What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-24 · 183 added, 243 removed, 266 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with “Item 6.

Selected Financial Data” and our financial statements and related notes included elsewhere in this Annual Report.

You should read the following discussion and analysis together with our financial statements and related notes included elsewhere in this Annual Report.

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

2 unchanged sentences

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

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

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

In contrast to conventional approaches to antibody design, which focus on the segment of antibodies that interact with target antigens, our protein engineering efforts and the XmAb technologies are focused on the Fc domain, the part of an antibody that interacts with multiple segments of the immune system and controls antibody structure.

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

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

For example, our capabilities have enabled us to develop an antibody scaffold to rapidly create novel bispecific antibodies that bind two different targets simultaneously, creating entirely new biological mechanisms.

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

Currently, there are two marketed drugs that have been developed with our XmAb technologies.

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

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

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

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

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

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

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

Three medicines have been developed with our Fc technologies.

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

Refer to Part I, Item 1, "XmAb Bispecific Technologies"

3 unchanged sentences

While the pandemic did not significantly disrupt our business during the year ended December 31, 2021, the evolving nature of the pandemic prevents us from reasonably predicting how the pandemic will affect our financial condition, results of operations and cash flows due to numerous uncertainties.

These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impacts and the direct

and indirect economic effects of the pandemic and containment measures, among others.

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

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

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

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

1 unchanged sentence

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

Our partner Vir Biotechnology, Inc.

is evaluating VIR-7831, an antibody that targets the SARS-CoV-2 virus in a Phase 3 study.

VIR-7831 incorporates our Xtend Fc technology for longer duration of action.

VIR-7832, which also targets the SARS-CoV-2 virus, also incorporates Xtend technology and is in the preclinical stages of development.

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

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

VIR-7832, a second antibody licensed to Vir, which also targets the SARS-CoV-2 virus, incorporates Xtend technology and other XmAb Fc technologies, and it is currently enrolling patients in a Phase 1b/2a study.

We are eligible to receive a mid-single digit percentage royalty on the net sales of both sotrovimab and VIR-7832.

Our partner Bristol-Myers Squibb (BMS) has also licensed our Xtend technology to improve the half-life of antibodies that target SARS-CoV-2 and is supporting a Phase 2 study for a combination of two half-life-extended antibodies.

We are eligible to receive royalties on net sales of the BMS candidate.

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

The COVID-19 pandemic has not adversely affected our ability to generate revenues for the year ended December 31, 2020.

During the year, we received $165 million from our partnerships and collaborations including those with MorphoSys, Alexion, Gilead, Janssen, Aimmune and Omeros.

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

If the pandemic continues for an extended period and adversely affects the sales or clinical, development and regulatory progress of partnered programs, the amount of revenue we could earn would be adversely affected.

The COVID-19 pandemic has not adversely affected the amount of revenue we generate from such partnerships and collaborations for the year ended December 31, 2021.

During the year, we received $204.9 million from our partnerships and collaborations including those with Vir, MorphoSys, Alexion, Janssen, and Viridian.

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

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

● Clinical studies:

We are currently enrolling patients in six clinical programs, and our partner Genentech is enrolling patients in the Phase 1 study of our co-development program XmAb306 (also known as RG6323).

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

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

Although the COVID-19 pandemic has not materially affected the development of our clinical programs for the year ended December 31, 2020, some of our clinical programs temporarily experienced slower patient enrollment, and the initiations of new studies for certain programs have been delayed as a result of the COVID-19 pandemic.

Although the pandemic has not materially affected the development of our clinical programs for the year ended December 31, 2021, some of our clinical programs temporarily experienced slower patient enrollment, and the initiations of new studies for certain programs have been delayed as a result of the COVID-19 pandemic.

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

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

● Research and development activities:

We require all non-laboratory employees to work remotely, and we have implemented additional health, safety and environmental procedures for all onsite laboratory research employees.

● Research, development, and administrative activities:

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

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

As of December 31, 2021, these activities have continued without interruption from the pandemic.

Our development activities include initiating a Phase 1 study of XmAb564 in healthy volunteers and conducting IND-enabling studies for XmAb819.

Our development activities include initiating a Phase 1 study of XmAb819, our first 2+1 CD3 bispecific candidate that targets ENPP3, and conducting IND-enabling studies for XmAb808, our first tumor selective CD28 bispecific candidate that targets B7-H3, and XmAb662, our reduced-potency engineered IL12 cytokine candidate.

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

During the third quarter of 2020, the manufacturers of our drug supplies notified us of critical shortages of materials used in their manufacturing processes due to pandemic-related reallocation of resources.

The shortages will not affect our current clinical programs as we have sufficient drug supply to continue the ongoing trials without interruption.

However, the shortages

have extended the development timelines of early-stage development candidates, including XmAb819, by three to six months based on current information from our vendors.

The development timelines for additional early-stage programs and ongoing clinical programs could be affected if the supply interruption extends longer than current estimates.

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

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

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

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 studies for seven wholly owned or co-development candidates to treat patients with many different types of cancer, and an eighth, to be developed for patients with autoimmune disease, is expected to enter clinical development in early 2021.

We and our partners are currently enrolling Phase 1 or Phase 2 studies for seven wholly owned or co-development candidates to treat patients with many different types of cancer and autoimmune diseases, and an eighth, to be developed for patients with kidney cancer, is expected to enter clinical development in early 2022.

