What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-24 compared with 2025-02-24 · 47 added, 114 removed, 166 unchanged (49% of the section changed)

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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.

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

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

We are currently enrolling Phase 1 or Phase 2 studies for four wholly-owned candidates to treat patients with many different types of serious diseases.

We and our partners are currently enrolling Phase 1 or Phase 2 studies for five wholly-owned or co-development candidates to treat patients with many different types of cancer and autoimmune diseases,

Vudalimab (PD-1 x CTLA-4):

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XmAb819 (ENPP3 x CD3) :

XmAb819 is a bispecific T-cell engager that targets ENPP3, a tumor-associated antigen in renal cell carcinoma (RCC), and CD3, an activating receptor on T cells.

XmAb819 is a bispecific antibody that targets ENPP3 and CD3.

ENPP3 is a tumor-associated antigen in renal cell carcinoma (RCC).

The XmAb 2+1 multivalent format used in XmAb819 enables greater selectivity for ENPP3 expressing tumor cells compared to normal cells, which also express ENPP3 at lower levels.

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XmAb808 (B7-H3 x CD28):

XmAb808 is a tumor-selective, co-stimulatory XmAb 2+1 bispecific T-cell engager 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.

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 to evaluate XmAb808 in combination with pembrolizumab in patients with advanced solid tumors.

XmAb541 (CLDN6 x CD3):

XmAb541 is a bispecific T-cell engager that targets Claudin-6 (CLDN6), a tumor-associated antigen in ovarian cancer and other solid tumors, and 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.

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XmAb564 (IL2-Fc Cytokine):

XmAb564 is a 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.

In the first half of 2024, we concluded a Phase 1b study that was evaluating the safety and tolerability of multiple ascending doses of XmAb564, administered subcutaneously in patients, and we have paused further development.

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.

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.

As previously disclosed, 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 the first half of 2024, we concluded a Phase 1 study that was evaluating XmAb662 in patients with advanced solid tumors, and we have paused further development.

Candidates Previously Co-Developed with Partners

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

As previously disclosed, 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.

Candidates Co-Developed with Partners

Plamotamab (CD20 x CD3):

Plamotamab is a bispecific T-cell engager that targets CD20, a target receptor on B cells, and CD3.

Results from the expansion portion of a Phase 1 study indicate that intravenous plamotamab monotherapy was well tolerated and demonstrated encouraging clinical activity in heavily pretreated patients with an advanced form of lymphoma at the recommended Phase 2 intravenous dose.

In 2023, we completed patient enrollment in subcutaneous dose escalation cohorts of the Phase 1 study.

We had been co-developing plamotamab with Johnson & Johnson (J&J), and in June 2024, we regained exclusive worldwide rights to develop and commercialize the candidate.

We are reviewing plamotamab's potential for addressing the unmet medical needs of patients.

Plamotamab is a bispecific antibody that targets CD20, an antigen on B-cell tumors, and CD3, an activating receptor on T cells, and we are co-developing the program in collaboration with J&J.

Results from the expansion portion of a Phase 1 study in patients with refractory non-Hodgkin lymphoma indicate that intravenous plamotamab monotherapy was well tolerated and demonstrated encouraging clinical activity in heavily pretreated patients at the recommended Phase 2 intravenous dose.

In 2023, we completed patient enrollment in subcutaneous dose escalation cohorts of this study.

Efbalropendekin alfa (IL15/IL15Rα-Fc Cytokine):

Efbalropendekin alfa (XmAb306/RG6323) is a reduced-potency IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we previously co-developed 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 a Phase 1 study evaluating efbalropendekin in patients with relapsed/refractory multiple myeloma in combination with cevostamab (FcRH5 x CD3 bispecific antibody).

Efbalropendekin alfa (XmAb306/RG6323) is a reduced-potency IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we are co-developing this program in collaboration with Genentech, a member of the Roche Group.

