Xencor, Inc. ($XNCR)

Hello again, everyone. My name is Etzer Darout, one of the senior biotech analysts at Barclays. My pleasure to welcome Xencor to our fireside chat. With us today, we have Bassil Dahiyat, President and Chief Executive Officer; Dane Leone, Executive Vice President of Strategy. And so thank you guys for joining us today. Maybe, Bassil, just to kick us off, just give us a broad overview of Xencor and some of the milestones that you would like to hit in 2026.

So Xencor is a company that was founded around really world-leading protein engineering technology. We've established ourselves over the last couple of decades as people who can create antibodies that can truly have best-in-class properties. There's multiple marketed products we've built. Our technology is used widely around pharma to have created a broad pipeline in oncology, autoimmune disease and other areas. Right now, we're focused on building our own internal proprietary pipeline of drugs that we've built with these techniques, and we focused in solid tumors, particularly T-cell engagers for solid tumors, a class that's really emerging that we've managed to put ourselves into the forefront of and then best-in-class bispecific and long-acting antibodies in autoimmune disease. Critical for us in the next 12 to 18 months are define fully the dosing regimens and efficacy safety profiles for our 2 lead solid tumor T cell engager CD3 bispecific antibodies, XmAb819 and 541 that we expect to have recommended Phase III doses and pivotal plans by the end of the year, so we can hopefully in 2027, initiate pivotal trials for those. And then as we roll forward into 2027 for our TL1A bispecific and long-acting monospecific have key readouts that are going to really set the stage for their value creation in late phase.

Great. And maybe just kick us off with 819. We're going to have some data, as you mentioned, in the second half of this year. You think about sort of the incremental data update that we could get there, what ultimately strengthens your conviction around pivotal studies in 2027 for that program?

So XmAb819 is our ENPP3 CD3 bispecific antibody. We built it with the format that we designed to help separate out the ability to kill high ENPP3 expressing tumor cells while sparing lower ENPP3 expressing normal tissues. So there's a pretty good spread, but you have to make an antibody that can separate those 2 out. We do it with our 2+1 format. I won't go into the technical details now. We published on that quite a bit. And I think our early clinical data that we published at the triple meeting last year demonstrated really once we deal with the on-class CD3 bispecific on-class effect of CRS in the early weeks as you prime the patient, the tolerability of the agent was excellent after that first month, indicating that it's likely that our design achieved what it wanted to avoiding impacting healthy tissues. The efficacy there was quite promising, 25% response rate in the most heavily pretreated population seen in renal cell carcinoma. 4 prior lines median, over 1/3 of patients that had prior HIF-2 alpha therapy, which is an emerging class has never been seen before. So that generated a lot of enthusiasm in the investigator community. We have lots of patients who want to come on study, and that's allowing us to deliver by the end of this year, we believe, the kind of data that is going to define really the value proposition we expect would be a significant lever on the community's awareness of what we're doing and the value of it and define our Phase III because early on, when we were just getting the ball rolling last year in 2025, we pulled data from cohorts that had just reached active doses to get an overall sense of the drug and its tolerability and its efficacy. Again, really exciting in that very late line. This year, we have now the opportunity to characterize in detail with solid numbers of patients, specific dose levels because we've continued to escalate so we can choose which dose level is the right one for Phase III define the priming regimen really carefully and have that specific granular data that shows people we understand the drug, we see its efficacy. As we've been able to enroll more patients, we've really solidified that. And I think we should start to see evidence of durability, at least from some of the cohorts that we had earlier on like late last year, early this year, looking at duration of response to start defining that real winning profile. So I'd say that's really where we think the data this year could be very telling.

Great. And as you think about sort of the potential to move into earlier lines of therapy, as you mentioned, the 25% response rate that you saw in a very late line setting. What gives you more confidence around the ability to move to earlier lines? Is it going to be the durability signal, maybe seeing sort of, again, the response rates in heavily pretreated population, the same? Could we get patients that have less pretreatment where we can maybe see maybe higher responses? What ultimately builds that thesis around...

So it's predicated on the fact that we have a novel mechanism in renal cell carcinoma, right? It has been IO -- sorry, it's been PD-1s. It's been VEGF receptor TKIs and now HIF-2 alpha, which is essentially a tyrosine kinase inhibitor or an enzyme inhibitor as well. We bring a cytotoxic antibody recruiting the immune system into play that's targeted, right? In clear cell renal cell, it is nearly uniformly expressed in almost all patients and other subtypes a little less. So that novelty and the unique profile we have where after priming doses where you get to the CD3 CRS event, it's a very well-tolerated agent gives us a unique opportunity to move forward in line. So with that sort of scientific basis, I'll let Dane talk about how we envision the initial work going into pivotal and how that we can move up and how we're already doing some things there.

