Xencor, Inc. ($XNCR)

Hello, and welcome to the Xencor DDW 2026 Webcast. [Operator Instructions] Also as a reminder, this conference is being recorded today. I will now turn the call over to Charles Liles.

Thank you, and good morning. Yesterday, we issued a press release introducing the topics we plan to discuss on this webcast, including results from the Phase I study of XmAb942 and the preclinical characterization of XmAb412. The press release is available at www.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 Mark Osterman, Senior Vice President and Head of Clinical Development for Xencor's autoimmune programs. 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 Mark for a discussion of our Phase IIb XENITH-UC study. After the prepared remarks and presentation, we will open up the call for management to answer 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 & 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. Xencor is a clinical stage biotech company dedicated to making better medicines based on our world-class XmAb protein engineering platform. Our purpose is solving the hardest science and engineering problems to create new drugs and then developing them to advance the standard of care for patients and their caregivers. Our protein design tools and novel antibodies have been validated many, many times over through our commitment to using strategic partnerships when the best development strategy for a program involves another company. That approach has produced real advances in the standard of care for patients and caregivers, and there are many ongoing programs across oncology, autoimmune and infectious disease poised to continue that into the future. Xencor's wholly-owned clinical stage development pipeline is centered on 6 programs with differentiated molecules, all built with our protein engineering tools to enable better clinical outcomes and utility. Today we'll discuss our TL1A portfolio, consisting of XmAb942, our potential best-in-class monoclonal antibody that targets TL1A, an emerging biologic target implicated across a growing number of autoimmune and inflammatory diseases; and XmAb412, a novel bispecific antibody targeting TL1A and IL-23p19. XmAb942 is currently enrolling XENITH-UC, a global Phase IIb study of patients with moderately to severely active ulcerative colitis. And XmAb412 is starting Phase I in Q3 of this year. During the ongoing Digestive Disease Week Conference, we're presenting posters updating our progress on these programs. Our poster for XmAb942 provides PK/PD analysis based on our Phase I data that shows how our XENITH-UC study is testing our best-in-class drug exposure and target inhibition [indiscernible] better clinical results versus those observed from studies of first-gen TL1A-targeted biologics. We plan to provide a progress update on XENITH-UC around year-end and expect the results of the 12-week induction period during 2027. We're also presenting the preclinical characterization of our XmAb412 bispecific program. Our poster for 412 details the novel design of our bispecific targeting TL1A and IL-23p19 to deliver dual inhibition of these 2 key inflammatory pathways in autoimmune disease. Our first-in-human study is on track to start during the third quarter of this year and is expected to support moving into Phase II development during 2027. You can see here the large and growing landscape of inflammatory bowel disease therapies, and we're particularly drawn by the opportunity to address the high remaining unmet need by targeting the new and compelling biology of TL1A. We believe our XmAb tools can bring next-generation, highly potent and long-acting molecules to these patients to improve quality of life through lower injection burden and better target inhibition over the course of maintenance therapy. Our design philosophy for both XmAb942 and 412 was to address the key clinical pain points with our well-validated XmAb antibody modules and tools. For 942, we built a highly stable antibody with class-leading potency and applied our Xtend Fc domain to get a 74-day half-life in humans, a high-concentration formulation and Q12 week dosing. For 412, we built a novel bispecific 1-plus-1 format that John will tell you about to minimize immune complex formation and simplify formulation. And of course, we used our Xtend Fc to prolong half-life. We dialed in ultra-high potency, including [ subpicomolar ] binding. So this bispecific can match or beat existing traditional antibodies. We consistently challenge ourselves to push the boundaries of protein engineering to deliver better medicines to patients. We believe 942 is positioned to be the best-in-class anti-TL1A antibody, which we think creates a significant market opportunity within the emerging TL1A class for the treatment of inflammatory bowel disease, but also longer term positions 942 to be developed for a broad range of autoimmune inflammatory diseases like the many currently being studied within the class. XmAb412 is poised to deliver on the promise of dual targeted therapy for inflammatory bowel disease, which you can see exemplified by the most recent [ DUET-UC ] data, where 412 can deliver potentially class-leading combination potency in a single-molecule format that can follow the efficient clinical and commercial pathway of monoclonal antibodies or oral medications and avoid the highly costly and complex development of combinations and co-formulations, like the nearly 3x size of the DUET Phase IIb studies over standard programs. Now John Desjarlais, our Chief Scientific Officer, will walk us through the preclinical characterization of XmAb412 and introduce our XenLock platform. Go ahead, John.