Plamotamab (CD20 x CD3):

At the ASH Annual Meeting in December 2019, we presented preliminary safety and anti-tumor activity from the Phase 1 dose-escalation study of plamotamab in B-cell malignancies, including from patients with relapsed or refractory NHL.

The early results indicated that plamotamab was generally well tolerated and demonstrated encouraging clinical activity as a monotherapy.

We are currently enrolling patients in the ongoing monotherapy dose-escalation study and plan to initiate additional studies in 2021.

In November 2020, we entered a strategic clinical collaboration with MorphoSys AG to investigate the chemotherapy-free triple combination of plamotamab, tafasitamab and lenalidomide in patients with relapsed or refractory DLBCL, first-line DLBCL and relapsed or refractory FL.

Plamotamab, which redirects T cells to tumors, and tafasitamab, a CD19-directed XmAb antibody, combine powerful and distinct immune pathways, and this collaboration is designed to generate new clinical insights and accelerate development timelines for the program.

MorphoSys and Incyte will provide tafasitamab for the studies, which we will sponsor and fund.

Tafasitamab is co-commercialized in the U.S.

by MorphoSys and Incyte and is marketed as Monjuvi.

Monjuvi, the second product with XmAb technology to be approved for commercial marketing, was approved by the U.S.

FDA in July 2020.

XmAb717 (PD-1 x CTLA-4) :

In November 2020, we presented updated data from the Phase 1 study of XmAb717 in patients with multiple types of advanced solid tumors at the Annual Meeting of SITC.

Five cohorts in the expansion portion of the study enrolled patients with melanoma, RCC, NSCLC, CRPC and other cancers without approved checkpoint therapies.

XmAb717 was generally well-tolerated, and the most common treatment-related adverse events were irAEs;

however, rates of irAEs, including colitis, were lower than typically observed with CTLA-4 blockade.

The efficacy analysis included evaluable patients at the recommended dose level, 10.0 mg/kg.

A complete response was observed in a patient with melanoma, and partial responses were observed in multiple tumor types, including melanoma, RCC, NSCLC, CRPC and ovarian cancer.

The objective response rate across cohorts was 19%.

Across the expansion cohorts, approximately half of evaluable patients had at least 10% tumor shrinkage from baseline assessments, and nearly all these reductions occurred in patients with prior checkpoint inhibitor treatment.

The median duration of response was 119 days at the time of the data cut off, and 24 patients remained on treatment as of September 30, 2020.

Of nine patients with prostate cancer who had baseline and follow-up PSA assessments, one achieved a PSA reduction of greater than 50 percent.

Two additional patients achieved reductions of greater than 30 percent, one of whom had an unconfirmed partial response by RECIST.

Six of these nine patients remained on therapy as of the cut-off date.

In the first half of 2021, we plan to initiate a Phase 1b study of XmAb717 for patients with certain molecular subtypes of CRPC, as a monotherapy or in combination depending on the subtype, as these patients represent a high unmet medical need.

Vibecotamab (CD123 x CD3):

In December 2020, we presented updated data from the Phase 1 study of vibecotamab in patients with relapsed or refractory AML at the ASH Annual Meeting.

While CRS was the most common adverse event, the majority was observed in the first dose and was generally manageable with premedication.

The efficacy analysis included evaluable patients who received a dose of at least 0.75 mcg/kg, completed at least the first cycle of treatment and had at least one post-treatment disease assessment.

Two patients achieved CR, and three patients achieved a CR with incomplete hematologic recovery.

Additionally, two patients reached a morphologic leukemia-free state, and one patient experienced partial remission, as assessed by the investigator.

The ORR was 15%.

appeared to be associated with lower baseline disease burden, indicated by patients with lower blast percentages and lower PD1 expression on CD8+ and CD4+ T cells.

Seven responders had a baseline blast count less than or equal to 25% blasts in bone marrow.

The ORR increased to 26% when using this threshold to define the population with low disease burden for the analyses.

We are continuing the dose escalation study and are reviewing data with our partner, Novartis, in planning additional studies of vibecotamab.

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

At the ASH Annual Meeting in December 2021, we presented updated safety and anti-tumor activity data from the Phase 1 dose-escalation study of plamotamab in B-cell malignancies, including from patients with relapsed or refractory NHL.

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

We are currently enrolling patients with non-Hodgkin lymphoma in the monotherapy dose expansion cohorts to further evaluate the safety and efficacy of plamotamab monotherapy at the Phase 2 recommended dose, and we plan to present data from these cohorts in the second half of 2022.

Additionally, pharmacokinetic modeling supports subcutaneous administration, which we plan to incorporate into our ongoing Phase 1 monotherapy study.

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

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

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

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

In 2022, we plan to initiate a potentially registration-enabling Phase 2 study to evaluate the chemotherapy-free triple combination of plamotamab, tafasitamab and lenalidomide in patients with relapsed or refractory DLBCL Plamotamab, which redirects T cells to tumors, and tafasitamab, a CD19-directed XmAb antibody, combine powerful and distinct immune pathways, and the study is designed to generate new clinical insights and accelerate development timelines for the program.

MorphoSys AG and Incyte Corporation will provide tafasitamab for the studies.

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 castration-resistant prostate cancer, as well as for patients with other types of solid tumors.

In November 2021, we presented updated data from the Phase 1 study of vudalimab in patients with multiple types of advanced solid tumors at the SITC Annual Meeting.

Data from the Phase 1 study indicate that vudalimab was generally well-tolerated in heavily pretreated patients with encouraging clinical activity.