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

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

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

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

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

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co-development options;

the right to conduct studies with drug candidates developed in the collaboration.

and the right to conduct studies with drug candidates developed in the collaboration.

The types of arrangements that we have entered into with partners include product licenses, novel bispecific antibody collaborations, technology licensing agreements and strategic collaborations.

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

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

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).

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

We earned $1.6 million in estimated non-cash royalties from MorphoSys for the three months ended June 30, 2024.

We earned $2.9 million in estimated non-cash royalties from MorphoSys for the three months ended March 31, 2024.

Technology License Agreements

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

We earned a total of $13.8 million in estimated non-cash royalties from Alexion for the three months ended June 30, 2024.

We earned a total of $12.6 million in estimated non-cash royalties from Alexion for the three months ended March 31, 2024.

Refer to Part I, Item 1, Note 10, Collaboration and Licensing Agreements of the Notes to Financial Statements included in this Form 10-Q/A for a description of the key terms of our arrangements.

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To date, we have funded our operations primarily through the sale of stock and from payments generated from our product development partnerships and licensing arrangements.

As of June 30, 2024, we had an accumulated deficit of $612.2 million.

As of March 31, 2024, we had an accumulated deficit of $544.9 million.

Substantially all of the operating losses that we have incurred resulted from expenses incurred in connection with our product candidate development programs, our research activities and general and administrative costs associated with our operations.

Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in millions):

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in millions):

Three Months Ended

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Total operating expenses 70.7 79.8 (9.1)

Other income (expense), net (13.4) 4.0 (17.4)

Loss before income tax expense

Other expense, net

(19.4) — (19.4)

Income tax expense — — —

Net loss (74.1) (60.8) (13.3)

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$ (73.4) $ (60.8) $ (12.6)

Revenues for the three months ended June 30, 2024 are primarily from licensing revenue from Mabgeek and a third-party licensee as well as non-cash royalty revenue from Alexion and MorphoSys/Incyte.

Revenues for the three months ended June 30, 2023 are primarily from research revenue from our second collaboration with Janssen, royalty revenue from Alexion, and milestone revenue from Zenas.

Revenues for the three months ended March 31, 2024 are primarily from non-cash royalty revenue from Alexion and MorphoSys.

Revenues for the three months ended March 31, 2023 are primarily from royalty revenue from Alexion and milestone revenue from J&J.

Research and Development Expenses

The following tables summarize our research and development expenses for the three months ended June 30, 2024 and 2023 (in millions):

The following tables summarize our research and development expenses for the three months ended March 31, 2024 and 2023 (in millions):

Three Months Ended

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Total research and development expenses $ 56.9 $ 65.6 $ (8.7)

Research and development expenses increased by $1.5 million for the three months ended June 30, 2024 over the same period in 2023 primarily due to increased spending on other research and early stage programs, partially offset by decreased spending on our XmAb104 program.

Research and development expenses decreased by $8.7 million for the three months ended March 31, 2024 over the same period in 2023 primarily due to decreased spending on our plamotamab, XmAb541, XmAb104, XmAb564, and wind down costs on terminated programs, partially offset by increased spending on our XmAb819, XmAb808, and vudalimab programs.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended June 30, 2024 and 2023 (in millions):

The following table summarizes our general and administrative expenses for the three months ended March 31, 2024 and 2023 (in millions):

Three Months Ended

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General and administrative $ 13.8 $ 14.2 $ (0.4)

General and administrative expenses increased by $6.2 million for the three months ended June 30, 2024 over the same period in 2023 primarily due to increased spending on corporate activities, including stock-based compensation costs related to the extension of vesting periods and expiration dates of equity awards for employees who retired in April 2024.

Other Income (Expense), Net

Other (expense), net was $(13.4) million for the three months ended June 30, 2024, which consists of unrealized and realized losses recognized from the change in fair value and the sale of our equity investments and non-cash interest expense from the Ultomiris and Monjuvi Royalty Sale Agreements, partially offset by interest income earned on investments.