Thanks, Bassil. To address this need for bispecifics optimized for autoimmune disease, we aim to make a very high-potency and long-acting bispecifics with low immunogenicity potential and stability needed for high-concentration formulation. To do this, we expanded our modular XmAb platform with our new XenLock fab format that lets us readily combine full fab domains into highly stable multispecifics in a native-like IgG format. This allows us to generate binding domains from full barrier domain diversity and highly optimize their affinity and stability without the limitations of common light chain or BHH approaches. XenLock lets us assemble these fabs with our XmAb Fc domains and readily produce molecules with ultra-high affinity into whatever format we [ would like to]. The result is XmAb412, our TL1A by IL-23p19 bispecific with [ femtomolar ] affinity or [ subpicomolar ] for IL-23 and single-digit picomolar affinity for TL1A. We can see how the stringent engineering that we did to make XmAb412 in a very potent molecule. Cell-based assays for both TL1A activity on the left and IL-23 on the right show the same or better potency for suppressing these pathways from this bispecific compared to lead clinical TL1A and marketed IL-23 antibodies, with XmAb412 shown in the dark blue. The XenLock approach lets us get this very high potency from only half the number of binding domains for targets in the autospecific antibodies. This smaller single binding domain construct means less mass to put into the vial when we make high-concentration subcutaneous formulations, a big help for it. The other big advantage of this 1-plus-1 ultra-high potency format is the much lower propensity to cause immune complex formation and much smaller size of these complexes. In particular, for trimeric targets like TL1A, antibodies with 2 TL1A binding domains can create large immune complexes, as you can see in the schematic. Large immune complex formation is an important driver of antibody drug immunogenicity. But our 1-plus-1 format does not have that potential for a large complex formation as there's only one domain per drug molecule to stick to TL1A. We experimentally showed this with size exclusion chromatography. You can see just a single peak for XmAb412 in the presence of TL1A compared to the messy mixture of very high molecular weight complexes formed with a 2-plus-2 bispecific antibody using 2 TL1A binding domains, a common format used to make bispecifics quickly, but they potentially suffer from this liability. Turning to the in vivo data for XmAb412, we show on the left the long half-life observed in nonhuman primates of greater than 20 days, which extrapolates to an expected 60 to 70 days in humans, possibly enabling every 12-week dosing. XmAb412 uses our Xtend Fc domain for long half-life. This PK gives a very durable pharmacodynamic profile, and you can see that the complete suppression of pre-TL1A below detection limit has out-passed 2 months from a single dose. In summary, XmAb412 is poised to deliver potentially best-in-class innovation of both TL1A and IL-23. In addition to potency and extended half-life, we have a high-concentration formulation for simple subcu administration ready to go into our Phase I study starting in Q3 of this year. We expect this trial to validate our XenLock approach to making bispecifics tuned for the needs of autoimmune disease and have a second program in preclinical development behind XmAb412. Mark?

Thanks, John. Our first-in-human healthy participant study of XmAb942 was a randomized, double-blind, placebo-controlled Phase I study with a primary endpoint of safety, a secondary endpoint of pharmacokinetics and exploratory endpoints of immunogenicity and pharmacodynamics. We studied 4 different dose levels across single-ascending dose and multiple-ascending dose cohorts. The single-ascending dose cohorts tested 3 different dose levels given both subcutaneously and intravenously in 48 healthy volunteers. And the multiple-ascending dose cohorts tested 2 different dose levels, each given 3 times every 4 weeks intravenously in 16 healthy volunteers. As expected, XmAb942 was found to be safe and well tolerated in healthy participants with a similar rate of treatment-emergent adverse events between the XmAb942 arms and placebo. Specifically, all treatment-emergent adverse events were mild or moderate. The rates of overall treatment-emergent adverse events were similar in XmAb942 and placebo. There are no serious or severe treatment-emergent adverse events and no adverse events that led to discontinuation of either the drug or the study. Headache was the most common adverse event, occurring in 33% of participants administered XmAb942, compared to a slightly higher 38% of participants administered placebo. There are only 2 definite treatment-related adverse events, both of which were mild: 1 mild injection site reaction and 1 mild administration site bruise, both occurring in the highest dose subcutaneously. XmAb942 is found to have high and extended exposure after 20 weeks of follow-up in both single-ascending dose and multiple-ascending dose cohorts. The estimated terminal half-life of 74 days supports adequate drug levels at the 12-week dosing interval being used in the ongoing XENITH-UC Phase IIb study. We see here dose-dependent and durable target engagement with complex soluble TL1A after 20 weeks of follow-up, which again supports effective target inhibition for the 12-week maintenance dosing interval being used in the ongoing XENITH-UC Phase IIb trial. Reduction in free soluble TL1A was dramatic, rapid and durable, and was very consistent with the pharmacodynamic effect on total TL1A, with levels remaining below the lower limit of quantification through 20 weeks. XmAb942 has demonstrated best-in-class immunogenicity on rates of antidrug antibody positivity and observed neutralizing antibodies, compared to reported rates across healthy participant studies with first-generation anti-TL1A drugs. And importantly, for the target dose induction and maintenance regimens we are using in the ongoing XENITH-UC Phase IIb study, there were no healthy volunteers with neutralizing antibodies and only 25% had positivity for antidrug antibodies at any time point. In summary, we remain confident that the innovative design of XmAb942 can deliver a best-in-class clinical profile and supports our optimism for success with the ongoing global Phase IIb XENITH-UC study in moderate to severely active ulcerative colitis. Now it's my distinct pleasure to welcome Vip Jairath, who I've known for years from our academic work and mutual interest in endoscopic and histological assessment of disease activity in inflammatory bowel disease. As I was an inflammatory bowel disease academic on faculty at the University of Pennsylvania for almost 16 years, I had the good fortune to get to know Vip quite well over the years as we thought through a number of clinical and scientific questions together on many occasions. Vip is a Professor of Medicine and a John and Susan McDonald Endowed Chair in Inflammatory Bowel Disease at Western University in London, Ontario, Canada, and also Chief Medical Officer at Alimentiv. He has former training in the U.K., in London and Oxford. And of note, Vip has contributed so much to our field so far in his career in terms of clinical trial understanding and endpoints. Vip, thank you so much for joining us.

Great. Great. Thanks very much, Mark. Pleasure to be with you here and the rest of the team. Thank you for having me.

The clinical remission rates from large, randomized, controlled trials show that more than half of ulcerative colitis patients do not adequately respond to their advanced therapy, irrespective of mechanism of action, although the data appear to be potentially more promising with the TL1A inhibitor class. We've seen this trend now for 2 decades. Vip, what is your feeling regarding the unmet need with respect to efficacy in UC at the present day?

Mark, I'd entirely agree with you, we've seen this disappointing trend in the last 2 decades in ulcerative colitis. We have several approved drugs with different mechanism of actions in ulcerative colitis where we haven't yet broken this efficacy ceiling. So therefore, we still need new mechanisms for patients because there's still a substantial proportion that do not respond to their initial therapy and will sometimes subsequent therapies that they lose response to. So I agree with you there's a chance that these data and results could be more promising for patients with the TL1A class, particularly given its more [ tiotropic ] nature in terms of mechanism of action.