We have initiated a Phase 2 study of vudalimab in patients with certain molecular subtypes of CRPC, as a monotherapy or in combination depending on the molecular subtype, as these patients represent a high unmet medical need.

We plan to present initial data from the Phase 2 study in mCRPC in the second half of 2022.

We are initiating a second Phase 2 study for patients with advanced gynecologic and genitourinary malignancies, and the study will include a cohort to evaluate vudalimab in patients with clinically-defined high-risk mCRPC.

Tidutamab (SSTR2 x CD3):

In October 2020, we presented initial dose-escalation data from the ongoing Phase 1 study in patients with NET.

Tidutamab was generally well tolerated at the recommended dose identified for the expansion portion of the study.

Peripheral blood biomarkers indicated tidutamab induced acute and sustained T-cell activation at this dose, and a dose-dependent increase in proliferation and activation markers of CD8+ T cells was observed, which is consistent with tidutamab’s mechanism of action.

The best overall response was stable disease in the analysis to describe clinical activity, and the median duration of treatment was approximately seven months.

Completion of enrollment and longer follow-up are required to evaluate progression-free survival and the clinical utility of tidutamab for patients with NETs, which are an indolent, slow-growing tumor type.

Considering the biomarker analysis from this study and tidutamab’s encouraging safety profile, we plan to initiate an additional clinical study for patients with Merkel cell carcinoma and small cell lung cancer, SSTR2-expressing tumor types known to be responsive to immunotherapy, in early 2021.

Tidutamab is a bispecific antibody that targets somatostatin receptor 2, (SSTR2), a target on many neuroendocrine-like tumor types, and CD3.

Dose-escalation and expansion data from the Phase 1 study in patients with neuroendocrine tumors (NET) indicates that tidutamab was generally well tolerated at the recommended dose identified for the expansion portion of the study.

Tidutamab induced sustained activation of cytotoxic T cells and engagement of the SSTR2 target and demonstrated an encouraging safety profile.

We are enrolling patients in a Phase 2 clinical study for tidutamab in patients with Merkel cell carcinoma and small cell lung cancer, which are SSTR2-

expressing tumor types known to be responsive to immunotherapy.

XmAb306/RO7310729 (IL15/IL15Rα-Fc Cytokine) :

In March 2020, Genentech dosed the first patient in a Phase 1 dose-escalation study evaluating XmAb306, our first cytokine candidate, as a single agent and in combination with atezolizumab for patients with advanced solid tumors.

XmAb306 is an IL15/IL15Rα-Fc fusion protein that incorporates our Xtend extended half-life technology, and we are co-developing this program, as well as other potential IL-15 programs, in collaboration with Genentech.

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.

In November 2021, we announced encouraging early preliminary data from an ongoing Phase 1 study in patients with advanced solid tumors, while further dose escalation in both study arms continues.

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

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

Genentech has dosed cohorts of the Phase 1 study of XmAb306 in combination with atezolizumab and at least one additional combination study is currently being planned.

Additional studies of XmAb306 in combination with other agents, such as NK- or T-cell recruiting therapies, are being planned.

XmAb564 (IL2-Fc Cytokine):

XmAb564 is a wholly owned IL2-Fc fusion that we intend to develop for the treatment of patients with autoimmune diseases.

In January 2021, the IND application for XmAb564 was allowed by the FDA, and we plan to initiate a Phase 1 study in healthy volunteers in early 2021.

XmAb698 (CD38 x CD3):

In 2015, Amgen licensed rights to our preclinical CD38 x CD3 bispecific antibody program and developed AMG 424, which they evaluated in a Phase 1 study.

Amgen terminated the program in the second quarter of 2020, indicating it was stopped for adverse events that were likely CD38 target related.

Under the terms of the agreement, the rights to the CD38 program, including AMG 424, reverted to us.

A new study is currently being planned to start later this year, for the program, which we have renamed XmAb698.

XmAb564 is a wholly owned, monovalent, reduced-potency IL2-Fc fusion protein that we are developing for the treatment of patients with autoimmune diseases.

XmAb564 is engineered to selectively activate and expand regulatory T cells (Tregs), with reduced binding affinity for IL-2's beta receptor and increased binding affinity for its alpha receptor.

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

In April 2021, the first subject was dosed in a randomized, double-blind, placebo-controlled, single-ascending dose (SAD) Phase 1 clinical study to evaluate the safety and tolerability of XmAb564, administered subcutaneously in healthy adult volunteers.

In 2022, we plan to present tolerability, durability, and biomarker data from the Phase 1 SAD study, and we plan to initiate a multiple-ascending dose study in patients with autoimmune diseases.

Additional wholly owned XmAb bispecific antibody programs in Phase 1 clinical studies include XmAb841 (CTLA-4 x LAG-3) and XmAb104 (PD-1 x ICOS).

We continue enrolling patients with advanced solid tumors to these studies.

We have completed the dose escalation portions of these studies and are enrolling patients with advanced solid tumors.

XmAb968 (CD38 x CD3):

XmAb968 is a bispecific antibody that targets CD38 and CD3.

We are supporting a Phase 1 investigator sponsored trial, which is evaluating XmAb968 in patients with T-cell acute lymphoblastic leukemia, T-cell lymphoblastic lymphoma and acute myeloid leukemia.

Vibecotamab is a bispecific antibody that targets CD123 and CD3.

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

We do not intend any further internal development of this program.

Advancements Expanding XmAb Bispecific Platforms

5 unchanged sentences

ENPP3 is a tumor-associated antigen in renal cell carcinoma (RCC) and exhibits low level expression on normal tissues.

