Xencor, Inc. (XNCR) Earnings Call Transcript & Summary

Good afternoon. Welcome to Barclays Healthcare Global Conference. And of course, you can e-mail me and my associates if you have questions. But -- my name is Peter Wilson. I'm one of the biotech analysts at Barclays covering mid-cap oncology, and really delighted to have with us the CEO from Xencor, Bassil Dahiyat.

And I guess the first thing really for me is always like fantastic breadth of development over the years, like the way you kind of view your technology in that antibody space and kind of how it differentiates. I know now it has kind of changed to a certain degree because you're thinking bispecifics, et cetera. But just kind of what's the differentiation within that core that pharma companies want to partner with you?

So the issue of differentiation with biologics technology and antibody technology, in particular, is the competitive intensity is so high that the cutting edge is always running away from you. So you have to sprint to keep up with it or even better to be at the forefront of it. And so, about 16, 17 years ago, we pioneered the engineering of the bottom half of the antibodies, the Fc domain to control half-life, to control effector functions. Beyond that, a few years later, we started investing and developing a robust and very modular platform for bispecific antibodies, which now is in -- I don't know, there's maybe 7 or 8 programs in the clinics between Xencor and our partners, maybe even more by today. But again, the field moves on. Competitors emerge, copycats emerge. The subsequent wave of innovation that we've been pushing and pioneering that really gives us our differentiation now is identifying the biology and the immune system that we can now target with these bispecific tools and coming up with the antibody tools to engage them. And so, in particular, our CD28 technology and our new format for CD3 bispecifics. So these are both T-cell engagers, but in a different way, our 2+1 format and our CD28 are what offer, I think, a cutting-edge capability that's beyond what other companies have, that has attracted a lot of pharma interest. We've done a couple of transactions with Janssen on our CD28 toolkit. We've got our own first program in the clinic. And so, that's how you stay differentiated. You always have to push your research engine harder and harder.

And then I guess thinking about the bispecifics or your PD-1, CTLA-4, interesting combination. Kind of where you are for that prostate study that's in Phase 2? Kind of how is that going for enrolment? And when should we expect to see data?

Yes. So I would put that in the context of what are we doing with our pipeline and what are the key drivers and priorities for this year. I would say, vudalimab, our PD-1, CTLA-4 bispecific that we engineer to be more selective for engagement of just double checkpoint positive cells is one of our priorities. And I would say that is about enrolling our Phase 2 studies ongoing now in castrate-resistant prostate cancer, the first of which is in combination with chemotherapy or PARP inhibitor. And last year, we hit our safety run in, zeroed in now on our chemo regimen -- at the intensified chemo regimen, that we now are using, and we've been [ enrolling ] well. And the second Phase 2 study is a monotherapy study in clinically defined high-risk MCRPC. So a key goal for that program is to enroll those studies, and we'll guide on data timing a little bit later on in the year as we get closer. The other big priority for us is enrollment in our IL2 program for regulatory T-cells in autoimmune disease. So not a IL2 cancer like we're used to hearing about a lot, but an autoimmune disease. And that's establishing a dosing regimen that we hope can be a longer interval dosing regimen for autoimmune disease and the competitive molecules in the class. And then it's advancing our other newer bispecifics, these T-cell engagers, our CD28 and our renal cell, carcinoma CD3 program. So that's the context. I would say now, going back to vudalimab, the enrollment is going well. We've zeroed in on our chemotherapy combination dose. These agents are very active. vudalimab is active, and we did demonstrate as a monotherapy in Phase 1 that it seems to have a differentiated tolerability profile and improved tolerability profile over a combination of PD-1 and CTLA-4 antibodies used together. We had fewer of the sort of characteristic CTLA-4 blockade of AEs that often cause discontinuations like colitis. And so that's allowing us to combine with chemo and now figuring out the right balance there. I think we've got it. So that's enrolling well and the monotherapy is enrolling well. And the next stop for that program is efficacy data, right? And we'll guide on timing for that soon. That's really the go/no-go for the program.

And then the -- you changed the intensity of the chemotherapy. Kind of, how does that impact efficacy? How does that change how we should be looking at readouts as well?