Other income, net was $4.0 million for the three months ended June 30, 2023, which consists primarily of interest income earned on investments.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in millions):

Six Months Ended

2024 2023 Change

(As Restated)

Research collaboration $ — $ 22.5 $ (22.5)

Milestone 0.5 15.0 (14.5)

Royalties 30.9 27.0 3.9

Total revenues 39.9 64.5 (24.6)

Operating expenses:

Research and development 118.4 125.6 (7.2)

General and administrative 31.5 25.6 5.9

Total operating expenses 149.9 151.2 (1.3)

Other income (expense), net (32.9) 4.0 (36.9)

Loss before income tax expense

(142.9) (82.7) (60.2)

Income tax expense — — —

Net loss $ (142.9) $ (82.7) $ (60.2)

Net loss attributable to non-controlling interest (2.1) — (2.1)

Net loss attributable to Xencor, Inc.

$ (140.8) $ (82.7) $ (58.1)

Revenues for the six months ended June 30, 2024 are primarily licensing revenue from Mabgeek and a third-party licensee as well as non-cash royalty revenue from Alexion and MorphoSys.

Revenues for the six months ended June 30, 2023 are primarily from research revenue from our second collaboration with Janssen, royalty revenue from Alexion, and milestone revenue from Janssen and Zenas.

Research and Development Expenses

The following tables summarize our research and development expenses for the six months ended June 30, 2024 and 2023 (in millions):

Six Months Ended

2024 2023 Change

Product programs:

Bispecific programs:

CD3 programs:

Plamotamab* $ 5.0 $ 9.8 $ (4.8)

XmAb819 (ENPP3 x CD3) 13.1 9.3 3.8

XmAb541 (CLDN6 X CD3) 7.0 10.9 (3.9)

Total CD3 programs 25.1 30.0 (4.9)

XmAb808 (B7-H3 x CD28) 10.5 8.1 2.4

Tumor micro environment (TME) activator programs:

Vudalimab 23.7 17.3 6.4

XmAb104 3.2 13.0 (9.8)

Total TME activators programs 26.9 30.3 (3.4)

Subtotal bispecific programs 62.5 68.4 (5.9)

Cytokine programs:

XmAb306/RG6323 programs* 10.4 4.5 5.9

XmAb564 6.8 12.5 (5.7)

XmAb662 (IL-12-Fc) 4.8 7.0 (2.2)

Total cytokine programs 22.0 24.0 (2.0)

Other, research and early stage programs 33.2 28.9 4.3

Wind down costs of terminated programs (1)

0.7 4.3 (3.6)

Total research and development expenses $ 118.4 $ 125.6 $ (7.2)

*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.

Six Months Ended

2024 2023 Change

External research and development expenses $ 55.3 $ 54.0 $ 1.3

Internal research and development expenses 47.7 54.2 (6.5)

Stock based compensation 15.4 17.4 (2.0)

Total research and development expenses $ 118.4 $ 125.6 $ (7.2)

Research and development expenses decreased by $7.2 million for the six months ended June 30, 2024 over the same period in 2023 primarily due to decreased spending on our XmAb104 program, partially offset by increased spending on other research and early stage programs.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and 2023 (in millions):

Six Months Ended

2024 2023 Change

General and administrative $ 31.5 $ 25.6 $ 5.9

General and administrative expenses increased by $5.9 million for the six months ended June 30, 2024 over the same period in 2023 primarily due to increased corporate activities including stock-based compensation costs related to the extension of vesting periods and expiration dates of equity awards for employees who retired in April 2024.

Other Income (Expense), Net

Other income (expense), net was $(32.9) million and $4.0 million for the six months ended June 30, 2024 and 2023, respectively.

Other expense, net for the six months ended June 30, 2024 consists of an impairment charge on Zenas, our equity investment without a readily determinable fair value, unrealized and realized losses recognized from the change in fair value and the sale of our other equity investments with readily determinable fair values, and non-cash interest expense from the Ultomiris and Monjuvi Royalty Sale Agreements, partially offset by interest income earned on investments.