We presented preclinical data from this program and two other XmAb 2+1 bispecific antibody programs at the AACR Virtual Annual Meeting II in June 2020, and we plan to submit an IND application for XmAb819 in 2021.

We are currently initiating a Phase 1 study to evaluate XmAb819 in patients with RCC.

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.

Our CD28 platform is also the subject of our collaboration with Janssen Biotech, Inc., announced in December 2020, where we are creating and characterizing CD28 bispecific antibody candidates against a prostate tumor target specified by Janssen.

We are also advancing our wholly owned CD28 candidates including our lead candidate, a B7-H3 x CD28 bispecific antibody designed to be evaluated for the treatment of patients with a range of solid tumors, and it is currently advancing through preclinical development.

We presented preclinical data from the CD28 program at the SITC Annual Meeting in November 2020.

We are advancing wholly owned CD28 candidates including our lead candidate, XmAb808, a B7-H3 x CD28 bispecific antibody designed to be evaluated for the treatment of patients with a range of solid tumors, which is currently advancing in IND-enabling studies.

We plan to submit an IND application for XmAb808 in the first half of 2022 and initiate a Phase 1 study in the second half of 2022.

Our CD28 platform is also the subject of two collaborations with Janssen.

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

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

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

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

In November 2021, we presented emerging preclinical data from early-stage programs that highlighted several of our platform technologies at the Annual Meeting of the Society for Immunotherapy of Cancer, with poster presentations with data from our IL-12-Fc cytokine program, PD-L1 x CD28 bispecific antibody program, TGFβR2 bispecific program, and bispecific NK cell engager platform.

Progress Across Partnerships

9 unchanged sentences

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.

FDA approved Monjuvi (tafasitamab-cxix), the second product with XmAb technology to be approved for commercial marketing, in July 2020.

Monjuvi is a CD19-directed cytolytic antibody indicated in combination with lenalidomide for the treatment of certain adult patients with relapsed or refractory DLBCL, and it was created and initially developed by us.

Monjuvi is co-commercialized in the U.S.

by MorphoSys and Incyte.

The European Marketing Authorization Application for tafasitamab is currently under review by the European Medicines Agency.

In 2020, we earned a total of $37.5 million in regulatory milestones and royalties of $1.5 million on net sales of Monjuvi.

In February 2020, we granted Aimmune Therapeutics, Inc., subsequently acquired by Nestlé S.A., an exclusive worldwide license to develop and commercialize the investigational humanized monoclonal antibody XmAb7195, which has been renamed AIMab7195.

Aimmune indicated plans to develop AIMab7195 as an adjunctive treatment with its pipeline of oral immunotherapies to explore treatment outcomes in patients with food allergies.

Nestlé is solely responsible for costs related to the development and potential commercialization of AIMab7195, and additional studies of AIMab7195 are planned.

In 2020, Xencor received an upfront payment of $9.6 million in cash and Aimmune stock.

In October 2020, a second IL-15 cytokine candidate, which is engineered with a target-specific binding arm, was approved for further preclinical exploration under our Genentech collaboration.

As a Collaboration Product under the agreement, we share in 45% of development and commercialization costs, while Genentech will pay for commercial launch costs, and we will receive a 45% share of net profits from sales from all collaboration products, while also sharing in the net losses at the same percentage rate.

We are eligible to receive up to $180.0 million in clinical milestone payments for this candidate.

In November 2020, we entered into an agreement with a newly formed, privately held biotechnology company to which we licensed the exclusive worldwide rights to develop and commercialize three preclinical-stage Fc-engineered drug candidates for autoimmune disease:

XmAb6755, XPro9523 and XmAb10717.

These programs incorporate an Xtend Fc Domain, a Cytotoxic Fc Domain, or both.

We received a 15% equity interest in the company, and we will also receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

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

and is marketed by Incyte under the brand name Minjuvi in the E.U.

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

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

In April 2021, MorphoSys and Incyte announced the initiation of a Phase 3 study (inMIND) evaluating the addition of tafasitamab to lenalidomide and rituximab in patients with relapsed or refractory follicular lymphoma or marginal zone lymphoma.

In May 2021, MorphoSys and Incyte announced the initiation of a pivotal Phase 3 study (frontMIND) evaluating tafasitamab and lenalidomide in addition to rituximab, cyclophosphamide, doxorubicin, vincristine and prednisone (R-CHOP) compared to R-CHOP alone as first-line treatment for high-intermediate and high-risk patients with untreated DLBCL.

In 2021, we earned $12.5 million for the development milestone related to the inMind trial, and we recognized royalty revenue of $5.9 million on net sales of Monjuvi.

In March 2021, our two-year research collaboration with Genentech to discover new targeted IL-15 cytokine candidates concluded, and we may independently advance into development targeted IL-15 programs not previously

nominated under the agreement.

A targeted IL-15 program was identified as a development candidate under the Genentech Agreement in October 2020, and we were sharing in 45% of development costs for this candidate.

In August 2021, Genentech and Xencor ceased development of the targeted IL-15 program due to observations in preclinical studies that suggested an undesirable clinical profile.

No additional development of this candidate is planned by Genentech or us.

Genentech and we are planning to study additional combination agents with XmAb306.

In October 2017, we entered into an agreement with INmune, pursuant to which we provided INmune with an exclusive license to our XPro1595 drug candidate.

INmune is currently conducting or planning Phase 2 studies in patients with Alzheimer’s disease, mild cognitive impairment and treatment resistant depression.