Well, when we initially started the study, we kind of went with a maximum chemo approach across the range of Metastatic Prostate Cancer, MCRPC. We use the doublet of a platinum agent, carboplatin, with a taxane, cabazitaxel, across all chemo eligible patients. And those would be people who have aggressive variant mutations that are known and identified, people that don't have targetable mutations and people who've progressed after a PARP therapy. So we use maximal doublet platinum taxing chemo for everybody, even though the NCCN guidelines are only to offer that really high-intensity toxic chemo to the aggressive variant people. We want a maximal efficacy. What we did was we backed off to match the standard practice, which is aggressive variant, you get the platinum taxane doublet, but just the taxane for the other folks, right? And now that we're matching that, we're hopeful that it all -- the tolerability profile improves enough that we don't have to worry about discontinuations from 2 intensive chemo regimen. So I would say that we're now moving into where the standard is whereas we've been super aggressive on pushing for efficacy earlier. So I feel pretty good that we can still think of the benchmarks where the -- maybe the most important benchmark is cabazitaxel alone where you typically see a pretty poor durability, less than 6 months PFS and about a 30% response rate. So durability is, I think, really key. But initially, we'll just have [ OR ] data to guide us. So we need to hit that bar in the chemo combo.

So that's a nice bar setting for us about what we need to see in that data, and that's kind of like your internal go forward.

Right.

Okay. Kind of, I guess, thoughts beyond prostate cancer?

Yes. Checkpoints are very widely usable and PD-1 and CTLA-4 blockade can have a lot of use in a lot of indications. You've got to think of the competitive intensity and the potential differentiation. And recently, we noted data from a competitor program at AstraZeneca with a pretty similarly designed PD-1 CTLA-4 bispecific, really the sort of the closest similarity to vudalimab. And that was in front-line lung cancer, which definitely made us take note. Very big opportunity dominated by PD-1 plus chemo, pembro plus chemo, and they showed better durability in a small -- albeit very small Phase 1 study, and I think that opens the door in our thinking to examine that avenue for vudalimab. We haven't committed to any plans yet. We're still assessing feasibility and what might -- what exploration of that indication might be. But we know that AZ is pushing with multiple Phase 3s now they're going to try to start this year. And I think given the scale of the opportunity and the size of the space, there's certainly opportunity. We just have to figure out exactly best how to attack it. I'll note that the similarity between front-line lung and prostate cancer is the need for combining with chemotherapy to sort of position yourself against what you're competing against. And these bispecifics offer the promise of that, though we have to prove it that these bispecifics can de-intensify the toxicity that you get with combination therapy, say, PD-1,CTLA-4 antibody to allow the chemo combos. And also, they're both in checkpoint therapy naive patients, whether it's in the front-line setting for lung or in the prostate cancer setting where checkpoints aren't used frontline, right? So I think that's an important scientific point that how you use a checkpoint. They're probably best used in a setting that is naive to prior checkpoint therapy.

And then I guess with Astra in the space and the strategy, how does that evolve? Do you go after areas that -- where Astra is not touching? Or do you think you can run faster than Astra?

I think that we want to use the validation that another company has found here and decide whether we want to pursue it in the same indication based on the scope, the size of the opportunity space. And I think in lung cancer, it's enormous. And there's -- I think there's room for multiple agents, right? But this is such early days, we have to see, but it doesn't -- having a large company ahead of us doesn't necessarily preclude in an indication of that scale [ pursuit ].

Do you think you can differentiate on the molecule itself? Is there elements there, safety, efficacy?

We know that the molecules are similar with one significant difference, which is, our affinity and potency is about tenfold less, which we purposely designed to try to approach vudalimab as a way to make dual checkpoint blockade safer. How that plays out clinically? Currently, the data sets that are -- that we can compare is too early and too small, but we'll find out as we go forward. We don't know how that's going to play out, but it's certainly something we're keeping our eye on.

I'd love to talk through your RCC programs or your T-cell engagers, your ENPP3. Kind of how enrollment is going and kind of when we could see initial data?

Yes, that's a CD3 bispecific against a target expressed really brightly in nearly all patients with clear cell renal cell carcinoma, ENPP3, and I would say that the enrollment is going really well. There's an unmet need, and I think investigator community recognizes this for agents that do something different than a checkpoint inhibitor or a VEGF receptor, tyrosine kinase inhibitor, which dominate front-line [ the use in ] combination. And after that, patients really don't have many options other than retrying a VEGF TKI or a salvage chemo. A cytotoxic antibody approach like a CD3 against a tumor-associated target, there's really not a lot there. So there's an absolute need there. And given that the CR rate in front-line, even with the best therapies, is around 12%, there's a lot of patients that will progress. So it's a big opportunity with a lot of unmet need. That molecule was designed based on the really clean expression pattern of ENPP3 giving you a large magnitude of difference between tumor tissue and healthy tissue, and we now have the CD3 engineering tools to dial that in and to get to just the heavily expressing tissue and avoid the low-expressing healthy tissue. At least we've demonstrated that really nicely pre-clinically, and we hope it plays out clinically by using this new 2+1 format. We'll be buying avidly to the high-expressing cells, but on low expressing cells, each arm of the 2 that bind the tumor antigen individually, they don't work great. You need to have a lot of antigen present to get both to grab on. And then we bring in the CD3 with a modest potency. So all of these design tools that we've learned in the last half decade of we making CD3s and using them in the clinic are coming to bear. And there's clinical experience with ENPP3, but at the moment, no competition. Antibody-drug conjugate was tried about 5 or 6 years ago, saw good responses, but had ocular talks that stopped the program. That was very likely a class effect of the pay load. So it's really a great opportunity to bring CD3s and cytotoxic antibodies into a therapeutic area that needs it. So it's going well. It's early. We just started dosing in Q3. And the goal this year is to try to build -- get our doses up higher where we start seeing activity.

