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

Welcome to today's R&D call hosted by Xencor. [Operator Instructions]. I will now turn the call over to your host, Charles Liles, Senior Director of Corporate Communications and Investor Relations.

Thank you, and good afternoon. Earlier today, we issued a press release announcing positive interim results from our Phase I study of XmAb942 in healthy volunteers. It is available at xencor.com. Providing comments on the call from Xencor are Bassil Dahiyat, President and Chief Executive Officer; John Desjarlais, Executive Vice President and Chief Scientific Officer; Dane Leone, Executive Vice President and Chief Strategy Officer; and Kenneth Hung, Senior Vice President and Head of Xencor's Immunology Clinical Development. We are also joined by Dr. Vipul Jairath, Professor of Medicine in the Division of Gastroenterology at Western University and Chief Medical Officer at Alimentiv, who will join Ken for a discussion about the TL1A landscape in inflammatory bowel disease. After the prepared remarks and presentation, we will open up the call for your questions. Slides that we are using today should be visible here on the webcast and will be made available for download on the Events and Presentations page of our website around the time our remarks are concluded. Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the plans and objectives of management, future product offerings and research and development programs as well as future financial and operating results, future market conditions, future operations, the company's partnering efforts and capital requirements. These forward-looking statements are not historical facts, but rather are based on current expectations and beliefs and are based on information currently available to us. The outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, those factors contained in the Risk Factors section of our most recently filed annual report on Form 10-K. With that, I'll pass the call over to Bassil.

Thanks, Charles, and welcome, everyone. I'd like to start by putting today's TL1A program update into the context of our strategy and pipeline. Xencor's foundation is protein engineering and the rational design of drug molecules with new structures and mechanisms to meet unmet medical needs. Our XmAb platform has been validated by creating multiple approved drugs and promising oncology and immunology candidates in clinical development, both at our partners and internally. And we're continuing to push the boundaries of protein engineering with new tools and structures. Now looking at the details of our pipeline, we have CD3 T cell engagers in both oncology and autoimmune disease and the TL1A programs we'll be discussing today. These programs are our high potency half-life extended anti-TL1A XmAb942, which you'll see as very strong Phase I pharmacokinetic and safety data and our TL1AxIL-23p19 bispecific lead candidate, which we designed to bring the 2 best MOAs for inflammatory bowel disease together into a single molecule. This initial single ascending dose data for 942 is the first of a number of catalysts across our oncology and autoimmune pipelines for 2025. And we're also presenting some data from our multiple ascending dose study of 942 today ahead of previous guidance. We're on track for the 942 Phase II trial in ulcerative colitis to start in the second half and are providing more study design details in this presentation. We will also show data for one of our lead bispecifics, several of which are in early GMP production while we select the final lead for a first-in-human study in 2026. Now we'll start the dive into the TL1A program by touching on the lead indication, inflammatory bowel disease. It's a prevalent disease affecting greater than 3 million in the U.S. and Europe that puts a terrible burden on patients, shortening and greatly impairing the quality of their lives with diarrhea and rectal bleeding that often requires hospitalization and debilitating surgeries. Unfortunately, the existing medications are suboptimal and only lead to remission in 10% to 20% of patients and then a merry-go round of treatment relapse and changing therapy. Now the target TL1A entered this picture a few years ago with antibodies against TL1A showing exciting results in early-stage clinical trials in IBD. It's a pro-inflammatory cytokine that is expressed mostly in monocytic lineages, but also by some lymphocytes and it activates a range of lymphocytes, mostly in the NK and T lineages. Now in addition to the validation of anti-TL1As and IBD clinical trials, there's human genetic data in animal models that support its role in IBD as well as in other autoimmune and inflammatory diseases in a range of tissues. Perhaps the most interesting thing is the potential role of TL1A in fibrosis mediated by a signaling epithelial cells like fibroblasts. If this activity bears out, there's potential to impact fibrotic damage, which is a long-standing therapeutic challenge. Now our approach to targeting TL1A was to use our XmAb tools to build molecules specifically suited for use in chronic autoimmune diseases. Our first goal was to build a best-in-class anti-TL1A to address the opportunities in monotherapy and for combination with existing agents in IBD by selecting a very high affinity and potency TL1A binding domain and combining it with our validated Xtend Fc domain for long half-life. And of course, improved biophysical properties are central to XmAb engineering. So we targeted high stability and solubility. The result is XmAb942, which we believe can deliver high potency induction combined with a simple infrequent subcutaneous injection during maintenance. Now our second goal was to build the real killer Ab for IBD, a bispecific TL1A by IL-23p19. To combine the best 2 targets into a single easy-to-inject molecule that avoids the development and reimbursement complexities of combination therapies or co-formulations. All the same tools, extend Fc domains and biophysical optimization were used as for 942 for this bispecific -- but we also added our bispecific Fc domain and additional potency improvements to create a set of molecules, our XENP53000 lead series that matches the activity of the leading bivalent antibodies but with monovalent binding in an IgG structure that should avoid both immune complex formation and the stability development and immunogenicity liabilities of nonnative multi-specific structures. So I'll summarize the positioning of 942 before John digs into the Phase I results. By combining our greater than 71-day human half-life, with potentially class-leading TL1A neutralization, we've checked all the boxes that are missed by the first-generation molecules for durability and convenience, and we're readying our Phase II study with an efficient design and a Q 12-week subcutaneous maintenance dosing schedule. Now I'll hand it off to John.