Other income, net for the same period in 2023 consists primarily of interest income earned on investments, partially offset by unrealized loss recognized from the change in fair value of our equity investments.

General and administrative expenses decreased by $0.4 million for the three months ended March 31, 2024 over the same period in 2023 primarily due to decreased spending on professional fees.

Other Expense, Net

Other expense, net was $19.4 million for the three months ended March 31, 2024, which consists of an impairment charge on equity investments and non-cash interest expense from the Ultomiris and Monjuvi Royalty Sale Agreements, partially offset by interest income earned on investments and unrealized gain on equity investments.

Other expense, net for the three months ended March 31, 2023 consists of unrealized loss recognized from the change in fair value of our equity investments, offset by interest income earned on investments.

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

Six Months Ended

Three Months Ended

2024 2023 Change

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Financing activities $ 1,787 $ 922 $ 865

Net decrease in cash

$ (23,018) $ (19,232) $ (3,786)

Net increase (decrease) in cash $ (22,754) $ 18,452 $ (41,206)

Operating Activities

Cash used in operating activities for the six months ended June 30, 2024 and 2023 was $124.2 million and $68.8 million, respectively.

The increase in cash used in operating activities is due to the decrease in royalty revenue received as a result of the sale of future royalties under the Ultomiris and Monjuvi Royalty Sale Agreements in 2023 and higher spending in the six months ended June 30, 2024.

Cash used in operating activities for the three months ended March 31, 2024 and 2023 was $56.9 million and $30.6 million, respectively.

The increase in cash used in operating activities in the three months ended March 31, 2024 is

primarily due to the decrease in royalty revenue received as a result of the sale of future royalties under the Ultomiris and Monjuvi Royalty Sale Agreements in 2023.

Investing Activities

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Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2024 and 2023 are from the net proceeds from the exercise of stock options and purchase of ESPP.

Net cash provided by financing activities for the three months ended March 31, 2024 increased from net cash provided by financing activities for the three months ended March 31, 2023 due to increased net proceeds from the exercise of stock options.

Liquidity and Capital Resources

We have financed our operations primarily through private placements of our equity securities, the issuance of convertible notes, public offerings of our common stock, and payments received under our product development partnerships and licensing arrangements.

As of June 30, 2024, we had $585.4 million of cash, cash equivalents, restricted cash, and marketable debt securities compared to $697.4 million as of December 31, 2023.

As of March 31, 2024, we had $646.7 million of cash, cash equivalents, restricted cash, and marketable debt securities compared to $697.4 million as of December 31, 2023.

The investments in marketable debt securities are further described above in Note 6, Marketable Debt and Equity Securities , of Notes to Financial Statements included in this Form 10-Q/A.

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As we are currently in the clinical stage of development, it will be some time before we expect to achieve this, and it is uncertain that we ever will commercialize one or more of our internal product development candidates.

We expect that we will continue to increase our operating expenses in connection with ongoing, and additional clinical and preclinical development of product candidates in our pipeline and also development candidates that we are co-developing with our partners.

We expect that we will continue to increase our operating expenses in connection with ongoing as well as additional clinical and preclinical development of product candidates in our pipeline and also development candidates that we are co-developing with our partners.

Although it is difficult to predict our funding requirements, based upon our current operating plan, we expect that our existing cash, cash equivalents, marketable securities, and certain potential milestone payments will fund our operating expenses and capital expenditure requirements into 2027.

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Contractual Obligations and Commitments

There were no material changes outside of the ordinary course of business to our specific contractual obligations during the three months ended June 30, 2024.

There were no material changes outside of the ordinary course of business to our specific contractual obligations during the three months ended March 31, 2024.

Critical Accounting Policies

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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-Q/A

Item 2. Management’s Discussion and Analysis