Thank you, Vip. As has been well-described through a number of studies across multiple drugs and mechanisms of action, including vedolizumab and guselkumab most recently, there is often a strong drug exposure response relationship with inflammatory bowel disease, both in Crohn's disease and also in ulcerative colitis, with higher drug concentrations being associated with higher rates of clinical remission. The vedolizumab analysis shown in this slide I did with Takeda was in academia, and we see the largest delta between highest and lowest concentration strata of the 3 drugs portrayed here, as we used individual patient-level data from the [ GEMINI-1 ] randomized controlled trial and actually adjusted for the 5 variables that are known to most prominently affect vedolizumab clearance. Afimkibart also, not surprisingly, has been reported to exhibit an exposure response relationship, with higher drug concentration [ tertiles ] associated with higher rates of clinical remission in its Phase IIb UC trial. What is your opinion about the importance of drug exposure optimization in IBD with some of the TL1A inhibitor class?

Mark, as a key observation. I think it's really likely that we'll see a dose exposure response relationship with all of the TL1A class because that's been demonstrated to robust data across multiple different mechanism of actions in IBD already, including some of these data that you've shown here. And what we see here is that higher drug concentration levels have been associated with higher rates of response. What we also know is that immunogenicity to IBD drugs is often seen in the setting of low drug concentrations. So optimization of drug exposure is essential to protect against the formation of antidrug antibodies. Because if you develop these, we know it can impact both the rates of response and durability of response to our drugs. I suspect that the same phenomenon will hold true for the TL1A inhibitors. And therefore, it's really critical that optimization of drug exposure is likely to be important both to maximize the rates of clinical endpoints, which is clinical remission, but also, importantly, for those sustained long-term clinical remission rates that are so important.

Thanks a lot, Vip. We developed a unified quantitative systems pharmacology, QSP, model, integrating clinical and published data on XmAb942, tulisokibart and afimkibart, and extended it to support virtual population simulations and comparative population-level PK/PD predictions across compounds using the expected pivotal dose regimens for tulisokibart and afimkibart, compared to our target Phase IIb dose regimen of XmAb942. In the induction phase, our QSP model-based projections indicate that XmAb942 provides markedly enhanced TL1A inhibition, which predicted greater than 99% inhibition in 86% of patients, compared to only 30% to 40% of first-generation anti-TL1A antibodies. Regarding maintenance, it was also shown that higher exposure with afimkibart was associated with higher response rates in the Phase II UC trial. XmAb942 is designed to deliver maximum TL1A inhibition and is projected to achieve greater than 90% inhibition in 90% of patients versus 60% to 70% for first-generation antibodies during maintenance therapy, despite being dosed much less frequency. These higher drug exposures for XmAb942 during both induction and maintenance position our molecule very well to test whether increased exposure improves efficacy. Vip, what is your impression of our QSP modeling data and the potential efficacy profile of XmAb942?

Yes. Thanks, Mark. I'm frankly impressed with these modeling data for XmAb942. And my reading of this is that Xencor have really optimized the molecule's potential for getting high drug exposures, which are essential, as we just said, both during induction and maintenance. And ultimately, the importance of that is it could translate into high rates of clinical response and remission during the induction period, but then sustained during the maintenance period. And perhaps this will give last and durable response for patients. As I mentioned earlier, I do think there'll be an exposure response relationship for the TL1A class of drugs. And these model differences in TL1A inhibition between XmAb942 and these leading first-generation TL1A competitors is substantial and is compelling. My reading here is that XmAb942 appears to be well positioned and it potentially could be a best-in-class molecule in terms of efficacy. And really I'm excited and the community is excited with the results of XENITH-UC.

Thanks a lot, Vip. XmAb942 has a terminal half-life, as we mentioned, of 74 days, which not only is approximately 4 times as long as first-generation anti-TL1A antibodies, but also enables, at minimum, every 3-month dosing, which is what we are studying in our Phase IIb UC trial. Compared to the first-generation anti-TL1A antibody competitors, the number of subcutaneous injections administered during maintenance therapy with XmAb942 is significantly less. Vip, how do you feel that this difference in injection burden will be received by patients and their physicians? And what impact do you think that XmAb942 could have on overall patient experience and satisfaction?

So this is a key point. We know from many patient preference studies, and I know from my clinical practice of treating many patients with IBD, that injection burden is important and it matters to patients, also matters to the treating physicians. The key thing here that stands out was a markedly reduced injection burden with XmAb942 compared to first-generation anti-TL1A antibody competitors. And this has to be an attractive feature of this next-generation drug. And I think ultimately what I see is this has been enabled by the technology of your protein engineers and they've been able to manufacture this XmAb942 to lengthen its half-life so much. The frequent dosing requirement is not only very convenient for patients, but it's also a really nice addition in terms of the potential unpleasantness that patients sometimes report having to inject themselves with the needle. I'm sure patients will almost certainly welcome this improvement compared to first-generation anti-TL1A antibodies. And really taken together with the optimization of drug exposure to help maximize efficacy, I believe that XmAb942 is really uniquely poised to be a best-in-class drug.

Thanks so much, Vip. Appreciate that. So we have designed a proper and rigorous dose-ranging, double-blind, placebo-controlled, randomized Phase IIb trial in ulcerative colitis that can inform a single induction dose selection for Phase III. There are 3 active drug arms, each separated by half logarithm and dose, compared to placebo. Also, there's asymmetric randomization such as the highest dose arm will include the most patients. And in fact, overall, 77% of patients during induction will receive active drug and only 23% will receive placebo. Even the lowest-dose arm is designed to achieve greater than 90% target inhibition over the dosing interval, such that we expect some efficacy even at the lowest dose. The doses have also been selected to have the highest dose maximize drug exposure to potentially achieve greater induction efficacy than has been observed in the competitor trials. In addition to the convenient and patient-friendly every 12-week maintenance dosing, all patients will receive active drug at week 12 for up to 2 years as there will be an open-label extension for at least an additional year. Vip, what are your thoughts regarding this Phase IIb UC trial design?