Thanks, Bassil. So our Phase I design was a straightforward double-blinded dose escalation study in healthy volunteers, exploring both IV and subcutaneous doses at 3 dose levels. Subjects were randomized at a 6:2 ratio of active versus placebo. We also explored 2 multiple ascending dose cohorts. Endpoints were safety, pharmacokinetics and exploratory PD as well as immunogenicity. Now here, you can see the baseline characteristics for the 64 subjects at this analysis are in line with expectations for a healthy volunteer study. Our blinded interim safety analysis supports the view that XmAb942 is safe and well tolerated with no unexpected events for a Phase I dose escalation study in healthy volunteers. XmAb942 is expected to be aligned with the excellent safety profile demonstrated to date by the entire anti-TL1A drug class. Of course, aside from safety, one of the main goals of this first-in-human study was to evaluate the pharmacokinetics of this half-life extended anti-TL1A antibody XmAb942. With 3 cohorts of data at a low, medium and higher dose, you can see the expected dose-dependent increases in concentrations with both IV or subcutaneous dosing and with sustained serum exposure through up to 16 weeks of data. From these data sets, we performed a pooled analysis, yielding a half-life estimate of greater than 71 days for XmAb942. I'll note that we're still at less than 2 half-lives of data here, and we'll continue to collect additional time points as we process those data. The 71-day half-life is very much in line with our expectations given its 23-day half-life in nonhuman primates and is very promising for this program with the ultimate goal of being a much more convenient dosing regimen and potentially improved efficacy through greater exposure. Finally, we're able to show some very early data from multiple ascending dose component of the study. Our key takeaways from this data set shown on the right-hand plot is that the MAD data aligns very well with the SAD PK data and that there is no observable deviation of the PK profiles upon repeat dosing, suggesting that there is no evidence from this perspective for any impact of ADA emerging. On this next slide, we're looking at the total TL1A in circulation. This is an expected effect seen with other anti-TL1A antibodies when the antibody complexes with TL1A in circulation. Here, we're seeing impressive dose-dependent increases in target engagement and impressive durability of this effect for at least 16 weeks, consistent with our high binding potency and extended serum exposure. And this is reflected nicely in both the IV and subcutaneous cohorts. Consistent with that total TL1A data, we can also look at the amount of circulating free TL1A. And you can see here for all of our cohorts, the free TL1A levels are reduced significantly compared to the placebo groups. Their lower limit of quantification of this assay was 20 picogram per ml. And for all of our cohorts, the measured free TL1A was far below this limit. As per convention, we plot them here at half the value of the LLOQ and you can see that this reduction below the LLOQ is preserved through all the measured time points for at least 16 weeks after a single dose of XmAb942. The main design goal of XmAb942 was to have durable suppression of free TL1A levels to enable less frequent dosing. With the data we've accumulated so far, we've been able to build a quantitative systems pharmacology model for suppression of TL1A. Here, you can see the output of simulations modeling the effect of XmAb942 on TL1A levels in the gut of IBD patients who model low, medium and high induction doses, then a low-dose maintenance phase at Q12-week dosing. You can see here that the simulation suggests that Q12-week maintenance dosing can maintain strong suppression of TL1A, in fact, below 1% of baseline gut TL1A levels out to 52 weeks, where all the regimens converge at steady state. Given that this level of gut TL1A would be maintained well below what is expected in healthy adults, we believe clinical benefit can be maintained with XmAb942 dosed every 3 months. So in summary, we believe we achieved the goal set out for this Phase I study, higher consistency of adequate exposure for better clinical outcomes and induction and maintenance. Our model suggests this is feasible with a single subcutaneous maintenance dose with maintenance dosing every 12 weeks. And so far, no apparent impact of immunogenicity on pharmacokinetics or suppression of TL1A. So now I'll hand the call over to Kenneth Hung, who joined Xencor last year and leads clinical development for our immunology programs.

Thank you very much, John. This on this slide, we see a high-level overview of the clinical development plan for XmAb942 in what we're calling the XENITH studies. The dotted box in the upper left shows our current seamless Phase Ia/IIb in healthy participants and in patients with moderately to severely active ulcerative colitis. As just described, dosing in the Phase I portion has completed, and we are now entering the start-up phase for the Phase IIb portion. We also anticipate exploring Phase III planning in ulcerative colitis as well as potential initiation of development in Crohn's disease. In parallel, we are exploring disease expansion into the alternate disease indications as shown at the bottom of the slide. Here, we show an in-house quantitative systems pharmacology model demonstrating that the target Phase II induction and Q12-week maintenance dosing for XmAb942 shown in blue, are predicted to maintain higher overall exposure than the lead TL1A competitor Tulisokibart shown in orange based on their estimated Phase III dosing schedule, which is pursuing Q4-week maintenance dosing. Of note, XmAb942 demonstrates higher exposure during the early induction phase when robust disease control is most critical in the subsequent maintenance phase, thereby minimizing the chance of disease flares. The Phase IIb XENITH UC study leverages the emerging efficacy of the TL1A class of therapeutics to move directly to a full dose-ranging study that will enable Phase III dose selection. The IV administration during the 12-week induction period is designed to maximize drug exposure to potentially achieve greater induction efficacy than observed in peer studies. The observed long half-life from the Phase Ia study supports every 12-week subcutaneous maintenance dosing, an extremely appealing feature to patients. The study population will focus on patients with moderately to severely active ulcerative colitis that have failed at least one conventional or advanced therapy. The primary endpoint will be clinical remission based on the modified Mayo score at week 12. The study is designed to yield approximately 220 completers that will be randomized in an asymmetric 4:3:3:3 ratio to minimize the number of participants that may receive induction placebo. To maximize potential study recruitment, all induction placebo participants will be eligible to receive active treatment during the subsequent maintenance period. In summary, the XENITH UC study is well powered with achievable enrollment goals to support differentiated clinical outcomes. It employs an effective Phase II dose characterization and supports efficient pivotal design and the potential for gating XENITH expansion into Crohn's disease and other disease indications beyond IBD. Now it is my great pleasure to introduce Dr. Vipul Jairath, a leading key opinion leader in IBD and the Chief Medical Officer at Alimentiv, a leading CRO focused on IBD clinical trials. Dr. Jairath received his medical degree from the University of Leeds and his PhD from the University of Oxford. He is a practicing gastroenterologist and a specialist in inflammatory bowel disease. Dr. Jairath has been a leader in the development of many of the novel instruments used in clinical trials today and has been instrumental in the design of the overall XENITH program. Welcome, Dr. Jairath.