Yes. And I think a lot of it comes from what we've seen with the ENPP3 expression levels in clear cell histology and why we're developing a targeted T cell engager in an unselected patient population. So we're not prescreening by any cut point of ENPP3 positivity because the overall positivity rates are so high in this patient population. You have to remember that the monotherapy activity that we've seen in the profile that we presented in October last year, where we achieved a 25% response rate is in really heavily pretreated patients. So a median 4 prior lines, over 2/3 or about 2/3 had 2 or more prior TKIs, about 1/3 had prior HIF-2 alpha inhibitor, all IO, all TKI. And what that means is the phenotype of kind of the tumor microenvironment invariably changes, right, over those lines of therapy. Our investigators have been very vocal that given the novel mechanism and the first time we've seen kind of an IO-like mechanism work post PD-1 effectively in clear cell patients, we need to explore the true up line monotherapy potential. And so we're working on a protocol right now to engage a substudy in pre-TKI or TKI-naive patients that progressed on IO frontline therapy. Classically, that's defined as a patient that's intermediate to poor risk and is likely progressed on ipi/nivo. What that does for us is that gives us an opportunity to look in a substudy, a fast substudy, what the monotherapy potential is truer to that original biopsy where 90% of patients have at least adequate ENPP3 expression levels to respond to 819, our therapy. That could be something truly transformational to the entire development landscape. And it's -- for us, getting that signal in parallel while we plan the pivotal development of monotherapy in the later lines really gives us the totality of the clinical development planning of how to maximize the utility of this drug for these patients and clinicians.

Great. And we saw some data from ASCO GU around sort of HIF-2 alpha. Maybe first, your thoughts around ENPP3 as a target and the potential for synergy with other mechanisms that we're seeing sort of come through, if you will, in RCC.

Yes. I think the key for our hypothesis on how we could synergize is that really distinct mechanism of action, you're not going to be piling into the same pathway, right? The other piece is that distinct AE profile you have, in particular with TKIs, also to an extent with HIF-2 alpha, AEs that can be steady over time or build over time even. We have one where it's like -- it happens early and then it really, really seems to taper off. So I think there's a lot of opportunity there. I think the phenomenon we're seeing in RCC is a compression into earlier and earlier line with all 3 mechanisms, creating a significant unmet need third line, certainly, but even going into second line ultimately. So I think there's a lot of opportunity to advance. Initially, we're going to do monotherapy focus there, and we haven't disclosed what our combination therapy is yet, but it's something on our mind. Do you want to add anything to that?

Yes. By the numbers, what we've seen is for a novel modality, which is most recently Belzutifan with an FDA label that allows use by the clinical community post-IO, post TKI, 1 TKI, PD-1 effectively. Given that compression into earlier line of doublet therapy and potentially even triplet therapy going forward, the clinical community is looking for something that is novel and can be used. And Belzutifan is on track to be a blockbuster $1 billion drug just with the LITESPARK-005 study and the label afforded by that. We would look to replicate that strategy in a large part with some minor changes in detail, but we fully expect 819 with that similar label in the U.S. and EMA to be able to be a blockbuster drug in the late line. And obviously, that opportunity and market that we could capture into an earlier line or second line post ipi/nivo would be a great opportunity as well because that's about 1/3 of patients in the frontline that progress on ipi/nivo. So we're really excited about the totality here, but your question is right. Ultimately, you do want to explore combination therapy, right? And how you break it down is at the first part, PD-1 in the frontline is here to stay. It's being used in adjuvant setting, right? As we've seen early data sets from other T-cell engager studies with PD-1s, there is potential synergy, and there does not seem to be a penalty for additional CRS. So that's obviously of interest as we explore earlier line, which would obviously be more in the frontline scenarios for our clinical development plan. HIF-2 alpha is now the kind of the combo of choice for a lot of investigators. Probably below that, the clinical community is maybe a little bit more tepid on TKIs. They're really trying to get away from that access as much as possible, but you never say never. That's kind of how we would rank order the combination opportunities.

And as you think about your initial pivotal study next year, are there key design questions that have yet to be answered? Or do you have a pretty good sense of sort of the strategy around sort of the initial pivotal? And then also maybe how the subcu versus IV could ultimately play a role, whether if not in pivotal, ultimately, when you think about sort of go forward, how that dynamic can evolve?