Thanks, Mark. As you know, I spend a lot of my time thinking about these things, and I think you've really designed an excellent trial, state-of-the-art trial, it's been very well thought out. A number of reasons I say this. First, it's well crafted to do a full exploration of induction dose ranging. And that will give you confidence in the results to inform a single-induction dose to be selected for Phase III. And there's a number of other aspects that bring rigor to this Phase IIb. Secondly, your trial is attractive to patients, I think, for a number of reasons. First thing, obviously, the high probability of getting the active drug. The second thing is the drug doses have been well selected to potentially lead to efficacy, with the highest dose potentially maximizing efficacy due to optimized drug exposure. Third thing, there's only a 12-week placebo period, which is attractive to the sites in terms of recruitment. And the fourth thing is the very convenient and patient-centric Q12 maintenance dosing. In addition, there's an open-label extension that enables up to 2 years of free drug for patients. And the final and sixth thing here is I think it's a relatively derisked MOA given that we've seen 3 positive Phase II trials already of the first-generation anti-TL1A antibodies in UC. So given all of these features, I really expect this to be an impactful trial and XmAb942 will be an impactful drug.

Thanks a lot, Vip. And now as a glimpse into the future, at this DDW, we showcased a poster of our preclinical data of our TL1AxIL-23p19 bispecific molecule, as John has already talked to us about XmAb412. Our protein engineers have built a fantastic molecule in a 1-plus-1 format that enables subpicomolar affinity. We purposely chose to target p19 rather than p40 for IL-23 given the superior efficacy of p19 blockade over p40 blockade in IBD and also in psoriatic conditions. XmAb412 was found to robustly suppress both TL1A and IL-23 inflammatory pathways. In cellular assays, XmAb412 demonstrated [ IC50 ] values comparable or superior to clinical-stage TL1A inhibitors and approved IL-23 inhibitors. Allometric scaling predicts that XmAb412 will have a half-life between 60 to 70 days in humans, as in nonhuman primates, they achieved a half-life exceeding 20 days, with similar target engagement to monospecific antibodies. XmAb412 also supports a high-concentration, low-viscosity, citrate-free formulation suitable for subcutaneous dosing. Evaluation of XmAb412 in healthy volunteers is expected to begin in the third quarter of this year. Given the exciting results of J&J's DUET Phase IIb trials being presented here at DDW today, in fact, especially in multi-MOA refractory patients with the combination of guselkumab and [ dilimumab], was found to be meaningfully superior to either monotherapy, we present here the DUET-CD data on this slide, what are your views on the potential transformational efficacy that could be achieved with the combination of TL1A with IL-23, the safety profile of such a combination, and the streamlined regulatory and clinical development path offered by a bispecific in this context?

Thanks, Mark. Look, I think the combination of TL1A and IL-23 inhibition is probably the most exciting prospect I see in our field and potentially even more so than anti-TNF and IL-23. And that's given the possibly even more pleiotropic anti-inflammatory and even potentially antifibrotic potential that we see with TL1A inhibition. I expect this combination could be truly transformational and has the potential to yield efficacies that we've not yet seen in IBD and possibly even other immune-mediated inflammatory diseases. Equally, in this situation, safety, such a combination has to have a favorable safety profile. And I think that that's a potential here like JAK inhibitors where we've seen differential efficacy in some indications, but with some safety concerns that make that a long-term use far from ideal. Given the very good data here showing superiority of combination of TNF IL-23 inhibition versus either monotherapy in predominantly a bio-naive UC population and now the DUET data showing superiority of this combination in the more refractory patients, I do feel that this combination of TL1A and IL-23 could be a very strong first-line and later-line option for patients to deliver transformational efficacy, but in a safe form. Your new bispecific XmAb412 seems to be expertly constructive with very impressive affinities for both TL1A and IL-23. And I'm glad that you actually chose p19 as your target rather than p40 for the IL-23 blockade given we've seen superior efficacy in IBD and psoriatic conditions that you mentioned by targeting p19. On top of this, the very long expected half-life and promise of subcutaneous delivery are really the icing on the cake here to make this an ideal drug in many ways. That doesn't even take into account the fact that there are large and distinct advantages from regulatory and clinical development standpoint of testing a bispecific compared to a combination or co-formulation, as comparisons to each monotherapy are not a requirement for a bispecific entity, which not only improves the probability of technical and regulatory success for clinical trials of bispecifics, but it also saves an enormous amount of time and money and expediency in the development programs. So I'm really looking forward to the commencement of your Phase I program for XmAb412 later this year. And I'm very much looking forward to a Phase II program in 2027. I can say that many of my academic and community IBD colleagues around the world are really eagerly awaiting a Phase II trial of XmAb412 and IBD and really hope to be included as investigators in this program also.

Vip, we really appreciate your time and thoughtful comments. Thank you so much for joining us.

Thank you. A real pleasure.

It's always great to see you, my friend. Next, Dane Leone, our Chief Strategy Officer, will speak to TL1A strategy and development road map. Dane?

