization period over which the costs should be amortized. We recorded a charge for abandoned intangible assets of $1.3 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively. Such charges are reflected as general and administrative expenses. We determine if there has been an impairment of our intangible assets which include the capitalized patent and licensing costs whenever events such as recurring operating losses or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Accrued Research and Development Expenses As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing contracts and purchase orders, reviewing the terms of our license agreements, communicating with our applicable personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees to: • CROs and other service providers in connection with clinical studies; • contract manufacturers in connection with the production of and testing of clinical trial materials; and • vendors in connection with preclinical development activities. We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. 61 The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing these costs, we estimate the time period over which services will be performed for which we have not been invoiced and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period. Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Financial statement recognition of a tax position taken or expected to be taken in a tax return is determined based on a more-likely-than not threshold of that position being sustained. If the tax position meets this threshold, the benefit to be recognized is measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Our policy is to record interest and penalties related to uncertain tax positions as a component of income tax expense. We have recorded unrecognized tax benefits of $8.3 million related to capitalized research and development costs and state taxes, net of federal benefits, as of December 31, 2023. We did not have any material unrecognized tax benefits at December 31, 2022. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (TCJA) was enacted into law, which beginning in 2018, made several changes to U.S. corporate income tax provisions including a reduction in the U.S. corporate rate from a maximum rate of 35% to 21% effective January 1, 2018. The TCJA also allowed net operating losses (NOLs) incurred after January 1, 2018 to be carried forward indefinitely subject to limitations on the amount of NOLs that could be applied against taxable income each year. The TCJA also requires capitalization of certain research and development expenses beginning effective January 1, 2022. We recorded net deferred tax assets of $170.5 million as of December 31, 2023, which was fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily comprised of deferred revenue, capitalized research and development expenses, federal and state tax net operating loss (NOL) carryforwards and research and development tax credit carryforwards. As of December 31, 2023, we had cumulative net operating loss carryforwards for federal income tax purposes of approximately $54.2 million; all of such losses were incurred prior to December 31, 2017. We also had available tax credit carryforwards of $16.9 million for federal tax purposes. We had cumulative state tax loss carryforwards at December 31, 2023 of $155.9 million, and available state tax credit carryforwards of approximately $24.9 million, which can be carried forward to offset future taxable income, if any. Our federal net operating loss carryforwards incurred prior to January 1, 2018 expire starting in 2027; state net operating loss carryforwards expire starting in 2035; and federal tax credit carryforwards expire starting in 2034. We recorded income tax expense of $13.7 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. Valuation of Stock-Based Compensation We record the fair value of stock options and shares issued under our Employee Stock Purchase Plan (ESPP) to employees as of the grant date as compensation expense over the service period, which is generally the vesting period. For non-employees, we also record the fair value of stock options as of the grant date as compensation expense over the service period. We then periodically re-measure the awards to reflect the current fair value at each reporting period until the non-employee completes the performance obligation or the date on which a performance commitment is reached. Expense is recognized over the related service period. We calculate the fair value of stock-based compensation awards using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions, including volatility of our common 62 stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and the fair value of the underlying common stock on the date of grant. Common Stock Options Fair Value We recognize stock-based compensation expense in accordance with the provisions of ASC Topic 718, Compensation—Stock Compensation . The use of a Black-Scholes model requires us to apply judgment and make assumptions and estimates that include the following: • Expected Volatility —Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. • Expected Dividend Yield —We have never declared or paid dividends and have no plans to do so in the foreseeable future. • Risk-Free Interest Rate —This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resembles the expected life of the option. • Expected Term —This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years and we have estimated the expected life of the option term to be between six and eight years. We use a simplified method to calculate the average expected term for employee awards. Results of Operations The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2023 and 2022. For a comparison of our results of operations and financial condition for the years ended December 31, 2022 and 2021. see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual report on Form 10-K, filed with the SEC on February 27, 2023. Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in millions): Year ended December 31, 2023 2022 Change (As Restated) Revenues: Research collaboration $ 30.3 $ 7.0 $ 23.3 Milestone 88.5 5.5 83.0 Royalties 55.8 152.1 (96.3) Total revenues 174.6 164.6 10.0 Operating expenses: Research and development 253.6 199.6 54.0 General and administrative 53.4 47.5 5.9 Total operating expenses 307.0 247.1 59.9 Other income, net 12.7 28.0 (15.3) Income tax expense 13.7 0.7 13.0 Net loss (133.4) (55.2) (78.2) Net loss attributable to non-controlling interest (0.2) — (0.2) Net loss attributable to Xencor, Inc. $ (133.2) $ (55.2) $ (78.0) 63 Revenues Research collaboration revenues in 2023 and 2022 are primarily revenue recognized under our second Janssen agreement. Milestone payments increased by $83.0 million in 2023 from 2022 amounts primarily due to milestones received from Alexion, Gilead, J&J, Omeros, and Zenas in 2023, compared to milestones received from Astellas in 2022. Royalty revenues for 2023 are lower than royalty revenues in 2022 primarily due to a decrease in royalty revenue from Vir. Research and Development Expenses The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022 (in millions): Year Ended December 31, 2023 2022 Change Product programs: Bispecific programs: CD3 programs: Plamotamab* $ 16.5 $ 19.8 $ (3.3) XmAb819 (ENPP3 x CD3) 18.2 10.5 7.7 XmAb541 (CLDN6 X CD3) 20.4 7.1 13.3 Total CD3 programs 55.1 37.4 17.7 CD28 program: XmAb808 (B7H3 x CD3) 16.7 17.7 (1.0) Tumor micro environment (TME) activator programs: Vudalimab 44.2 22.8 21.4 XmAb104 24.2 21.3 2.9 Total TME activators programs 68.4 44.1 24.3 Subtotal bispecific programs 140.2 99.2 41.0 Cytokine programs: XmAb306/RG6323 programs* 14.1 13.2 0.9 XmAb564 24.1 17.2 6.9 XmAb662 (IL-12-Fc) 12.8 15.5 (2.7) Total cytokine programs 51.0 45.9 5.1 Other, research and early stage programs 51.7 30.8 20.9 Wind down costs of terminated programs (1) 10.7 23.7 (13.0) Total research and development expenses $ 253.6 $ 199.6 $ 54.0 *Includes net reimbursements to and from our partners pursuant to agreements that include cost-sharing arrangements. (1) Research and development expenses include wind down costs of programs that terminated in prior periods including the vibecotamab, tidutamab, and XmAb841 programs. 64 Research and development expenses increased by $54.0 million in 2023 over 2022 amounts primarily due to increased spending on our bispecific development programs including XmAb541, vudalimab, and early research and development programs. General and Administrative Expenses General and administrative expenses increased by $5.9 million in 2023 over 2022 amounts primarily due to increases in general and administrative compensation costs and additional spending on professional fees. Other Income, Net Other income, net decreased by $15.3 million in 2023 from 2022 amounts due to an increase in non-cash interest expense from the Ultomiris and Monjuvi Royalty Sale Agreements and a net decrease in unrealized gain from equity securities, partially offset by an increase in interest income from our investment in marketable debt securities. Liquidity and Capital Resources Since our inception, our operations have been primarily financed through proceeds from public offerings, private sales of our equity, and payments received under our collaboration and development partnerships and licensing arrangements. We have devoted our resources to funding research and development programs, including discovery research, preclinical and clinical development activities. We have incurred substantial operating losses since our inception, and we expect to continue to incur operating losses into the foreseeable future as we advance the ongoing development of our bispecific antibody and cytokine product candidates, evaluate opportunities for the potential clinical development of our other preclinical programs, and continue our research efforts. In November 2023, we entered into the Monjuvi Royalty Sale Agreement and Ultomiris Royalty Sale Agreement and received total proceeds from the transactions of $215.0 million. For further discussion of the sale of future royalties, refer to Note 12 - Sale of Future Royalties in the accompanying notes to the consolidated financial statements included in Part II, Item 8. Consolidated Statements and Supplementary Data of this Annual Report on Form 10-K/A. In 2023, we received a total of $111.7 million in milestone payments and royalties in connection with licensing of our technologies and products. At December 31, 2023, we had $697.4 million of cash, cash equivalents, and marketable debt securities compared to $584.5 million at December 31, 2022. We expect to continue to receive additional payments from our collaborators for research and development services rendered, additional milestone, contingent payments, opt-in and royalty payments. Our ability to receive milestone payments and contingent payments from our partners is dependent upon either our ability or our partners’ abilities to achieve certain levels of research and development activities and is therefore uncertain at this time. Funding Requirements We have not generated any revenue from product sales and do not expect to do so until we obtain regulatory approval and commercialize one or more of our product candidates. At the current stage of our clinical development programs, it will be some time before we expect to achieve this, and it is uncertain that we ever will. We expect that our operating expenses will continue to increase in connection with ongoing as well as additional planned clinical and preclinical development of product candidates in our pipeline. We expect to continue our collaboration arrangements and will look for additional collaboration and licensing opportunities. Although it is difficult to predict our funding requirements, based upon our current operating plan, we believe that our existing cash, cash equivalents and marketable securities, together with interest thereon and expected milestone and royalty payments will be sufficient to fund our operations into 2027. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. 65 Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands): Year ended December 31, 2023 2022 (As Restated) Net cash provided by (used in): Operating activities $ (77,926) $ 24,485 Investing activities (111,065) (119,725) Financing activities 189,219 5,702 Net increase (decrease) in cash and cash equivalents $ 228 $ (89,538) Operating Activities Net cash used in operating activities for the year ended December 31, 2023 reflects increased operating expenses, while net cash provided by operating activities for the year ended December 31, 2022 reflects milestone and royalty payments received during the year in excess of operating expenses. Investing Activities Investing activities consist primarily of proceeds from maturities of marketable securities offset by purchases of marketable securities available-for-sale, acquisition of intangible assets and purchases of property and equipment. In 2023, we purchased $89.8 million of marketable securities, net of $693.1 million of proceeds from sales and maturities. In 2022, we purchased $81.3 million of marketable securities, net of $306.6 million of proceeds from sales and maturities. We acquired $2.8 million and $4.9 million of intangible assets in the years ended December 31, 2023 and 2022, respectively. We purchased $18.4 million and $38.5 million of capital equipment for the years ended December 31, 2023 and 2022, respectively. We also converted a $5.0 million convertible note to equity investment for the year ended December 31, 2022. Financing Activities Net cash provided by financing activities during the year ended December 31, 2023 consists primarily of cash from the sale of future royalties under the Ultomiris and Monjuvi Royalty Sale Agreements. Net cash provided by financing activities during the year ended December 31, 2022 consists primarily of cash from stock option exercises and the sales of shares under the Employee Stock Purchase Plan (ESPP). Net cash provided by financing activities increased during 2023 from amounts reported for 2022 primarily from proceeds received from the sale of future royalties. Contractual Obligations and Commitments We are obligated to make future payments to third parties under in-license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of certain development and commercialization milestones. We have also entered into agreements with third-party vendors which will require us to make future payments upon the delivery of goods and services in future periods. In April 2021, we entered into a license agreement with BIO-TECHNE Corporation (BIO-TECHNE) for a non-exclusive license to a certain recombinant monoclonal antibody reactive with human Claudin-6 protein (CLDN6). This antibody is being developed in our XmAb541 program. Under this license agreement, we may be required to make $30.6 million in additional contingent payments which include $1.8 million of clinical milestones, $4.8 million of regulatory milestones and milestones on the achievement of certain sales of $24.0 million, in addition to royalties upon commercial sales of products of 0.5%. We made an upfront payment in connection with this license in 2021 and have not made any additional payments under this license agreement. In February 2016, we entered into a worldwide exclusive commercial license agreement with Selexis SA to develop and commercialize products produced from the Selexis cell line that was manufactured in connection with our 66 plamotamab drug candidate. In connection with the license, we may be required to make CHF 1.7 million in additional contingent obligations which include CHF 500,000 in development milestones, CHF 400,000 in regulatory milestones and CHF 800,000 in sales milestones, in addition to royalties upon commercial sales of products of less than 1%. In 2022, we recorded a milestone of CHF 200,000 upon initiation of Phase 2. In December 2017, we entered into worldwide exclusive commercial license agreements with Selexis to develop and commercialize products produced from the Selexis cell line that was manufactured for each of our bispecific antibody and cytokine drug candidates: vudalimab, XmAb306, XmAb564 and XmAb819. The terms for each agreement are identical and for each licensed cell line we may be required to make up to CHF 1.4 million in total development, regulatory and sales milestones which include CHF 425,000 in development milestones, CHF 340,000 in regulatory milestones and CHF 680,000 in sales milestones. In addition, we may be obligated to pay royalties upon commercial sales of approved products of less than 1%. In 2019, we made a milestone payment of CHF 75,000 in connection with an IND submission, and in 2020, we recorded a milestone payment due of CHF 75,000 in connection with an IND submission. In 2021, we recorded a milestone payment due of CHF 170,000 upon an initiation of Phase 2. In September 2020, we entered into an agreement with MD Andersen in which we agreed to provide up to $10.0 million in funding over a five-year period in exchange for MD Andersen conducting clinical studies with our drug candidates. In December 2021, we amended the agreement to extend it an additional year at the same level of funding. In August 2022 and in December 2022, we entered into agreements with Caris to license novel targets identified from their technology platform. The terms for the agreements provide that we may be obligated to pay development, regulatory and sales milestones for each target we elect to license in addition to royalties on net sales of approve products. As the amount and timing of sublicense fees and the achievement and timing of these milestones are not probable and estimable, such commitments have not been included on our balance sheet or in the contractual obligations and commitment tables above. New Accounting Pronouncements See Note 1 - Recent Accounting Pronouncements in the accompanying financial statements for information regarding recent accounting pronouncements.