What are the other learnings from the ADCs in the -- in that ENPP3 space?

So I would say that it really is that this target, if you can hit it with a cytotoxic antibody, you can create responses in advanced RCC. They're based on multiple responses. That's a beautiful validation that this target has potential, and it validated the basic science that initially drove us to the target, which is the beautiful expression pattern of healthy [ tear ] and tumor tissue way up here for ENPP3.

I know I get this question from time to time, kind of what's the best approach there? Is it like a better ADC? Or is it -- What's better?

Yes, that's a great question. I think that our control of CD3 bispecifics has improved a lot since the early days of the BiTE technologies. And now I think they offer the potential for really very little off-target toxicity if used properly, whereas ADCs, I think that's always going to be a challenge with the systemic tox that you have to manage. On-target tox is a different thing. If you're engineering your molecule so that it's killing a lot of the target cells and the unhealthy tissue, that can be a challenge. I think these new CD3 tools, the 2+1 format are going to help us avoid that, too. So the hope is that by using the immune system in the right way, you can have a less toxic therapy with a lot of avoiding the long-term toxicities that you get from chemo, which is ultimately what's dangling on in ADC.

And then I've got to ask about your CD28 franchise, and it's immensely interesting. Kind of for you, what's the real interest for using that as a bispecific to engage T-cells?

That's about turning on cold tumors, right? Which has been the holy grail for immunotherapy since the first PD-1 data came out about a decade ago -- a little more than a decade ago. There are certain tumors that respond really well to checkpoint inhibitor therapy because the immune system is prime to kill those tumors and you just have to release a break, and there's others that nothing happens. Prostate cancer, triple-negative breast cancer, gosh, many of the gynecologic tumors, right? More tumors than not, pancreatic, colorectal don't respond to checkpoint therapy. Now, how can you turn those on because the immune system is always in your body and it's present. CD28 is a way to try to do that and a potentially way to do that broadly. The challenge of targeting CD28 on T-cells, it's like in the old days, when you just hit it with an antibody, it was like lighting a fire. You can't control it. Bispecifics allow you to engineer a molecule that engages CD28, but only engages it productively when you got that antibody decorating a tumor cell, providing a lot of anchor points for the T cell CD28to see. And you can do that with bispecifics, designing the right affinities, the right valances. And so that's the promise is how can you term on [ cold ] tumors generally, but in that tumor specific way. With recent data from Regeneron with their PSMA CD28 showing that in a pretty notoriously cold tumor prostate cancer, it seems like from early data, you can turn it on. That was a really important validation of the approach. We're in the clinic with our B7-H3 CD28, which we think is a terrific target for CD28 expressed on numerous different tumors, really pretty clean in its expression. It's only on a handful of healthy tissues and at a much lower level than on its typical tumor expression. And so we wanted to have a sort of Swiss army knife of CD28 to apply for our first molecule to a bunch of different tumor types. And so that's in dose escalation right now. We are building numerous others now that we've seen this initial validation. There's a great opportunity to try to take this initial leadership position we haven't really cemented. And we're making a lot of different molecules and targeting cold tumors to see if we can flip that switch.

And I guess, when could we see the initial data there [indiscernible]?

Yes. I don't think we're going to see data this year. We just started our Phase 1 study last quarter. You have to start pretty low with these immunotherapy agents. So I wouldn't say our Phase 1 design is overly onerous. The FDA is understanding these immunotherapies better. It is in combination with pembro. And I would say that in 2024, we should hopefully have data. We're looking at a variety of cold tumors in our Phase 1. And the design is such that we hope we can go fast and see that effect in combination with a checkpoint inhibitor. We dose for a month -- every patient gets this. You pick your given dose level and your given cohort, you get XmAb808 or CD28 bispecific at that dose for 1 month, 2 doses. And at the end of that month, if you have passed that safety window, they add pembro on top of the additional CD28 doses. So you can sort of get away -- you can get your monotherapy dose escalation as well as your combo therapy dose escalation done with the same set of patients in one cohort. That should hopefully move us along much faster.