Thank you very much, Ken. Thanks for the introduction. Thanks for having me. It's a pleasure to be here. Thank you.

Despite the growing number of registered drugs for IBD, there still remains a high unmet medical need. Anti-TL1A therapies are an exciting novel class of IBD treatment on the horizon, if not already here. I'd be curious to hear your comments on the emerging data from the first-generation anti-TL1A antibody shown on this slide and where you see TL1A-based therapeutics eventually fitting into the current treatment paradigm for IBD.

Great. Thanks, Ken. I mean I think -- I guess one of the questions is why we're still seeing so many drugs being developed in this space because what I see is more activity in the IBD space than I've ever seen. And that's because we've reached largely what these slides show to some extent on other slides is we talk about this therapeutic ceiling. So the best available agents that we already have approved today, we're at the sort of 50% absolute remission rates at one year of therapy, which means half of our patients, we don't achieve remission. And therefore, that's why there's a need for mechanisms that work in different ways. Now TL1A is attractive for a number of reasons where it sits on the pathways upstream of TNFs, upstream of many other cytokines is amplifying protein, which, in theory, dampens down many-inflammatory responses, but also act on fibrosis as is outlined. So -- and I think as you see, there's now 3 other compounds, which are outlined here, and these aren't the absolute rates. These are the placebo-adjusted clinical and endoscopic endpoints seen at both the end of induction and maintenance of three different programs. And my sense of these data, and again, it's Phase II and caveats that come with the numbers of Phase II and it has to pan out in a Phase III trial is that these are shifting the need a little bit because the absolute rates of remission that we've seen at induction historically for many of our agents is 20% and 15% over placebo. And here, we're starting to see agents pushing that boundary. And these are all fairly consistent, and that's what should give us confidence in this MOA that we're seeing about 25% placebo-adjusted rate at induction. So for me, this is JAK-like efficacy, if you like. I don't think we have anything else in the clinic today other than JAK inhibition that achieves those rates at the end of induction at least and out to maintenance. And of course, JAK inhibitors have some safety issues which come with them. They have an FDA label for second-line use in the U.S.A. and require monitoring. So I think 2 things. One is, I think, it's clear that this class works. It's clear from the Phase II data so far that I think the needle has been shifted slightly incrementally. And with every new compound, if we're getting an extra 5%, we're going to get north of the -- towards the 60% remission rates and more where we need to. And I think the other aspect is from a safety perspective, caveat Phase II programs. But across all 3 of these programs, there haven't been any safety signals at all. And then I think the next question around positioning. Ultimately, positioning is what's determined by the payers in the jurisdictions. If you just take the example that I've already used the JAK inhibition, it's first line everywhere in the world and second line in the U.S., and that's because of the label. In the end, provided there are no safety issues, which are not anticipated with this MOA and payers are willing to approve these therapies, then there's no reason it wouldn't be used first line and also at subsequent lines of therapy.

Very interesting. Thank you so much. Key emerging data from the vedolizumab and risankizumab clinical studies suggesting that clinical outcomes after biologic treatment may be limited due to variability in patient drug exposure. Do you believe we might expect a similar experience with the first-generation anti-TL1A antibodies? And if so, how might this impact overall efficacy?

Yes. Thanks, Ken. I mean I think on the left, you've shown the classic quartile plots and these dose response relationships. And I think we've seen this is vedolizumab, but I think you can show this for a number of the other approved monoclonal antibodies that you see these exposure response relationships where those with drug concentrations in the highest quartiles at a particular time point have higher efficacy rates and those with concentrations in the lowest quartiles have lower efficacy. Now I think it's important to caveat that this is association, it's not causality. But nonetheless, we see this observation across a number of the monoclonal antibodies, which has resulted in a practice of -- or conceptually saying, well, could we get more drug into serum concentrations and therefore, potentially more drug into tissue where the disease is by giving higher doses upfront. And if we take the concept of ulcerative colitis, I mean, the way we've developed drugs for ulcerative colitis for going back to anti-TNFs for over 20 years now is this concept of high dose induction and then dropping down to potentially slightly lower dose in maintenance. And that is because these patients are sick, they're unwell. They've got high inflammatory cytokine burden. They have leaky guts. They're losing drug in the colon and the stool itself. So the concept is that we want to give as much drug upfront as possible in ulcerative colitis to overcome that burden, get patients into remission and then deescalate to a dose that is safe in maintenance and adequate, of course. So I think in theory, if we can give as much drug as possible based upon what you have in terms of tox data coming in and what we can model going in. The idea would be that if we can take those in the highest quartile currently and notch up a little bit and really improve exposure in those patients and the converse, take the ones with the lowest drug concentrations and notch that up by giving more drug that in theory, that might be associated with better efficacy. So really, we want to give as much drug as we can from a safety tox practical perspective in induction to overcome that burden and then move down to a maintenance dose of choice. So based upon what we've seen here in other monoclonals, I think the same approach should be used here.

No, that's very interesting. So it sounds like in a way, we can almost steal from the acute severe UC experience, try to maximize drug exposure during induction and then could kind of back off during the maintenance period. If we follow such a paradigm, we might be able to improve -- potentially improve upon the efficacy observed with the first-generation anti-TL1A therapies.

Yes. I think that's a reasonable analogy. Of course, those hospitalized acute severe colitis typically in these programs, but the concept is we give those patients 10 milligrams per kilogram with infliximab, and not once, but sometimes more than once to overcome that whole antigen sync concept. So I think the same principle applies to date, whether even if we've looked at small molecules like JAKs or monoclonal antibodies that we want to give as high a dose as possible induction and then pick the maintenance dose that will be informed by the trial because we -- so the whole concept, first drug works the best and give that drug as best possible, so the maximum dose that you can to overcome inflammatory burden. I think those principles still apply today.

That sounds great. So on this slide, we know that IBD is a lifelong chronic disease that requires tight disease control to prevent the disastrous potential from disease flares. Does it seem reasonable to you that a more convenient maintenance dosing schedule may improve patient compliance and ultimately, patient quality of life?

Yes. Look, I think if you -- what's striking on here is if we think about agents that were given maintenance and many of our drugs now IV induction subQ maintenance, you can go as frequently as Q2, as you have on the left here, to therapies that we have approved today are typically Q4 or Q8. The only exception is ustekinumab, which is now biosimilar, which also does have a Q12 label in some jurisdictions, but it's not used Q12, it's Q8 and typically Q4. So as we're developing in this example, particularly with your antibody, the structure and the manufacturing of these to both lower immunogenicity, but also allow longer dosing interval. I think for my patients, if I think about patients I treat, that is really important. It won't go for saying life changing, but it's not far off. If you suddenly having to inject yourself every 2 weeks with an agent or every 4 weeks. And now you have something, if it pans out to be successful, that you can give every 12 weeks. So you're basically getting 4 doses a year, that is life-changing for a patient because if they're in remission, what I always say to my patients is I want you to wake up in the morning and live your life, not knowing that -- forgetting that you have the disease, right? So the goal of our drugs is for you to forget that you live with ulcerative colitis or Crohn's disease, you live a totally normal life. And important and that is getting people into remission and keeping them that way. But I think if you're only giving something potentially 4 times a year, that is really a significant change in the treatment paradigm for us and for our patients. And I think the other aspect that goes alongside that, and I think you potentially alluded to this is probably better compliance, right? If you only have to take something 4 times a year, you're much more likely to do it than if you have to take something every 2 weeks or 1 week. I mean if we think -- if I go back to adalimumab, most of our patients, we dose escalate and they get to weekly dosing. So I think you're much more likely to be compliant as well if you only have to do it 4 times a year. So -- and at the end, if I look to the future and think TL1As are going to approve, that's going to be the next drug in our clinic. And if I have a range of these and one of them is 12-week dosing and the others aren't, and there's nothing in terms of efficacy, there's -- I can't think of many situations where a patient would choose to have it dosed more frequently because it's not as if they're going into a clinic or hospital and having supervised dosing in the vast majority of these scenarios. So it's important from a patient convenience aspect is important for tolerability and durability potentially. And I think in terms of sort of that shared care decision-making, it's a no-brainer that you would pick something you only have to take 4 times a year rather than many times a year.

No, that sounds great. So very happy to hear your thoughts and very excited that our next-gen anti-TL1A therapy is pursuing a Q12 maintenance dosing interval. So here on this slide, we show the VEGA study. So I think this is familiar to many people. It demonstrates the potential for combined TNF and IL-23 blockade. As we know, it has wedded the appetite of the field for future combination therapy strategies in IBD. I'd be curious to hear your thoughts in general about the future of combination therapy in IBD and where it might fit in the current treatment landscape.

Yes. Thanks, Ken. I've spent quite a bit of time thinking about this and working in this area. And I think I'd probably say the same thing to everyone who's developing new therapies at this time, at this stage of development is that if they don't have a plan for combination, it's going to be challenging to see where agents are going to fit 5 years from now because outside of TL1A, I don't see anything in the clinic or in the clinical trials clinic right now at Phase III that has a high chance of success as 1 or 2 agents, but not many. So that's number one. So I think you have to be -- for mono agents, if you're not at the bar of 23s and/or JAKs, it's hard to see how there will be a place in the approval, even getting through the development program let alone getting something approved. I think it's clear from TL1A is that we're in that line of efficacy, if not even more, right? So that will play out, but the Phase II data certainly suggests we may be shifting the needle already a little bit on IL-23. So that's the first thing. So I say to everyone, I've got to have a combination development plan even at Phase II potentially or have subsequent plans after the mono agent, and that is highlighted well in this slide. So this is the VEGA trial in ulcerative colitis, which was a POC of TNF and IL-23 and I think there was some basic work done in mice and some in silico modeling suggesting there may be synergisms between IL-23 and TNF in terms of the number of gene pathways they knock out and the modules that they knock out in terms of inflammation, epithelial repair fibrosis. And I think when you put 2 things together, they can either -- one can either negate the effect of the other, one can promote the effect of the other or they can be absolutely additive. And if you look on the left here, I think this is endoscopic remission or clinical remission is essentially 1 plus 1 is 2. I mean, not far off, if you look at the endoscopic remission data, they're almost double when you put together the mono agent, it's almost twice as efficacious as single agent. So here's the first tantalizing data that why combination therapy might get us to the breaking that efficacy ceiling that we started off talking about at the start here. And I'm not sure when we'll see the results reported, but we will see at some point DUET trials reported, which are the subsequent trials to here, which are IL-23 and TNF for both CD and UC and a number of other late-stage assets are already being married up in combination trials, largely Phase IV non-label enabling nonregulatory trials, but it's really where the field has to go if we're going to get to anywhere near our psoriasis type remission ratio. If we're going to get to 60%, 70%, 80%, this is the only way I see in the next -- in the foreseeable future that we go unless we have a companion biomarker-driven study, which we're still searching for that biomarker or if something comes along that's related to the fundamental biology. So this has to be the future. And then then I guess the question is what do you marry together? And I say some of these combination studies that we're starting to see at late phases or Phase IVs or almost marriages a convenient sponsor has the assets and to put them together. But I think there has to be a bit more than that. There has to be orthogonal mechanism of action, number one, that might be complementary. Number two, that there aren't going to be major safety concerns by putting them together. And so I think from the aspect of TL1A, and we're not showing the data and deep dive in this, but I think there was some post-hoc work done from the TUSCANY TL1A program suggesting that there was upregulation of IL-23, I think, in some of the those who had lower response rates, which makes sense that you might combine IL-23 in this pathway. So if I was going to pick up a marriage partner for most agents today, I think it has to probably would be IL-23. I think we've got a few years of safety data from other indications is building an IBD. I think treating patients with that agent for the last 2 years now, it has shifted the needle in both certainly Crohn's, and we'll see that in UC too. And it seems like -- I think there's some basic reasons why it might be good to put those two together, both on the gene pathways knocked out and the modules from epithelial and inflammatory pathways, but also from an efficacy perspective, those seem to be orthogonal enough, but they may be additive, I think from a safety perspective, it makes sense. So I think that's one potential combination, but no doubt, this has to be the future if we're really going to make a difference.

No, no, completely agree. Very excited to hear your thoughts. Completely agree mirroring TL1A IL-23 very favorable safety profiles, orthogonal mechanism of action and the very exciting results from the TUSCANY study showing that the TL1A nonresponders show continued IL-23 tone. So I think this is a very rational combination and very happy to hear that you agree with our initial thoughts. So with that, many thanks for joining us today, Dr. Jairath, and sharing your welcome insights. Now I'll hand the call back to John for an update on our TL1A IL-23 bispecific lead candidate selection. John?

Thank you, Ken, and thank you, Dr. Jairath. So it's well established now that both IL-23 and TL1A inhibition can have positive impact on disease control and inflammatory bowel disease. So we set out to create a novel TL1A x IL-23 bispecific antibody. First, we wanted to create a bispecific antibody format that looks as much like a classic monoclonal antibody as possible. We firmly believe that is the best way to ensure minimal immunogenicity and long half-life. We've also included our extend half-life substitution to promote durable in vivo persistence. Finally, we also wanted an antibody that can match the functional inhibition potency against both axis. So you can see here in these in vitro assays using one of several leads as an example that we compare favorably to leading anti-TL1A antibodies for TL1A functional blockade. That's on the left-hand plot. And at the same time, compare favorably here on the right-hand plot on the IL-23 side against multiple approved anti-IL-23 antibodies. We're very excited about this new program, which we believe has strong potential to provide improved clinical benefit to IBD patients. We expect to have this program starting in first-in-human studies in 2026. Dane?

Thank you, John. Our first-in-human data presented today is an early but important step for Xencor to support patients and clinicians that continue to need more and better treatment options for inflammatory bowel disease. We are continuing to build dialogue in partnership with the IBD community to ensure the design of our TL1A pipeline delivers on what matters most to patients and their care providers. We are encouraged that the Phase II data from the first-generation class of drugs targeting the TL1A inflammatory pathway have built up excitement for a new treatment modality that could be a highly utilized and early line option for treatment of IBD patients with advanced disease. Current expectations from a survey in gastroenterologist that treat a high number of moderate to severe the active ulcerative colitis patients indicate that at least 1/3 of advanced ulcerative colitis patients can end up receiving a therapy targeting TL1A. In 9 out of 10 gastroenterologist surveyed believe that anti-TL1A drugs will likely be used as either the first or second client of advanced therapy. So we start to ask what makes a next gen best in class drug targeting TL1A, drug exposure matters. There continues to be mounting evidence that prolabel single biologics to treat advanced IBD unfortunately leaves a significant fraction of patients with lower than target drug exposure and very likely higher levels to drug exposure could equate to improved clinical outcomes in both induction and maintenance periods of treatment. As we presented today, XmAb942 is greater than 99% in addition of soluble TL1A [indiscernible] across both induction and maintenance period with higher serum concentration than leading firsthand anti-TL1A drug provides and opportunity for XmAb942 to deliver better drug exposure and potential disease control versus the first generation IBD biologics. The use of subcutaneous dosing with biologic drugs as maintenance for patients with IBD has improved the patient experience but there is a limit to the injection burden which is why we are excited to develop XmAb942 as a single subcutaneous injection formulation from maintenance period dosing and dosing frequency matters. Over 90% of gastroenterologist survey taught that XmAb942s every 12 week dosing in the maintenance period could be a very meaningful or meaningful improvement over the dosing frequency of the first generation anti-TL1A biologics under development. While we are excited for the start of our Phase 2 study the XmAb942 as a monitor for ulcerative colitis in the second half of the 2025 we have already been planning for the future of IBD treatment. Dual targeting of different inflammatory pathways is emerging as this future. We have designed drug TL1A pipeline to accommodate a treatment landscape in the 2030s where clinicians will want flexibility to combine novel branded therapies with potentially biosimilar version of today's standard of care drugs. retaining flexibility with XmAb942 to the best-in-class combination partner of choice is a key tenet of our current plan. Given the safety and effectiveness of both TL1A and Il-23 biologics we observed a great deal of interest in dual targeting both inflammatory pathways. We are excited to bring the full strength of this Xencor protein engineering platform to build a novel TL1A and IL23 P19 bispecific antibody. As John highlighted, we've great progress with our TL1A IL23 P19 bispecific program achieving lead development candidate are equally potent to the respective class leading monospecific antibodies which means in a single molecule we're poised to deliver on the promise of combination therapy with more manufacturing efficiencies and co-formulation approaches, offer potential ease of use administration and be accessible to patients as the current class of biologics for IPD. The clinical development plan for TL1A pipeline is fold important development milestones during the next 3 years. Our busy [indiscernible] year roadmap includes the start of XENITH-UC during the second half of 2025 with potential triggering additional development into Crohn's disease. During 2026, we expect to evaluate potential expansion opportunities for XmAb942 and to diseases that can also benefit from a best in class anti-TL1A drug. We are on track our lead selection XmAb TL1A x IL23p19 bispecific, with first in-human study initiation drug expected during 2026. This could support Phase 2 study during 2027. And with that, I will hand it back over to Bassil for concluding remarks.

Thanks Dane. This year has seen major achievements for our TL1A team in delivering critical data and in advancing operational plans. First, our Phase I PK/PD data for XmAb942 supports our goal of a molecule that can give effective drug exposure to maximize a fraction of patients who benefit from therapy while providing convenient maintenance dosing. Second, we built bispecific leads that have the heightened potency needed to match 2 monospecific antibodies but with half the mass in a simple IgG format. And both programs are on track for efficient Phase II clinical development with the cash to support it, very important in this landscape. With that, we'd like to open up the call for questions.

[Operator Instructions] And our first question comes from Gregory Renza with RBC Capital Markets.

Can you hear me okay?

Yes. Can hear you, Greg.

Congrats on the progress. Thanks for taking my question Bassil and team and great to have Dr. Jairath on as well. And just with respect, Bassil, to the doctor's commentary on the positioning of a next-gen TL1A. Just curious if you can comment on how Xencor is sort of preparing for that. There are a lot of moving parts. We've counted several TL1A agents as you've alluded to under development. But maybe just point us to how Xencor is kind of preparing to run those clinical trials, Bassil, what can you do to attract those patients and centers amidst what is an increasingly crowded space?

Yes. I think, first of all, it's build the best molecule that we can with what we believe, at least to date is the most compelling profile. I think that's going to attract patients. The maintenance dosing, the excellent potency that we've demonstrated all show that kind of promise. And I think the other piece, and this is where I'll let Dane comment in a second, is having a really efficient and aggressive clinical development strategy, right? We want to be positioned to be the agent of choice for those combinations with existing agents that are out there that are going to be biosimilar in a few years by having the best monovalent and the fastest monovalent long-acting TL1A out there, right, the fastest to develop. So that's the overall strategy. And I'll let Dane comment, maybe on the particulars.

Sure. Thank you, Bassil, and thanks for the question, Greg. Yes, I think there's a number of design features that we put into the Phase II study discussed today at a high level that hopefully make us a good partner with the clinical sites globally that will be enrolling these studies and would have interest in the Phase II study despite, to your point, the Phase III studies that are ongoing at the moment with several different pure anti-TL1A targeted drugs. We've made this Phase II as attractive I think possible and are working hand with the important investigators. And thankfully, we have one of those on the call with us today to make this not just a clinical experience for patients, but also the caregivers as well. Furthermore, it's our commitment to IBD innovation really. We have a pipeline now, with a bispecific antibody that hopefully really entices that view of what's next for breaking through that ceiling of response and clinical remission that we highlighted today as being really a cap on monospecific therapy. So we're really excited to start the process heading into 2026, so again, going back to a lot of these investigators that will be working with us on the Phase II for XmAb942 and discussing what the future could look like for our bispecific antibody. I think that commitment to the pipeline of innovation is going to be a big differentiator, not just amongst our peers, but for the IBD clinical community at large.

Yes, that's really helpful, guys. And maybe just a quick follow-up and just to broaden the question. When we think about the larger players involved just more strategically, would you consider a more typical out-licensing strategy with 942 or even as you develop the bispecific? Or is the base case that you will continue to have the capacity to take this all the way through? Thanks again and congrats on the update.

Thanks a lot, Greg. So our base case is that we are certainly committed to running this Phase II study, which we hope will establish XmAb942 as the most attractive agent. And I think what we want to do though, is in the meantime, accelerate every opportunity to understand how it's going to fit in the landscape long term by exploring the idea of how we might do combinations as we go further into development, combinations with existing agents. So I'll say, never say never on partnering, but you have to have a base plan for how you're going to move forward for a number of years. And you've got to make those decisions based on what's going to get the most rapid access to patients of your new agent. We believe we have the resources to take this molecule a long way. I'll commit to all the way when we take that next step. But I think how we can rapidly combine is something we definitely have keenly in our mind, but we think we can also find ways to do that going forward, controlling the asset and developing it ourselves.

Our next question comes from Tara Bancroft with Cowen and Company.

So my question is about the Phase IIb or even later. So one is, do you have thoughts on if you might look specifically at a biomarker population like 3101 and Tulisokibart? And then in the context of all the data that you and Dr. Jairath talked about in the prepared remarks, what do you think is the bar for efficacy for 942 specifically in Phase II? Like what remission rate would you view as competitive?

Yes. I'll touch on the biomarker question, then maybe I'll let Dane touch on what we think the bar for success might be and how much we're willing to talk about that at this point. So just to be clear, we have a very active biomarker program, and we're going to be looking at a lot of different biomarkers in the study. We're allocating a lot of effort and budget to that. I will say I think it's an exploratory effort right now. I'm not certain that the biomarkers that have been looked at so far have given a clear direction yet. So I think we're very committed to being in that exploring phase with the rest of the field. We'll see how that evolves over the next few years.

I guess I'll weigh in with the kind of non-answer to your question. It depends. So when you look at the field of clinical studies in IBD biologics and JAK inhibs clearly, there's a difference in clinical remission treatment effect size relative to placebo based on the prior treatment history of the patients. So I would say at this point, we're probably not in terms of discussing what we expect the complexion of our study participants to be to kind of determine what we would think the overall efficacy hurdle would be.

Our next question comes from with Yen-Der Li with Leerink Partners.

Can you hear me?

Yes. We can hear you.

This is Yen-Der Li on for Jonathan Chang. Congrats on the positive data. I have 2 questions. So the first one, on the 942 program, you mentioned that there is no apparent impact of the antidrug antibody on PK. Could you share more details on how frequent do you observe an drug antibody within the Phase I study? And how does that compare with the other published TL1A data?

Yes. So just to be clear, what we were writing about any impact on PK of ADA. All of our ADA data, the actual measurements of antidrug antibodies is still pending because we're still in the midst of the study and gathering samples. So we don't have any direct ADA data yet. We will report that when we publish these full study results at a medical conference, obviously. Now what we're saying is the biggest consequence of ADA that you worry about is that it's clearing your drug and that it's pulling it out of circulation. And what we've seen -- what we're saying is even with multiple doses, we're not seeing any apparent impact on PK that might be from ADA. There's no reductions in drugs. There's no outliers in our data sets or data points that are pulled down. So we think that's a great start. We're very encouraged by that. And it's just -- we're trying to get this data out to investors as quick as we can. All the full data sets coming soon.

Got it. Understood. And I guess the second question also kind of related to ADA. So for the TL1A and IL-23 bispecific, can you share your thoughts on how to avoid immunogenicity with the bispecific that targets to like soluble targets and that might cause like forming of immune complex.

Yes. Maybe I don't know, John, are you happy to handle this one? I mean that goes right in our design philosophy.

Yes, sure. So you probably noted from the schematic that I showed that we designed a 1 plus 1 bispecific antibody. So it's monovalent engagement for both IL-23 and TL1A. That's opposed to other types of molecules that would have sort of a dual bivalent engagement -- and basically, the more valency you have, the more potential you have for immune complex formation. So we wanted to minimize the valency to the extent possible and 1 plus 1 is as low as you can go for a bispecific antibody. There are other factors as well. So we have a super clean set of Fc effector function knockout substitutions included in our bispecific antibody. That minimizes engagement of the Fc by antigen-presenting cells and so on and so forth. And then beyond that, we just work really hard. We mentioned we've got 6 or so leads that we're working on, a whole series of them. The example that I showed was just one of them. And really, the only thing that's going to determine the lead selection is the intensive analysis the developability and the biophysical properties of those leads. So optimizing for biophysical properties is thought to be one of the best ways you can minimize immunogenicity.

Yes. So we took the time to make very, very high potency binders so we could get what we think would be maximal effect from this monovalent binding, so you avoid forming those higher order oligomeric immune complexes when you have soluble targets getting bound by 2 domains. And when we looked at formats, we wanted to avoid bivalent formats and really do the hard work upfront of making a really great set of binders into a bispecific structure.

Our next question comes from Brian Cheng with JPMorgan.

Maybe just first is just have you looked into the effects of downstream biomarkers like the reactive proteins or interferon gamma, just to see if there is any downstream effect? And if so, is there a downstream linear relationship? And then second, on the doses that you have disclosed here 942, the low, medium, high, what is the relationship between each of the doses? Is it a linear step-up between each of the dose?

Sure. I'll answer the first one. Given that these are healthy volunteers, looking at downstream effects on cytokines is really almost impossible because the baseline function of those cytokines at baseline, the serum levels are quite low. I mean, John, I'm not missing anything, right?

You said exactly what I would have responded with that. Yes. There's not enough signal to look at. So you're sort of the noise is trash.

Yes, yes, yes. I'm sorry, your second question, Brian?

On just the dose at the low median. Rainer step-up at each of the dose?

Let me think for a second before I answer. Actually, it was a geometric step-up, so stepping up by a fold. In our single ascending dose study, that's what we did. In our Phase II design, it's a little bit less specific. The step sizes are different. They're based on our QSP modeling to have doses that hopefully span the range of efficacy, so we can really narrow down what our best dose for Phase III is, again, do the hard work of the dose ranging in the Phase II.

Our next question comes from Alec Stranahan with BofA Securities.

Can you hear me?

Yes.

Okay. Great. Just 2 quick ones for us, and I appreciate the questions here. But both are kind of around the safety that you're seeing. I appreciate that the study is still blinded, but I would be curious if you can see in the data that you have access to, if there's any dose-dependent increase in AEs, say, maybe more grade 1 at lower doses and more grade 2 at the higher doses. And just based on patient makeup in the Phase IIb, I guess, how would you expect safety to maybe change when moving into the disease setting? Are there any key items you'll be looking out for either as an on-target or versus other medicines?

Yes, sure. So we did not see any kind of dose relationship and the slides are going to be posted on our website, I think, momentarily. And so you'll see there was just 3 potentially related AEs. There was no dose relationship for all AEs related or not, really very clean Phase I that we saw. We're very happy with that safety data. As to what to anticipate in a patient population, I think we anticipate our agent should behave like the other TL1As, just longer acting and more potent. So it's hopefully something that's going to be a pretty uninteresting story. So far, it's been pretty uninteresting and exactly the ways we'd hoped.

Okay. And maybe just one quick one, if I can. Just with the dosimetry reflecting your observations or your expectations from your non-human primate models on PK/PD. Curious if there's any read-through to your other ongoing dose escalations, either for ENPP3 or Claudin 6 and whether this data maybe gives you more confidence on the doses that you're testing in those studies?

Yes, no problem. Yes. Not really a lot of crossover here given the real divergence of mechanisms we're talking about. You've got an inhibitor of TL1A here, which is sort of just quietly kind of symmetrically mopping up a cytokine. On our oncology programs, our T cell engagers, you're actually agonizing a T cell, a total different paradigm. It certainly gives us added confidence in the quality of Xencor molecules, the biophysical robustness of them. It's a pretty high bar to get to this kind of half-life. But we already knew that. There's been so many agents, marketed agents, partnered agents. But it is nice to see another really beautiful performance by an XmAb.

Our next question comes from Eva Fortea-Verdejo with Wells Fargo Securities.

Congrats on the data. A couple from us. First, could you provide some clarification? Maybe I missed it on the dosing schedule for the IV portion of the UC study? Like how often are these patients going to be dosed during this initial like 12-week induction period? And the second question is, how are you thinking about indications for the TL1A IL23 bispecific where it could provide most benefit or would make the most sense to start with over 942?

Sure. It's a pretty standard induction schedule we're planning on using. You can see it from the modeled PK and PD plots that we showed again, the slides will be up in a minute you can see where the peaks go. It's an IV induction. So you can just read it right off there. And it's been a long call, so I don't want to read it off wrongly because I don't have the slides in front of me. Does anybody else want to let Eva know? We'll pull that up while I talk about other indications. So there's -- how differentiated do we want to be with the bispecific versus 942. I don't know that that's the first place we think. Certainly, there could be a different range of uses. But again, the initial objective has been what's the really killer app for how to give combination therapy to UC patients in a way that, as Dr. Jairath said, you hopefully can make them forget they have a disease. That's what we all want to do for patients. So a bispecific that lets us do that in IBD is maybe our primary initial indication. There's a lot of biology around both 23 and TL1A to explore. So you saw what's on the slide. We'll guide more as we do a lot more preclinical work and vetting work. But yes, there's -- I just pulled up the slide. So day 0, week 2, then week 6, week 10 is our induction schedule, very standard. And then we go into a Q12-week maintenance subcutaneous.

Our next question comes from Matt Phipps with William Blair.

Congrats on this update here. Curious following up on the induction. I guess with the IV versus subcutaneous, it doesn't seem to be that big of a difference in kind of the total TL1A concentrations by 2 or 4 weeks. So do you think higher, faster Cmax is going to be important in the induction phase? And then that medium subcutaneous dose you plan to take into the Phase IIb, is that something you think you can fit into an auto-injector or some kind of self-administered type pen eventually?

Sure, sure. So our current plan right now and the dose we're taking forward in maintenance, we believe can be given in a single injection, right? So it, in fact, has already been given in single injections in our Phase I and subcutaneous, and it's worked out quite nicely, as you can see. So the work on putting that into things like auto-injectors, prefilled syringes, et cetera, absolutely something we have in the drawing board. I don't see any reason why not. Obviously, we'd have to guide on that as we go forward. But our goal is to have it to be really simple to give. So you're right on the mark. That's exactly what we're aiming for ultimately.

Our next question comes from Sean McCutcheon with Raymond James & Associates.

Sean, are you there?

Can you guys hear me now?

Yes, we got you.

Can you talk a bit more about what you'll need to see in order to trigger development in Crohn's and maybe what you would expect the variables to differ within ulcerative colitis? And then maybe can you give some detail on the remaining gating factors for the bispecific IND and when you can get that into the clinic?

Sure. Maybe I'll touch on the second one first and I know the gating factors are we've got this handful of leads, all of which look to have really exciting and excellent potency. They're going through the early run-up of GMP production all in parallel, so we can stay on our 2026 first-in-human time line start. And it's going to be what John said, the developability. I mean, all the nitty-gritty basics of biophysics and formulation and all of that, we put several of them forward so we can pick the best one. And hopefully, that gives us what we want to see, which is a high concentration formulation, high storage stability, et cetera, et cetera. Again, we've been very successful at doing that in the past for a wide range of bispecifics. So we're hopeful there. So that's really the only -- I wouldn't say there's a gate to moving forward to first in human. It's just picking which one of these all pretty promising from the data we have so far leads, which one is the winner. Then I guess your question on what are the remaining gates I guess it's really looking at peer or competitor data as they look at other indications, we're watching closely all of those studies to see when should we peel off and add an indication. And then it's also the progress we make at operationalizing our Phase II and UC, the XENITH UC study and advancing it so we can make sure we allocate our resources judiciously. So it's kind of a combination of internal and external drivers. Anyone you want to add anything on that? I think I kept rolling, sorry.

Great. If we want, we can move on to the final question of the day. Our final question comes from Peter Lawson with Barclays.

Can you hear me?

Yes, we got you.

Okay. On the Phase II, I may have missed this, but just the rationale for starting with IV and then switching to subcutaneous. And then if you've already seen an MTD

MTD, no, we have not seen any DLTs or any serious AEs or high-grade AEs. So no, it's perfectly clean all the way up in the escalation. And there's no reason to go any higher. We're loading them up pretty good. Maybe, I mean, Dane, do you want to take the other one on the rationale for the route?

Sure. Thanks for the question, Peter. Yes, I think it's fairly standard at this point to an earlier question around potential Cmax of using an intravenous infusion in the induction period, especially with patients that are refractory, have disease flare to attenuate the symptoms as quickly as possible. And then once you brought the disease under control with your normal 12-week induction cycle, you would then go to the convenience of the maintenance period where, in our case, we'll be dosing every 12 weeks with a single subcutaneous injection, which we think will be very favorable to patients and clinicians.

And then just on -- going back to the Phase II design and final question, just there a percentage of patients you're expecting or what line of therapy you're expecting a mix between as you kind of phrase it conventional versus advanced therapy?

Yes. So we haven't gone to specifics. I think there was an earlier question just in terms of what we expect treatment effect size to be which, as you know from experience with advanced therapies in ulcerative colitis and Crohn's varies greatly depending on the prior treatment history of the patient. In our case, we think it's probably a little premature ahead of the Phase II start to get into the complexion of advanced therapy that we may expect across the different clinical sites we'll be using globally.

All right. This concludes the Q&A section of the call. I would now like to turn the call back to your host for closing remarks.

I'd like to thank everybody for joining us today to review these really exciting interim results for XmAb942 and our go-forward plans for our TL1A programs. We look forward to further updates on these and others in our portfolio in the coming quarters. And I hope everybody else has a wonderful rest of your day.