Thank you, Mark and Vip. Great conversation and really appreciate all the insights. Today we've discussed the key points to why our TL1A pipeline is primed to deliver the next generation of advanced therapies for patients living with moderately to severely active inflammatory bowel disease. Our focus on novel best-in-class therapies targeting TL1A aims to deliver both an improvement in clinical outcomes over today's drugs while also providing the convenience of less frequent injectable dosing for a best-in-market biologic class. We view the future landscape of innovative medicines in IBD to be defined by branded TL1A monotherapy, the emergence of bispecifics and oral inhibitors of traditional biologic targets. Biosimilar versions of today's branded medicines will also continue to play an important role as more affordable monotherapy drugs targeting IL-23 and integrin inhibitors will add to the armamentarium of cost-effective options for patients as the TNF class does today. Looking ahead at our road map, we are hard at work executing on our time line to enable exciting data-driven decisions during 2027 for the next phase of development for our TL1A pipeline. As you can see, we expect to report the primary analysis set of XENITH-UC 12-week induction period during 2027 and use that data in tandem with the first-in-human XmAb412 study data to optimize our investment across our TL1A pipeline for the next phase of development. Longer term, we expect the full data of XENITH-UC along with early looks at Phase II patient data for the XmAb412 program to provide us with rational decision-making around planning registration-enabling studies. Of course, data will allow us to evaluate opportunities to optimize the development of our TL1A pipeline through strategic relationships. Going back now to our overarching business strategy, as Bassil provided in his intro, we view our commitment to delivering innovative medicines as part of a life cycle that we also assess through the lens of business development opportunities. We think there is good precedent that programs delivering on the potential of better medicines in IBD to have optionality when it comes to strategic relationships, and we plan to make these decisions driven by our data as our programs progress. Our XmAb412 first-in-human study is on track to start during the third quarter of 2026. And for XmAb942, we expect to report an update on enrollment progress around year-end, along with the recommendation of the Data Monitoring Committee on the prespecified blinded interim analysis for XENITH-UC. 2027 will be another exciting year for both programs with the interim results of the first-in-human study of 412 expected during the first half of 2027, which will help validate the pharmacokinetics and pharmacodynamics of the novel bispecific platform that we now call XenLock. The second half of 2027 will provide a clear answer to the pharmacological thesis of XENITH-UC, whether best-in-class drug exposure can support best-in-class clinical results with XmAb942. In conclusion, the hard work and dedication of the Xencor team to delivering better medicines to patients living with inflammatory bowel disease is at a clinical inflection point, and we are committed to continuing to rapidly advance our TL1A pipeline in the coming years. And with that, we're ready to take questions. Operator?

[Operator Instructions] our first question comes from Jonathan Chang with Leerink Partners.

This is Albert Agustinus on for Jonathan Chang, and congratulations on the data. How do you see this 942 data fit into your plan to expand the program into Crohn's disease and indications beyond IBD? What do you need to see from the program for you to make the decision?

Thanks, Jonathan. I'll take that question for the team. It's a great part of the road map that we have and the flexibility to make these decisions that are data-driven. So as been part of the plan since the initiation of the 942 program, we've looked at UC is a first proof of concept on drug exposure given there's clear benchmarks of what we can deliver with a best-in-class investment market biologic. So as we think about moving towards the primary analysis set of XENITH-UC in 2027, that can trigger or catalyze additional investment and, obviously, parallel development pathways into Crohn's disease, as has been very traditional with many other IBD programs from our peers. So we feel very confident about the profile here. That said, to be rational about our data-driven decisions, we do want to see that data in the back half of 2027 as a trigger point.

Our next question comes from Tara Bancroft with TD Cowen.

Congrats on the data. This is Ikenna on for Tara. So across the TL1A class, we've seen clinical remission rates pretty high. You guys showed it on the chart there. Given your modeling suggests a deeper and more durable TL1A inhibition for 942, how do you think about the extent to which that could translate to higher remission rates in the Phase IIb? Like where is the ceiling?

So that's a great question. Before I turn it over to Mark and Vip to comment, I don't think anybody knows where the ceiling is. There are some glimmers of data implying there's some directionality from existing studies like [ TUSCANY-E2B ]. Maybe I'll let you guys opine on that. But yes, there's an element of uncertainty inherent, which is why we're so excited about the XENITH-UC experiment. What do you...

Yes, I'll start and turn it over to my friend. Since I'm no longer the KOL. But we see for many of our drugs in IBD, both in UC and in Crohn's disease, that there's efficacy left on the table. We see it both in clinical trials and we see it clinically with patients every day. And then we are confident with the design of this molecule that we will capture additional efficacy given that we can maximize exposure to this drug. As far as where that ceiling is for this MOA in a completely optimized manner, it's unclear. There are some patients who will never respond to a TL1A drug because their pathobiology is different. And at the current time, we don't have a great way to individually pathotype patients to find out what's driving each of the diseases and which pathways are most important for them. So I think it's unclear what the actual ceiling will be. But I'm confident that there's efficacy left on the table that could potentially be recaptured with this drug.

Yes, I'd agree with that, Mark. I mean I think we've seen with some of the other assets, that we've seen consistent data, which have been 20% to 25% deltas over placebo, which is really better than anything that we have today. And obviously, JAKs are up there with that kind of efficacy, but there's some trade-off with safety. So I think really that's the sort of marginal delta that we've seen in the existing programs. But as you've outlined, there are some potential additional attributes of this that could move that needle a little bit more, and that's incremental and important for our field to get to those benchmarks.

Our next question comes from Etzer Darout with Barclays.

Just one for me. I'm curious about the relative positioning of 412 relative to 942. Really, is just 412 meant as a follow-on or next-gen path, or maybe aiming at a different patient population, refractory disease or TL1A responders versus nonresponders? Just how you're thinking about the 2 molecules coexisting in IBD.

Yes, Etzer. So I think the TL1A class is still revealing itself where it can have an impact. I mean if you recall from our earlier slide, there's more than half a dozen additional autoimmune and inflammatory indications where TL1A is being tested with really very good underlying preclinical and genetic rationale for why it ought to be a good target in those diseases. So I think when we look at 412 and 942, this TL1A mono and TL1A plus p19 mechanisms, we see sort of, first, an ability to address all of these other indications where p19 might not be a target of use. That's a great additional benefit of 942 as a monotherapy. Of course, there are some other non-IBD indications where IL-23, like in derm, can be very useful. So first, there's sort of just the ability to be positioned for the long-term future of a broad potential pipeline in a product. Maybe within IBD, Dane, if you can comment on more of the subtleties about how we're using our experimental data coming out of our clinical trials.