In connection with the license, we received shares of INmune common stock and an option to acquire up to 10% of the outstanding common stock of INmune for $10.0 million.

In June 2021, we sold the option to INmune for $15.0 million in cash and $3.3 million in additional shares of INmune common stock.

In September 2021, we exercised an option to acquire an additional 108,000 shares of INmune common stock for $0.8 million.

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.

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.

Novel Bispecific Antibody Collaborations

1 unchanged sentence

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

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

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

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

1 unchanged sentence

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

In 2020, we received a $50 million upfront payment from Janssen.

In 2020, we received a $2.5 million milestone payment related to our agreement with Astellas Pharma, Inc., which has advanced an XmAb bispecific candidate into IND enabling studies.

Under our March 2019 agreement with Astellas, we applied our XmAb bispecific Fc technology to an antigen pair provided by Astellas and generated bispecific antibody candidates for further development by Astellas.

In 2019, we completed delivery of the bispecific candidates to Astellas for further development and potential commercialization.

Other XmAb bispecific antibodies being developed by our partners include Amgen's AMG 509, a STEAP1 x CD3 XmAb 2+1 bispecific antibody, which being evaluated in a Phase 1 study for patients with prostate cancer, and an undisclosed bispecific antibody candidate being developed by Novartis, which is also in Phase 1 development.

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

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

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

Technology License Agreements

3 unchanged sentences

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

Ultomiris has received marketing authorizations from regulatory agencies in the U.S., Europe and Japan for the treatment of adult patients with paroxysmal nocturnal hemoglobinuria (PNH) and for patients with atypical hemolytic uremic syndrome (aHUS).

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

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

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

In 2020, we earned $16.2 million in royalties and $10.0 million in sales-based milestone payments from Alexion.

In January 2020, we entered an agreement with Gilead Sciences, Inc., under which Gilead has access to our Xtend and Cytotoxic XmAb Fc technologies for developing and commercializing elipovimab (GS-9722), Gilead’s effector-enhanced broadly neutralizing anti-HIV antibody, as well as up to three additional anti-HIV antibodies.

In 2020, Gilead exercised all three options.

Gilead has advanced elipovimab and GS-9723 into Phase 1 clinical studies.

In 2020, we received $13.5 million in upfront and option payments from Gilead.

In March 2020, we entered a second agreement with Vir Biotechnology, Inc., under which Vir has non-exclusive access to our Xtend Fc technology to extend the half-life of novel antibodies being investigated as potential treatments for patients with COVID-19, as well as prophylactic use against infection from the SARS-CoV-2 virus.

Vir has commenced a Phase 3 clinical study of VIR-7831 for the early treatment of COVID-19 patients who are at high risk of hospitalization and has indicated plans to initiate a clinical study of VIR-7832 in the near future.

In August 2020, we entered into an agreement with Omeros Corporation, under which we provided Omeros a non-exclusive license to access our Xtend Fc technology, an exclusive license to apply Xtend Fc technology to an identified antibody and options to apply Xtend Fc technology to three additional antibodies.

In 2020, we received an upfront payment of $5.0 million from Omeros.

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

MiRagen subsequently changed its name to Viridian Therapeutics, Inc.

We received an upfront payment of 322,407 shares of Viridian common stock valued at $6.0 million.

In 2021, we earned $22.2 million in royalties from Alexion.

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

Vir has advanced two programs under this agreement.

In the second quarter of 2021, Vir announced plans to initiate a Phase 2 trial of VIR-3434 in combination with an siRNA drug candidate as a potential treatment for patients with chronic hepatitis B virus infection, and we earned $0.5 million for the development milestone.

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

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

A second drug candidate, VIR-7832, is in a Phase 1b/2a trial of adults with mild-to-moderate COVID-19.

In 2021, we earned estimated $52.2 million in royalties from Vir.

In May 2021, we entered into a technology license agreement with Bristol-Myers Squibb Company (BMS) under which BMS has access to Xtend Fc technology to extend the half-life of a novel antibody combination therapy that is intended to neutralize the SARS-CoV-2 virus for the treatment or prevention of COVID-19.

Phase 2 and 3 studies are planned as part of the NIH ACTIV-2 trial examining treatment of infected outpatients.

Under the terms of the agreement, BMS is solely responsible for the activities and costs related to research, development, regulatory, and commercial activities for their COVID-19 drug candidates, and we are eligible to receive royalties on net sales.

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

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

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

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

We received an upfront payment of 394,737 shares of Viridian common stock valued at $7.5 million and are eligible to receive development, regulatory and sales milestones in addition to royalties on net sales of approved products under the agreement.

In connection with our June 2016 collaboration and license agreement with Novartis, we granted Novartis a non-exclusive license to certain non-bispecific Fc technologies to apply against up to ten targets.

In 2021, Novartis exercised its right to incorporate our Xtend Fc domain into a drug candidate.

In 2021, we earned $3.0 million in milestones for a development milestone related to an undisclosed XmAb antibody program that Novartis has advanced into Phase 1 clinical studies.

Strategic Collaborations

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

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

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

In July 2020, we entered an agreement with Atreca, Inc., to research, develop and commercialize novel CD3 bispecific antibodies as potential therapeutics in oncology.

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

Up to two joint programs are eligible to be mutually selected for further development and commercialization, with each partner sharing 50% of costs and profits.

Each company has the option to lead development, regulatory and commercialization activities for one of the two joint programs.