It's such an interesting program because you've got [ B7-H3 ]. That would kind of give you really clear shot, right, of taking something through to development, through to commercialization, very little competition in the sense.

Yes. I would say both our XmAb819 and ENPP3 program in renal cell as well as XmAb808, the molecules were designed to get us into indications and settings where, if they show promising activity, you could design a program that a small company could take all the way. We want to have those kinds of programs that we can grow our company around, maybe as an easier and more simple and clearly defined development path and you have with, say, a cytokine in combination with different oncology therapies. And so that was a conscious decision. So we are really excited. It is early days, but we've maintained a strong balance sheet at Xencor. So we can dig into these early programs and keep reinvesting in that early phase. So we can try to stay at that bleeding edge.

I'll pivot back to the pipeline, but I definitely have to ask you a question around Silicon Valley Bank kind of exposure. [ So running ] to Silicon Valley, but I guess that regional banks and nonbank lenders, if there's anything you can give your thought?

So we maintain our cash accounts, which are all AAA rated government paper, at JPMorgan. We didn't have any exposure to Silicon Valley Bank. And I think what the Fed did was great for the sector and great for the entire U.S. economy to stabilize things. And crazy over the last weekend, but it seems -- I'm quite hopeful it's been the [ raven ] year though for the whole sector.

Just -- and then back to B7-H3, CD8 -- CD28, sorry. Kind of what's the bar for success? And is prostate the most obvious first?

I think for initial proof of concept, any one of the cold tumors is a way to use bar for success where by targeting those, really, any response is more than one hits the bar, right? That's what the point of using cold tumors is. Pembro alone, you have a lot of documented evidence. And in places like prostate cancer, triple-negative breast, there's not a lot of activity. And so those are the ones you need to focus on to get your look at activity. I think for continued development, prostate cancer is a very exciting area. We could honestly consider combining it with vudalimab as we advance and have our XmAb810 dose, right? So an all internal immunotherapy regimen. We can also imagine combining it in RCC, where B7-H3 is expressed with XmAb819 because CD28 can productively combine with CD3 bispecifics to boost that. Signal 1 CD3 signal would be Signal 2 of CD28, but in a way that lets you have that T-cell activation be more specific to the tumor and your CD3 is getting a boost without maybe having too much CD3 dose and causing some of that CRS. Now you can maybe have a safer CD3. So there's a lot of ways to productively combine it. And I think it's way too early to pick a development path. Let's get the data in a few cold tumors and see where we stand.

Do you think we'd get to a recommended Phase 2 dose this year? Or is it trying to work out which routes you take?

I suspect given how low in dose we've had to start that this year would be pretty optimistic for an RP2D.

And then I guess, finally, just kind of thinking about the combination strategies as well, I mean ,that's where things open up in a really interesting way.

Yes. So CD28 provide that signal to T-cell boost releasing the brake and giving you that longer-term activation, maintenance of activation. And so therefore, they productively combine with checkpoint inhibitors which release the break on an ongoing Signal 1, a T-cell receptor driven Signal 1, where you're recognizing some neoantigen. They combine beautifully with CD3. And there's all this preclinical data that we and others have shown this. CD3 is directly engaged the T-cell receptor through the CD3 subunit and turn on the T-cell. And we look at the different agents that we have just in our repertoire. Vudalimab, PD-1, CTLA-4 is a really interesting combination with a CD28. You sort of get a double whammy on Signal 2 because CD28 fights to turn on a Signal 2, CTLA-4 fights to turn it off, right? So you could get that double whammy. And it would be a wholly-owned Xencor combo, like I mentioned, our [ XmAb808 ] [ non ] program. There's other CD3s out there that we've certainly got our eye on and we've discussed as we go forward, potentially collaborating with other companies. So there's a suite of them. And each -- I would imagine each tumor type is going to have its best combination agent, mostly based on what the leading agents are and then somewhat on the biology.

And then I guess, finally, with like a minute left on the time, just business development strategies. Are you accelerating that, decelerating? How should we think about that?

As a company, we're focused on our internal pipeline and think about business development as a way to advance a program that we simply look at our own resources and time frames and think a partner could greatly help the value of it. A great case of that is our plamotamab program, our CD20/CD3 program in lymphoma, we partnered that with Janssen a little over a year ago. Saw a really promising Phase 1 data, but a competitive landscape intensity that was very high and an indication that I would call medium-sized lymphoma, not vast size like front-line lung cancer. So we think of partnerships as ways to supplement our own internal development or sometimes just license out something we're not going to do. Given the high interest in CD28, we are considering the idea of partnering to expand the early pipeline moving forward. We certainly want to control the bulk of it, but I could see the entertaining ideas there.

Perfect. Thank you. With that, thank you so much, Bassil.

Thank you, Peter.