Yes. No, absolutely. And I think there's kind of a short-term window of the answer here and then maybe a longer-term window of the answer. So the short-term window of the answer is with 942, obviously, we wanted to provide a best-in-class monotherapy biologic that can be optimized for clinical convenience as well as drug exposures. And I think that's what we're delivering with the 942 program, which gives us a really clear pathway into what we think the next great branded drug class will be for IBD specifically. But as Bassil mentioned, the opportunity for the TL1A class is rapidly expanding with over an $80 billion potential TAM outside of IBD as it currently stands today in a number of our peer proof-of-concept studies. We'll be watching those studies to see how they read out and feel confident that the clear and thorough dose characterization that we're doing in the XENITH-UC study ongoing today with a readout in 2027 will allow us to actually move into other indications much more rapidly through that knowledge of our PK/PD and dose characterization as it relates to inpatient study with clear disease in a controlled study. With XmAb412, as Bassil said, that's a very clear, almost rifle shot at certain indications that are implicated in TL1A and IL-23, which are very large indications even outside of IBD. For 412, it's also validating our next-generation bispecific platform that we call XenLock. And so there's a duality there of the importance of the validation of our first-in-human studies for 412 that will have first data in the first half of 2027, allowing us to really invest in that program and platform. But as we said in the survey and market research we've done with gastroenterologists, 412 represents a real position in the market to help clinicians provide better care for their patients that are not only looking for a best-in-class, next-in-class biologic to use as a first-line agent, but as we said, many clinicians in our surveys and market research would also use a bispecific approach or multi-specific approach when the patients are inadequately responding or nonresponding to a frontline IL-23. And so there's a lot of different opportunities within our portfolio. But yes, you're absolutely right in your question that 412 and 942 will continue to differentiate from each other as our clinical portfolio advances.

And can I piggyback on another...

Absolutely.

So based on sort of looking at this thing as a clinician, as an epidemiologist, even within the IBD space, there is a home for both of these drugs. Now remember that even though you might have more differentiated efficacy with the combination therapy on a population level, on an individual base level, individual pathotyping, many patients do not require combination therapy in clinical practice or in clinical trials. So there is a home even within IBD space itself for both drugs, that they can both live in the same space and serve different patient populations. I don't know, Vip, if you want to.

Yes. No, I fully agree. I think where bispecifics or the combination assets fit into the treatment paradigm is evolving. And obviously, we're seeing direct results today, which is in a refractory population for a co-formulation. But I think from a bispecific population, there will be patients where you might want to use this first line and patients where you might want to use it downstream for those specific reasons. But absolutely, I see a space for both of these, and where they land in the treatment paradigm will evolve. But it's a combination of both first line and in refractory patients.

Our next question comes from Timur Ivannikov with Cantor Fitzgerald.

This is Timur on for Steve Seedhouse with Cantor. So can you just talk a little bit more about how you will use 942 monotherapy data and 412 Phase I data to make a follow-on development decision? Just in terms of immunogenicity or inhibition data that you're looking at, since it's not -- the mechanism is not completely apples-to-apples, you're inhibiting 2 different pathways with the bispecific. So if 412 looks similar in terms of inhibition of the TL1A pathway, how would you position it in terms of 942?

Yes. So it's our data where we're going to be looking for 412 to see what kind of half-life and target coverage it gives us in terms of durability and depth. That will obviously have an important role. And with 942 verifying our thesis of better drug exposure leads to better efficacy is a part of that thinking package. But remember, there's all of the work going on around the industry validating, or potentially not validating, TL1A in a range of other indications. And so those pieces are all going to come together in that 2027 time frame and help us make decisions how to maximize the value of both assets. That's sort of the big picture. I don't know if there's anything to add to that or...

Yes. I mean the technical point, Timur, is in 2027, we'll have a coinciding of both the first-in-human healthy volunteer data for 412. As Bassil said, will give us PK/PD immunogenicity check on a novel bispecific platform and the drug properties of 412, which we're very excited about. But also we'll have that 12-week primary analysis set and induction data in ulcerative colitis from the XENITH-UC Phase IIb study of 942. And that will help us understand of how to optimize both of those development pathways, potentially in IBD or other areas. But then you look ahead, we're looking to rapidly move 412, if all goes well in the first-in-human study, into proof-of-concept Phase II studies in patients. And that data we hope will also coincide with the maintenance period readout of the XENITH-UC IIb study, which will occur a little later after the primary analysis set. And those 2 data packages together will be really powerful in informing us on how to optimize both of these programs for longer-term success in registration-enabling studies.

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

On 412, can you maybe speak a bit more to the [ sophiometric ] considerations for the bispecific versus combination of monospecifics and your conclusions from the preclinical data that drive confidence in translating this into humans? And maybe to be a bit coy, do you expect the dosing to be driven by the TL1A component?