In addition, the agreement allows each partner the option to pursue up to two programs independently, with a mid- to high-single digit percent royalty payable on net sales to the other partner.

In September 2020, we entered an agreement with The University of Texas MD Anderson Cancer Center, under which we will design and execute new investigator-sponsored clinical studies with our portfolio of XmAb drug candidates.

We are committing $10.0 million in funding and supporting these studies over an initial five-year term.

In November 2020, we entered the clinical collaboration with MorphoSys and Incyte to investigate the combination of plamotamab, tafasitamab and lenalidomide in patients with relapsed or refractory DLBCL, first-line DLBCL and relapsed or refractory follicular lymphoma (FL).

In December 2020, we entered into a second agreement with MD Anderson to develop novel CD3 bispecific antibody therapeutics for the potential treatment of patients with cancer.

MD Anderson will work to identify and develop potential antibodies, and we will apply its our Fc bispecific technology to create therapeutic candidates.

MD Anderson will then conduct and fund all preclinical activities to advance candidates toward clinical studies.

We have certain exclusive options to license worldwide rights to develop and commercialize potential new medicines arising from the collaboration.

In February 2021, we announced an agreement with the University of California, Los Angeles (UCLA) to develop therapeutic antibodies, pairing novel targets proposed by scientists at UCLA and utilizing our XmAb Fc domains.

UCLA’s Technology Development Group will work with faculty to propose potential antibody drug candidates, and for selected candidates, we will use a streamlined framework with predefined terms to enter sponsored research agreements and potential license agreements.

Refer to Part IV, Item 15, Note 10, "Collaboration and Licensing Agreements"

of the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a description of the key terms of our arrangements.

of the notes to our financial statements included in this Annual Report on Form 10-K for a description of the key terms of our arrangements.

Financial Operations Overview

5 unchanged sentences

The following is a comparison of collaboration, product licensing, and technology licensing revenue for the years ended December 31, 2021 and 2020 (in millions):

MiRagen/Viridian

Private BioCo

Research and Development Expenses

5 unchanged sentences

External research and development expenses include preclinical testing costs, clinical trial costs and fees paid to external service providers.

External service providers include contract research organizations (CRO) and contract manufacturing organizations (CMO) to conduct clinical trials, manufacturing and process development, IND-enabling toxicology testing and formulation of clinical drug supplies.

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 incurred.

11 unchanged sentences

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 current Good Manufacturing Practices (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.

9 unchanged sentences

Tumor microenvironment (TME) activator programs:

Vudalimab (XmAb717)

Total TME activator programs

Cytokine programs:

XmAb306/RG6323*

XmAb306/RG6323 and a targeted IL-15 candidate*

Total cytokine programs

7 unchanged sentences

Other Income, Net

For the years ended December 31, 2020, 2019 and 2018, other income, net consists primarily of interest income from our investments during the years.

For the year ended December 31, 2021, other income, net, consists primarily of realized and unrealized gain on equity securities during the year, while for the year ended December 31, 2020, other income, net, consists primarily of interest income from our investments 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, 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 believes judgment is

involved in determining revenue recognition, 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.

12 unchanged sentences

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, 2020 and 2019 was $16.0 million and $14.4 million, respectively.

The net capitalized patents, licenses, and other intangible assets as of December 31, 2021 and 2020 were $16.5 million and $16.0 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.

3 unchanged sentences

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.

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.

1 unchanged sentence

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 $0.5 million, $0.2 million and $0.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

We recorded a charge for abandoned intangible assets of $0.9 million and $0.5 million for the years ended December 31, 2021 and 2020, respectively.

Such charges are reflected as general and administrative expenses.

10 unchanged sentences

● 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 contract research organizations that conduct and manage clinical studies on our behalf.

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.

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.

8 unchanged sentences

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.

Our policy is to record interest and penalties related to uncertain tax positions as a component of income tax expense.

We have concluded that there are no material uncertain tax positions and have not recorded an income tax expense or liability for uncertain tax positions as of December 31, 2021.

16 unchanged sentences

Approximately $0.5 million of federal tax credits will expire if unused from 2021 through 2024.

No income tax expense or benefit was recorded for the year ended December 31, 2020.

We recorded an income tax expense of $0.3 million related to state AMT for the year ended December 31, 2019, and no income tax expense or benefit was recorded for the year ended December 31, 2018.

No income tax expense or benefit was recorded for the year ended December 31, 2021 or 2020.

Valuation of Stock-Based Compensation

16 unchanged sentences

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, 2021 and 2020.

For a comparison of our results of operations and financial condition for the years ended December 31, 2020 and 2019.

see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual report on Form 10-K, filed with the SEC on February 23, 2021.

Comparison of the Years Ended December 31, 2021 and 2020

7 unchanged sentences

Other income, net

Income tax expense

Net income (loss)

Research collaboration revenues in 2020 and 2019 represent revenue recognized under our Genentech and Astellas agreements.

Milestone payments increased by $27.0 million in 2020 over 2019 amounts primarily due to receiving milestones from Alexion, Astellas, and MorphoSys in 2020 compared to milestones received from Amgen, Alexion, and Novartis in 2019.

Licensing revenues in 2020 primarily consist of revenues recognized from various technology and product license agreements entered throughout the year, and licensing revenues in 2019 primarily consist of revenues recognized from our Genentech agreement.

Royalty revenues for 2020 represent revenue recognized from our Alexion and MorphoSys agreements while royalty revenues in 2019 represent royalties from our Alexion agreement.