Yes. I think the design for the pivotal in monotherapy is really crystallizing pretty nicely. We had ad board and steering committee meetings at ASCO GU a couple of weeks ago. I think there was a pretty broad consensus on all the key parameters. I think we have good models from all these precedent studies about what kind of what the bar is. These precedent studies have had typically response rates, 20%, maybe in the high teens and then 5-ish month PFS. So I think that sets a good bar. We'll be disclosing all those kinds of details if all goes well. And as we expect late this year when we -- after we roll out our Phase I data RP3D. So that's all really crystallized. I think the script will be fairly clear for us to follow. Going to your point on the subcu versus IV, subcu is a little behind. We've established IV dosing first. It could potentially be helpful in commercial. I think one thing to note is even with our IV, we are at Q2-week dosing and maintenance now, and we're going to be exploring Q3 week. So we'll let the efficacy data drive because we don't want to have a more convenient play that leaves efficacy on the table. As we characterize that, we should be able to wrap that up as we get into early '27 and understand exactly how subcu might layer in.

Great. And for the expansion cohorts, are those patients still sort of unselected for ENPP3?

Correct. Unselected. All clear cells.

And maybe if you can talk about sort of maybe enrollment dynamics, how that is going and how you...

Yes. Since we had our data out and we've continued and things have been moving forward, the excitement from the clinical community around having a novel agent with a novel MOA that has activity in these late-line subjects and in particular, that can be given long term and seems tolerable has really generated a lot of patient and investigator interest. And so we've been able to enroll pretty rapidly. We're happy with that. We think we can answer all the key questions with this impulse of patients, all the key questions around priming and final dose this year.

Right. And maybe on 6 CD3 program, you saw some initial early confirmed PRs in ovarian and germ cell tumors. Ultimately, what sort of drives, if you will, the decision around whether or not this is sort of a big opportunity or maybe a more niche opportunity in just smaller tumor types. What could sort of drive.

Yes. This year's data should do that. So we've gotten to target dose ranges late last year. We've coalesced around the right range right now, and we're enrolling across gyne tumors and germ cell tumors to see does the efficacy get us where we need to go. In gyne tumors, particularly ovarian, which is the largest opportunity, it's a competitive space. There's a lot of modalities, a lot of agents. I think we know the bars that we would want to hit in this early data to suggest continued pursuit there. I think in germ cell tumors, there's a really strong unmet need and a different commercial dynamic completely, as you point out, and potentially an opportunity to expand beyond that later line. So the data, response rate data and all those pieces will come together later this year because we have been enrolling. We'll have a knowledge base at the right doses in those indications to make the strategic decisions for each going forward into '27.

And then how much data could we see in the second half of 2026 to kind of help drive?

Yes, I think adequate numbers of patients at our target dose to really establish a recommended Phase III dose. So certainly, at the dose levels, sufficient to give that kind of -- these are expansion cohorts we'll be talking about.

And with this initial data set, I think, with the other sort of -- or the number of tumor types, I guess, in both oncology indications, I mean, certainly, the patient numbers could ultimately balloon if we see additional data in other cancers.

Right. Absolutely.

How are you thinking about potential pivotal and then also commercialization strategy around those, assuming success? And then now you're talking about maybe from thousands of patients to hundreds of thousands of patients.

Yes. So for us, it's about building the basic building blocks with efficacy data right now to define what is that next step that we can then follow on with greater numbers. Just like with our 819 program ENPP3, we've started expansion cohorts in papillary renal cell, in colorectal cancer, MSS and in adeno non-small cell lung cancer, all of those are biomarker selected, but substantial fractions. So move quickly, establish yourself monotherapy in a setting where you could move quickly, get that initial -- our ultimate strategy, get that initial commercial momentum going in a manageable way and then keep bringing things along and bootstrap up.

Great. And then in terms of strategy, you've not shied away from partnerships in the past. Do you see these assets as maybe go it alone assets commercially?

That's our base case. That's our base case, absolutely.

And maybe shift gears to immunology for the remaining time. Obviously, TL1A, long-acting, ulcerative colitis and others competitive areas. You plan to disclose some healthy volunteer data soon. Maybe just what investors should focus in on that data set? Is it half-life, PK, safety, are you thinking about?

Yes. So we disclosed, I think, the real punchline data from our Phase I in healthy volunteers for our long-acting TL1A XmAb942 last year. This is going to be the full Phase I data set with all the follow-up. And really, it's just confirmation. We reported a 71-day plus half-life. We reported really durable suppression of the TL1A levels, which is the key biomarker from genomic biomarker, key levels, single doses out to 16 weeks. No apparent impact of ADA on PK, on PD. Really just -- it's about confirmation of that as we enroll our Phase IIb global study, which is a study that's exploring 3 dose levels. It's well powered 220 completers against placebo to establish what is the Phase III dose so that you can really move forward rapidly and offer to ourselves or whether we partner the ability to get into pivotal trials definitively and quickly without having to do multiple doses and pivotals. That's at DDW in a few weeks. Also, our bispecific IL-23p19 TL1A program will have its first public data disclosure there. Preclinical. We expect to be in the clinic in the first half -- in the second half in healthy volunteers. And that will be full preclinical workup in vitro in vivo data that can help people look at half-life and potency at really how we design this thing to address the really high challenges for bispecifics in I&I.

Right. And for 942, you think about the XENITH-UC study, when we look at sort of clinical benchmarks today, ultimately, what do you think can position this as a potentially best-in-class in terms of efficacy, durability and then sort of maybe frequency.

Yes, I'll mention the design and maybe Dane can touch on how the clinical strategy plays into that. So we built a molecule with very high potency, de novo TNA binder. We believe higher potency than others have reported. That's important. You want to cover the target, put our extremely well-validated Xtend technology, a couple of marketed products, many, many clinical programs use it to extend the half-life. Again, we got over 70-day half-life. And that hopefully lets us cover the target and get maximal exposure for the longest period of time. Then maybe, Dane, you want to mention how we design the study then?

Sure. Yes. And that was the guiding light for us in the early stages of the TL1A program with XmAb942 under design by the protein engineers was how can we get better exposure in the biologic class for IBD, where we think in many respects, these patients are being kind of underdosed on a target level. We had early evidence of that with vedolizumab, where there was a clear exposure response in the induction period from their studies in ulcerative colitis and Crohn's. We saw that with the IL-23 class that reinduction or extended induction with mirikizumab could capture north of another 50% of patients. And we went with that in mid-program, we finally got the data from the TL1A class, [indiscernible] UC and TUSCANY-2b. And the same thing, you got extended capture of clinical response with longer induction or there was an exposure response that was very clear at over 10% difference in clinical remission on the exposure tertiles in TUSCANY-2b. So our Phase IIb study design will answer that question at the top dose level that we're dosing in the IIb study, we will have better target engagement based on our models than the pivotal dose regimens being used by our peers with the first-gen TL1A molecules. And I think there's a real there there. We'll see what happens, but it's a very exciting, well-structured, robust study to test that hypothesis while delivering clinical convenience of Q 12-week dosing in the maintenance period with a single subcutaneous injection. In terms of the market opportunity, we think that kind of the intersection of better efficacy and better clinical convenience allows us to go maybe a couple of years into the branded period of the first [indiscernible], convert that market well into the runway of having all of this entire class remain on brand for many years after, convert the market on new scripts and then ultimately take the dominant market share. We've seen that work time and time again with other biologic classes, including the IL-23 class in diabetes, and we think there would be no difference for the TL1A class. So our design of the IIb is to be as efficient to move through clin reg development and get into commercial launch as fast as we can. And I think we have a good strategy. We'll see how it reads out when we have the primary analysis set in 2027.

Right. And for the 412 program, TL1A, IL-23p19, I guess, maybe conceptually, what's the problem that you're solving? You think about depth of induction for ulcerative colitis, for example, durability, the ability to maybe reach refractory patients, how do you think about sort of the value proposition?

I think it's driven by what's driving all the excitement about combination therapy in I&I in general and in IBD in particular, you get a cap on the percentage of patients that are going to go into true remission, right? People are going to have a deep response, IL-23, it's capped around whatever, 20-ish percent on a placebo-adjusted rate. You got TNF, that's a little lower vedolizumab's a little. How do we get that number higher? How do we reach more patients? The belief is that the different targets are going to reach different patients, hitting both at once at the least should give you some kind of additivity of the people that one and the other doesn't cover, maybe even synergy, we'll see. So it really leverages that growing appreciation that we need to hit more targets in order to reach more patients. That's a very strong driving factor for this bispecific as well.

And for those 2 target antigens, specifically, we have translational data from real clinical studies where in the nonresponding patients to TL1A, TL1A monotherapy you are seeing relative upregulation of IL-23. And that was a supportive basis that these could be orthogonal/synergistic targets to combine into a single bispecific molecule.

Great. And just quickly, you're going from 10, thousands of patients in oncology and potentially millions of patients in immunology. So how are you thinking about that from a strategic standpoint?

Yes. We are keeping our eyes open about when we get to key data inflections and value inflections for the program, what's the best path is bringing more resources on board makes sense. We obviously stay engaged with a lot of parties. We've historically done that. And we're going to make a decision based on the quality of the data and what we need in the next step.

Great. Thank you. So we're up on our time. Bassil, Dane, thank you so much for your participation.

Thank you so much.

Thank you.