Yes. That's a good framing of the question. So the beauty of bispecifics is that you don't have to address all the different ways you might dose a combination together. Now someone might flip that around and say, "Oh, I can't optimize the dose of the 2 different arms." A part of the reason why we really look -- zoom out and look at why did Xencor pick this pair of targets as its first real autoimmune bispecific, something that wasn't a T cell engager, it's because the stoichiometry has been driven by the biology here. We've seen a very, very large amount of data in humans across a decade of the excellent safety record of IL-23p19 inhibition. And in fact, better drug exposure, higher doses, you see this in post-marketing studies, higher doses give you potentially better efficacy as you get more exposure, but also the safety, the excellent safety track record seems to be maintained. Just this past weekend at DDW, I've seen a number of talks about that. So you've got one drug class that's incredibly well validated to be very safe where more drug seems to maintain that safety. With TL1A, certainly less data is out there. But we've seen across the class now 3 different programs, different drug molecules, different antibodies with different designs, also have just an outstanding track record of safety in all the reported data. So we have an opportunity here to take 2 targets where we can just turn both knobs to 11, right, and maximize drug inhibition in the molecule and really truly take the best advantage of a bispecific approach and avoid having to do unnecessary dose-ranging and combination sort of dose matrices. So that was the basis of our design, just push the limit on the affinity, which pushes the potency because these targets are validated to be very safe and more inhibition is believed to be better. I think that's a pretty universal belief. I mean, I don't know, Vip and Mark, if you would agree with that thought. I see them nodding good. So when we look at the preclinical data, aside from the affinity, subpicomolar on the p19 side, about 1 picomolar on the TL1A side, John and his team did just a remarkable job of design. And the XenLock piece is enabling that, as John said. When now you're looking at nonhuman primates for the other half of it, exposure is also about half-life, we see a 20-day half-life that essentially matches the half-life in nonhuman primates we saw for 942, which translated into an over 74-day human half-life. So we're really optimistic that we're going to get that kind of durability and coverage, hopefully, patient convenience. And the last piece of the puzzle, when you think about actually making a practical drug, you've got to actually make it. You've got to make kilograms of it, put it in vials, ship it all around the world and then have it be easily injected into patients in a subcu format. The XenLock format put on top of our long track record of XmAb Fc domains -- bispecific Fc domains, we've been able to produce this in standard antibody manufacturing processes at scale and we're delivering drug now to clinical sites in the next couple of months in a very high-concentration formulation with yields that we're quite proud of. So all the pieces of a biophysical optimized molecule with the right underlying biological thesis that more is better for these 2 targets, I think, really came together beautifully. So it's the perfect first case for an autoimmune bispecific on the biology side.

Our next question comes from Gregory Renza with Truist Securities.

[indiscernible] benchmarking studies shown that XmAb942 is superior [indiscernible] inhibition TL1A. Just curious if you've done similar experiments with second generations like [ spies ], agents or other assets out of China, how does it look compared to those? And if I may tag around one more question, how do you view the potential commercial trade-off between your 12 -- once every 12 weeks versus maybe a more aggressive or less frequent dosing like Q12 weeks to Q24 weeks that your second-generation peers are marketing?

So simple one. The first maybe 1/3 of your question was inaudible. I'm sorry, could you possibly repeat your whole question? I just want to make sure we address it properly. We really couldn't hear about the first 1/3.

Sorry about that. Okay. So basically, I'm just curious if you've done any preclinical benchmarking for XmAb942 to the second-generation TL1A. I mean it looks better than first generation. Just curious how it compares to the second-generation TL1A agents.

I see. So a benchmark 942 versus other second-gen agents. Well, I mean, we're aware of some data from peer program on initial half-life disclosures that look promising based on using long half-life Fc domains. I don't know that we've seen from any second-generation TL1As any immunogenicity disclosure from human data. I do believe that from published preclinical data, XmAb942 has the highest affinity, and that should translate quite directly to higher potency, again, based on preclinical data of inhibition of the target TL1A on human cells. I don't know that we've seen any other details of early clinical characterization of other second-gen TL1As in any kind of thorough way. Obviously, we await further data. We know it's a very active class. We feel very confident about our positioning and the very thorough job we did maximizing and making best-in-class potency and half-life for the program as well as a very robust Phase II design.

I think there's a philosophy component here. Xencor sat down to make something that could solve a clear clinical problem and unmet need in inflammatory bowel disease. And we really like the TL1A target from emergent data 3 years ago. And so as world-class protein engineers with a protein engineering platform that's been validated many, many times over, we had our heart and our passion to make these molecules as good as they possibly could be. And I think it's hard for third parties or third-party protein engineering platforms to have that same commitment and dedication when they're making molecules for other people to develop that they'll never have a part in the clinical development. Our research team walks hand-in-hand with our clinical development team on a daily basis to design the best molecules and solve the clinical problems. And we feel confident that the molecules we make across the entire spectrum of our portfolio are best-in-class designed and delivered medicines at the end of the day. Now the other component of this is of the second-gen class, we're ahead of everyone else by a long shot in the development pathway to market. That's why we engaged a Phase IIb study right out of the gate from a first-in-human healthy volunteer study and have executed that relentlessly. We started in clinic first-in-human in November of 2024 with XmAb942. Less than a year later, we were in a global Phase IIb study, and we're on track 2 years from that point to deliver a Phase IIb study results that will be registration-enabling in the traditional efficient pathway of biologic drug development. So we feel very good in our market position of delivering the best-in-class and best-in-market biologic targeting TL1A.

Our next question comes from Madeleine Stone with William Blair.

Great. This is Madeleine on for Matt Phipps. 109 -- or 412, actually, could you maybe discuss a bit more on how confident you are that 412 will not lead to an immune complex formation that could drive autoantibody response?

Yes. So what we're very confident of is that the very well sort of understood and accepted possibility of a trimeric ligand like TL1A or other members of the TNF super family, like how a trimeric ligand when you bind it with a bivalent antibody like your standard Y-shaped antibody, that's going to create this ability to form -- easily form these clusters, right, where you have TL1A trimer 1 binding on the left side of the antibody, TL1A trimer 2 binding on the right side. Meanwhile, TL1A trimer 1 has another antibody in its other side, trimer 2 has yet another antibody in its other side, and you get these big clusters like we had that picture of. It's simply not possible for these multi-molecular clusters to form when you only have one TL1A binding equivalent on your antibody drug. Obviously, you have to make sure your antibody drug is stable and soluble, so it itself is not prone to aggregation, right? So if it is aggregating itself, you can have these artifacts emerge. So we always strive to make the most stable and soluble antibodies. It's just like the bedrock biophysical underpinning of all of our design work, which I think we've amply demonstrated over the decades. You will never completely eliminate the ability of the immune system to surveil anything you put into the human body. That's just a predicate, right? You put an antibody -- you put a drug into the human body, it will notice. What we believe we've done is greatly significantly reduce the ease of that recognition by the immune system relative to what happens when you have bivalent molecules against a trimeric ligand. So that's the essence of that one design choice that we hope skews the probabilities in the favor of XmAb412.