Increased research collaboration revenues in 2021 is primarily revenue recognized under our Janssen and Novartis agreements, while research collaboration revenues in 2020 is primarily revenue recognized under our Genentech agreement.

Milestone payments decreased by $29.2 million in 2021 over 2020 amounts primarily due to milestones received from Janssen and MorphoSys in 2021, compared to milestones received from Alexion and MorphoSys in 2020.

Licensing revenues in 2021 primarily consist of revenues recognized from Janssen, Viridian, and Zenas, and licensing revenues in 2020 primarily consist of revenues recognized from various technology and product license agreements entered throughout the year.

Increased royalty revenues for 2021 is primarily due to revenue recognized from our Alexion, MorphoSys, and Vir agreements over royalty amounts in 2020, which is primarily revenue recognized from our Alexion agreement.

Research and Development Expenses

7 unchanged sentences

Tumor microenvironment (TME) activator programs:

Vudalimab (XmAb717)

Total TME activator programs

Cytokine programs:

XmAb306/RG6323*

XmAb306/RG6323 and a targeted IL-15 candidate*

Total cytokine programs

4 unchanged sentences

Research and development expenses increased by $22.7 million in 2021 over 2020 amounts as we continue to expand our pipeline of bispecific antibody and cytokine candidates.

Increased research and development spending in 2020 was driven by increased spending on our plamotamab, XmAb819, XmAb717 and XmAb564 programs and was partially offset by lower spending on our obexelimab program during the year.

General and Administrative Expenses

General and administrative expenses increased by $5.4 million in 2020 over 2019 amounts primarily due to an increase in staffing, professional expenses and spending on intellectual property and licenses.

Other Income, Net

Other income, net decreased by $5.9 million in 2020 over 2019 amounts reflecting decreases in interest income earned on our investments in marketable securities, due to declining in interest rates in 2020.

Comparison of the Years Ended December 31, 2019 and 2018

The following table summarizes our results of operations for the year ended December 31, 2019 and 2018 (in millions):

Research collaboration

Total revenues

Operating expenses:

Research and development

General and administrative

Total operating expenses

Other income, net

Income tax benefit

Net income (loss)

Research collaboration revenues in 2019 represent revenue recognized under our Genentech and Astellas agreements while the research collaboration revenues in 2018 represent revenue recognized under our Novartis Agreement.

Milestone payments increased by $2.7 million in 2019 over 2018 amounts primarily due to receiving contractual milestones in 2019 from Amgen, Alexion and Novartis compared to contractual milestones received primarily from Alexion in 2018.

Licensing revenues in 2019 primarily consist of revenues recognized from our Genentech agreement.

Royalty revenues for 2019 represent royalty revenue recognized from our Alexion agreement.

Research and Development Expenses

The following table summarizes our research and development expenses for the years ended December 31, 2019 and 2018 (in millions):

Product programs:

Obexelimab (XmAb5871)

Bispecific programs:

CD3 programs:

XmAb819 (ENPP3 x CD3)

Total CD3 programs

Tumor microenvironment (TME) activator programs:

Total TME activator programs

Cytokine programs:

XmAb306/RG6323*

Total cytokine programs

Subtotal bispecific programs

Other, research and early stage programs

Total research and development expenses

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

Research and development expenses increased by $21.1 million in 2019 over 2018 amounts as we continue to expand our pipeline of bispecific antibody and cytokine candidates.

Increased spending on our CD3 bispecific and our cytokine programs offset reduced spending on our TME activator candidates during the year.

Increased research and development spending in 2021 was primarily driven by increased spending on our XmAb819 program and other early-stage programs including IND enabling studies for our B7-H3 x CD28 program and early development work on XmAb662, our IL-12 cytokine program, during the year.

General and Administrative Expenses

General and administrative expenses increased by $1.8 million in 2019 over 2018 amounts primarily due to an increase in facility costs, staffing and intellectual property costs.

General and administrative expenses increased by $9.1 million in 2021 over 2020 amounts primarily due to increased general and administrative staffing, and additional spending on facilities and intellectual property costs including licensing fees.

Other Income, Net

Other income, net increased by $4.4 million in 2019 over 2018 amounts reflecting additional interest income earned on our investments in marketable securities, which is due to higher investment balances as a result of our upfront proceeds received from our Genentech and Astellas agreements in March 2019.

Other income, net increased by $31.3 million in 2021 over 2020 amounts reflecting the gain realized from the sale of the INmune option, and the unrealized gain recognized from the change in accounting for our investments in equity securities in connection with our licensing transactions.

Liquidity and Capital Resources

3 unchanged sentences

In 2021, we received a total of $204.9 million in upfront payments, milestones, and royalties in connection with licensing of our technologies and products.

In March 2019, we received a total of $135.0 million in upfront payment in connection with our Genentech and Astellas collaboration agreements.

In March 2018, we completed the sale of 8,395,000 shares of common stock which included shares that we issued pursuant the underwriters’ exercise of their over-allotment option pursuant to a follow-on public offering.

We received net proceeds of $245.5 million, after deducting underwriters’ discounts and offering expenses.

At December 31, 2020, we had $604.0 million of cash, cash equivalents and marketable debt securities compared to $601.3 million at December 31, 2019.

At December 31, 2021, we had $664.1 million of cash, cash equivalents, marketable debt securities, and receivables compared to $610.2 million at December 31, 2020.

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.

2 unchanged sentences

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.

As we are currently in the early clinical stages of development, it will be some time before we expect to achieve this, and it is uncertain that we ever will.

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 2024.

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.