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

A quick one from us. Are you considering other potential mechanisms to combine with 942 beyond your TL1A IL-23 bispecific strategy?

So that's a great question about how the future might unfold. There are certainly a lot of other mechanisms that we can imagine combining 942 with as the development of the molecule advances, as we establish our dose efficacy relationship, as we hope to do in XENITH-UC and push the program forward. There are certainly other bispecifics we have on -- in our preclinical development and as well as on the design table for a variety of targets using this new XenLock format that lets us get these really high affinities into simple -- simply engineered and produced molecules. I think our current focus is establishing the efficacy response relationships, hopefully pushing that ceiling of efficacy higher, and then establishing how 412 fits against 942. I think there's just so much uncertainty about how that future is going to unfold. We're just going to wait and see. I don't know if there's anything more concrete we can add on that.

I think from a market research perspective, it goes back to the point we made in the presentation. We believe TL1A is going to be the branded anchor of biologic monotherapy and combination therapy in the future, which is a good thing for our portfolio and retains a lot of utility for the monospecific in development, even though we're also taking this very targeted shot with XmAb412 on TL1A and IL-23p19 biology. That said, we also don't really envision a future where combining 2 biosimilar targets together in a co-formulated approach is going to be necessarily viable as I think for the benefit of the payers, the system, the patients and their caregivers, as is today already used, you can take 2 biosimilar targets and different mechanisms off the shelf and provide them to your patients in the clinic. And it would be kind of a hard argument to make why someone would pay a branded price that's more expensive than the individual components for their patients. So we feel very good about TL1A being the right anchor, to your question, and fully agree that there will be different targets to engage with it as data continues to evolve in the clinical setting.

Our last question comes from Alec Stranahan with BofA Securities.

This is Matthew on for Alec. On ADAs for 942, the poster pointed to 57% incidence. Can you maybe speak to the kinetics where you saw the decrease in incidence and magnitude with increased drug exposure? Is this driven by small and baseline variability? Or is there something, different hypothesis going on? And then for XENITH-UC, you noted the target dose is at 25%. I guess, is that just based on dose selection or were there other changes to the trial design or patient characteristics?

Well, I'll take the first one on ADA. So this was a healthy volunteer study with an n of 6 per cohort. We did 8 different cohorts, so you can sort of -- IV subcu and we did MAD cohorts. And at the 3 different dose levels tested, both SAD IV subcu and MAD, it was a very consistent pattern of as you gave more drug, the magnitude of your ADA signal and the frequency of positivity went down. So I think the consistency across IV subcu SAD/MAD makes it very clear, that's a real signal. And it's frankly utterly unsurprising given that that is a very, very common, almost the dominant pattern seen in biologic drugs, particularly monoclonal antibody therapeutics in humans. So the more drug you give, the more you sort of swamp out an immune response and tolerize. So that we're very confident of. And we're very pleased that we saw overall ADA rate, I think it was 57%. It's lower than reported from 2 of the leading first-generation TL1As, and our [ NAB ] rate was as well significantly lower than the ones that have reported. So we're happy with that. And furthermore, when we look at our high-dose go-forward dose for XENITH-UC, so the highest induction dose and our selective maintenance dose, it had an even lower ADA rate of 25%. So we think we're very well positioned with a very favorable profile relative to everything that's been reported by other people in their Phase Is. And that speaks to the quality of the design of the molecule because the underlying biophysical stability of your molecule is always the first thing that your body's immune surveillance has to -- first immune surveillance [ see]. So maybe on the second question, I know, Dane, you were saying, you want to touch on that?

Sure. Yes. And obviously, looking forward to seeing you guys at the BofA Healthcare Conference next week, first and foremost. But to your actual question, immunogenicity was one of the key things that we aim to solve for from an engineering perspective when we were looking at the liabilities of the first-generation TL1As. And as Bassil said, our focus on stability, epitope selection and overall kind of design, one would say, of the molecule, I think, has proven out to be best-in-class immunogenicity. The question from you and many others has been, can you make a molecular target of TL1A in a biologic, have acceptable immunogenicity rates that we can feel confident are not going to be deleterious to efficacy? As is the concern with some of the first-gen TL1A molecules. We think we did it, right? So to the point of an overall rate of 57%, which is lower than the 65% report for tulisokibart and the 98% report for afimkibart, we don't have that liability. And then kind of driving the point of the dose selection. And dose regimen that we're actually using in the XENITH-UC IIb study, we're using obviously a high-dose induction IV along with a single subcutaneous maintenance dose. That dosing regimen has 0% neutralizing antibodies and only a 25% ADA rate. So we feel very confident of the drug exposure that we're going to get in XENITH-UC not being impacted by immunogenicity, and again, very clearly able for us to elucidate whether best-in-class drug exposure will drive best-in-class clinical efficacy.

We have no further questions at this time. I will now turn the call back over to Bassil Dahiyat for closing remarks.

Thanks very much. And we'd really like to thank everybody who's joined us on this call. We're very excited by what's coming next for our TL1A programs. And we are really looking forward to updating you as we advance XmAb412, our bispecific, into first-in-humans later this year and as we read out data from XmAb942 in 2027. And we're also looking forward to initiating Phase II studies with XmAb412 in 2027. So a very busy year upcoming for us. And thank you again. Look forward to speaking soon.

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