5 unchanged sentences

Financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used by operating activities for the year ended December 31, 2020 reflects that upfront and milestone payments and royalties received in the year funded a majority of the operating expenses incurred during the year.

Net cash provided by operating activities for the year ended December 31, 2019 reflects upfront and milestone payments received in excess of operating expenses, while net cash used in operations for the years ended December 31, 2018 reflects operating expenses in excess of milestone payments primarily for advancing our pipeline of bispecific antibody candidates during such years.

Net cash used by operating activities for the years ended December 31, 2021 and December 31, 2020 reflect the operating expenses incurred in each year offset by the upfront, milestone, and royalty payments received during the respective year.

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 2020, we redeemed $114.0 million of marketable securities, net of $643.7 million of purchase.

In 2021, we purchased $24.4 million of marketable securities, net of $485.2 million of proceeds from sales and maturities.

In 2018, we purchased $155.7 million in marketable securities, net of $222.1 million of proceeds from sale and maturities.

We acquired $3.2 million, $3.7 million and $1.9 million of intangible assets in the years ended December 31, 2020, 2019 and 2018, respectively.

We purchased $10.5 million, $7.4 million and $7.2 million of capital equipment for the years ended December 31, 2020, 2019 and 2018 respectively.

The increase in capital expenditure in 2020 compared to 2019 and 2018 is primarily due to facility improvements for our laboratory facilities.

In 2020, we redeemed $114.0 million of marketable securities, net of $643.7 million of purchase.

We acquired $2.7 million and $3.2 million of intangible assets in the years ended December 31, 2021 and 2020, respectively.

We purchased $11.8 million and $10.5 million of capital equipment for the years ended December 31, 2021 and 2020, respectively.

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

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2020 and 2019 consists primarily of cash from stock option exercises and the sales of shares under the ESPP.

Net cash provided by financing activities during the year ended December 31, 2018 consists primarily of net proceeds from our March 2018 follow-on public offering and cash from stock option exercises and the sale of shares under the ESPP.

Net cash provided by financing activities during the year ended December 31, 2021 consists primarily of proceeds from issuance of common stock in connection with our Janssen collaboration, stock option exercises, and proceeds from the sales of shares under our Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities during the year ended December 31, 2020 consists primarily of cash from stock option exercises and the sales of shares under the ESPP.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations at December 31, 2020 (in thousands):

Payments due by period

Operating lease obligation relating to facilities (1)

(1) Consists of operating leases on our corporate headquarters in Monrovia, CA encompassing two floors of 24,000 square feet each

that expire in December 2025 and September 2022, respectively, and on our San Diego, CA offices encompassing 24,000 square feet that expires in August 2022.

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.

2 unchanged sentences

The variable domain of this antibody is incorporated in our tidutamab drug candidate.

Under this license agreement, we may be required to make $3.8 million in additional contingent payments which include $800,000 of clinical milestones and $3.0 million of regulatory milestones, in addition to royalties upon commercial sales of products of less than 1%.

We made an upfront payment of $200,000 in connection with this license and made a Phase 1 milestone payment of $100,000 in 2018.

We have not made any additional milestone payments under this arrangement.

Under this license agreement, we may be required to make $3.8 million in additional contingent payments which include $0.8 million of clinical milestones and $3.0 million of regulatory milestones, in addition to royalties upon commercial sales of products of less than 1%.

We made an upfront payment of $0.2 million in connection with this license and made a Phase 1 milestone payment of $0.1 million in 2018.

We made a Phase 2 milestone payment of $0.2 million in 2021.

We entered into a second agreement with BIO-TECHNE, effective February 2018, for a non-exclusive license to a certain recombinant monoclonal antibody reactive with human programmed death protein, PD-1.

1 unchanged sentence

We made an upfront payment in connection with this license in 2019 and have not made any additional payments under this license agreement.

In November 2015, 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 vibecotamab drug candidate.

We made an upfront payment of 50,000 Swiss Francs (CHF) in connection with the license and 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%.

During 2016, we made a CHF 100,000 milestone payment in connection with an IND submission.

There were no additional milestone payments made 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 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%.

During 2016, we made a CHF 100,000 milestone payment in connection with an IND submission.

There were no additional milestone payments made under this license agreement.

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

tidutamab, XmAb717, XmAb841, XmAb104, XmAb306, XmAb564 and XmAb819.

antibody and cytokine drug candidates:

tidutamab, vudalimab, XmAb841, XmAb104, 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 2018, we made three milestone payments of CHF 85,000 each in connection with three separate IND submissions.

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 December 2012, we entered into a Cross-License Agreement with MedImmune, LLC (MedImmune) for a non-exclusive license to certain MedImmune patents related to half-life technology.

Under the terms of the agreement, we may be obligated to make contingent payments in connection with the use of our Xtend™ technology, including use

by us in our development candidates and also for use by our licensees.

These contingent payments total $250,000 per program and include $150,000 in clinical milestones and $100,000 in regulatory milestones.

In addition, we may be obligated to make contingent payments for tiered sales milestones on the sale of approved products from $20,000 per year to $1.0 million per year.

Our obligations to make payments under this agreement expire in December 2021.

Under the terms of the agreement, we made payments in connection with the use of our Xtend™ technology, including use by us in our development candidates and also for use by our licensees.

Our obligations to make payments under this agreement expired in December 2021.

We made milestone payments under this agreement of $375,000 and $1,275,000 for 2020 and 2021, respectively.

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.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.

New Accounting Pronouncements

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis