Good day, and thank you for standing by. Welcome to the third quarter 2021 Xencor conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations. Please go ahead.
Thank you and good afternoon. Earlier today, we issued a press release which outlines the topics we plan to discuss today. The press release is available at www.xencor.com. With me on the call today are Bassil Dahiyat, President and Chief Executive Officer, Allen Yang, Chief Medical Officer, John Desjarlais, Chief Scientific Officer, and John Kuch, Chief Financial Officer. After the remarks, we'll open up the call for your questions. 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 company's future financial and operating results, future market conditions, the plans and objectives of management, future operations, the company's partnering efforts, capital requirements, future product offerings, and research and development programs.
These forward-looking statements are not historical facts, but rather are based on our 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 factor section of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q. With that, let me pass the call over to Bassil.
Thanks, Charles, and good afternoon, everyone. We've used our array of modular protein engineering tools to create our internal development portfolio in oncology and autoimmune disease that currently includes six bispecific antibodies, either in phase I or phase II studies, and two cytokines in phase I. Our portfolio approach allows us to take multiple simultaneous shots on goal in the clinic, and the proof of concept data we generate guides which programs we advance, which we terminate, or which we partner. Today, we've announced data from the first of our cytokine programs, XmAb306, a reduced potency, long-acting IL-15 Fc fusion protein in co-development with Genentech, which Allen will touch on momentarily. First, a quick update on our collaborations.
Last month, we entered a global collaboration and license agreement with Janssen to advance plamotamab, our CD20 x CD3 bispecific antibody, and to create novel CD28 bispecific antibodies against malignant B cells to combine the plamotamab and potentially other CD3 bispecifics in lymphoma. The HSR waiting period expired last week, and the agreement is closed. We're delighted to expand our ongoing CD28 work with the Janssen team and to plan plamotamab development together. We believe collaborating with Janssen is the best way to broaden and accelerate our efforts in lymphoma and to maximize the opportunity for plamotamab to bring benefit to patients in a very promising and crowded field. Just a few other updates across our partners' programs, which incorporate our plug-and-play XmAb Fc domains.
Now in August, tafasitamab, which was created and initially developed by us, was granted conditional marketing authorization by the European Commission in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma who are not eligible for autologous stem cell transplantation. In the E.U., tafasitamab is marketed by Incyte as Minjuvi, while in the U.S., it's co-marketed by Incyte and MorphoSys as Monjuvi. We're also pleased that our partners Vir Biotechnology and GSK continue to receive emergency or temporary authorizations for sotrovimab, their investigational SARS-CoV-2 antibody that incorporates our Xtend technology in countries across the globe for the treatment of mild to moderate COVID-19 in high-risk adult and pediatric patients.
With these two products, Monjuvi and sotrovimab, along with Ultomiris from the Alexion unit of AstraZeneca, our partnerships have resulted now in three marketed XmAb medicines, which are available to treat rare patients with a range of serious illnesses. Now, with that, we'll turn to Allen Yang, our Chief Medical Officer, who will review our recent clinical highlights and upcoming plans. Allen.
Thanks, Bassil. Today, we'll be touching on recent updates across several clinical stage programs, starting with XmAb306. Today, we announced encouraging initial dose escalation data from our first clinical stage cytokine, XmAb306, which is co-developed in collaboration with Genentech, a member of the Roche Group. Exceptional NK cell expansion of 40- 100 fold increases compared to baseline has been observed and with good tolerability to date. As we continue to escalate, we're now observing signs of effector T cell proliferation in the periphery. XmAb306 safety profile, biological activity, and preliminary signs of antitumor activity at this early stage provide initial validation of our reduced potency approach to engineering XmAb cytokine therapeutics, and we are considering new trials to study combinations with a range of NK and T cell recruiting therapies.
Shifting to plamotamab, as you probably saw, we announced that an abstract was accepted for presentation at the American Society of Hematology annual meeting in December. In a few weeks, we'll present updated clinical results from the phase I study in patients with non-Hodgkin lymphoma. We identified a dose regimen, 50 mg flat dosing every two weeks after step-up dosing, that is much higher than we have previously reported by weight-based dosing. Due to our new step-up schedule, it is generally well-tolerated with encouraging monotherapy activity.
We believe that the best opportunities for patients require a focus on studying unique combinations of plamotamab with chemotherapy-free partners, and we are working to initiate our randomized phase II combination study with tafasitamab and lenalidomide, a highly active regimen now approved in relapse lymphoma with a label in second line and later. Plamotamab CD20 targeted T cell redirection of tumors and tafasitamab CD19 targeted enhanced ADCC tumor killing combine distinct immune pathways and tumor-associated antigens. We think the combination is differentiated approach for treating patients with lymphoma. The study should be initiated in late 2021 or early 2022. Going forward alongside Janssen, we look forward to investigating additional mechanisms that avoid the downsides of systemic chemotherapy, such as novel CD28 bispecifics that are anticipated under our collaboration.
Moving on to vudalimab, which was formerly known as XmAb717, we have started dosing patients in a phase II study of the PD-1 CTLA-4 dual checkpoint bispecific antibody. The study is enrolling patients with metastatic castrate-resistant prostate cancer that we classify by molecular subtype as a monotherapy or in combination, depending on the subtype. This is an indication with a high unmet need and is currently without much checkpoint inhibitor use beyond MSI-H tumors. Earlier studies suggest that PD-1 and CTLA-4 inhibition has promise in prostate cancer. Therefore, dual targeting of PD-1 and CTLA-4 with a potentially differentiated tolerability profile could meet an important unmet clinical need. At the same time, we're initiating a second phase II study in patients with advanced pelvic tumors, including gynecological malignancies, which represent another opportunity for dual targeting of PD-1 and CTLA-4 to address an unmet need.
In addition, this study includes a cohort of clinically defined high-risk metastatic castrate-resistant prostate cancer, which will allow us to study vudalimab monotherapy in a specific population of aggressive prostate cancer independent of molecular profiling data. Later this week at SITC, we will present mature data from the ongoing phase I study's expansion cohorts with a focus on patients with prostate cancer, renal cancer, and a basket cohort of tumors without approved checkpoint therapies. These cohorts are those for where, the data were still immature at SITC 2020. Next, tidutamab is our CD3 bispecific that targets SSTR2, and last week we presented additional follow-up from the phase I study in patients with neuroendocrine tumors. The poster is available on our website.
Results from the study indicate that tidutamab was generally well-tolerated with a low incidence and severity of cytokine release syndrome, and it induced meaningful T-cell activation in a challenging disease setting. We've begun dosing patients in the phase II study in patients with Merkel cell carcinoma and small cell lung cancer, which are SSTR2-expressing tumor types known to be responsive to immunotherapies. Finally, as we noted in our press release, we do not intend to devote additional internal resources to furthering the development of vibecotamab, the CD123 x CD3 bispecific antibody. In addition, Novartis is terminating its rights to vibecotamab, which will be effective early next year. This decision reflects our broad portfolio development strategy which requires us to make difficult decisions like these so we can dedicate resources to our most promising programs and allow room for exciting new drug candidates to be tested in the clinic.
Moving on to those, I'd like to turn the call over to John Desjarlais, our CSO. John?
Thanks, Allen. We've dedicated a lot of effort in research years to using the full range of our protein engineering tools to turn native cytokines into therapeutics. Our approach seeks to create drug candidates with a long duration of therapeutic activity that remain under the threshold for toxicities that has limited the clinical use of cytokines historically. First, we make small changes in the cytokine to selectively reduce binding affinity to its receptors, and that lowers its potency. This alone creates a better tolerated, longer acting, and far more sustained immune-stimulating activity in preclinical models. We take a further step to enhance stability and pharmacokinetics by fusing the cytokine to an XmAb bispecific Fc domain, which includes our Xtend mutations to further enhance persistence. We're beginning to see clinical data that is now validating our approach, as reviewed by Allen with XmAb306.
Our second cytokine program designed with the same principles is XmAb564, our wholly owned IL-2 Fc fusion engineered to selectively activate regulatory T cells or Tregs for the treatment of autoimmune disease. The phase I study for XmAb564 is ongoing. Our next cytokine program scheduled to enter the clinic is XmAb662, our preclinical IL-12 Fc program. IL-12 is a potent pro-inflammatory cytokine that promotes high levels of interferon gamma secretion from T cells and NK cells, increasing their cytotoxicity and the immunogenicity of the tumor microenvironment by making tumor antigens more visible to the immune system. It's previously been demonstrated that IL-12 can have strong antitumor activity, but as has been the case across therapeutic cytokine development historically, it has a narrow therapeutic index that limits its utility.
We believe that XmAb662, which was designed with our cytokine engineering methodology to lower the potency and to prolong the duration of action, could be a significant advancement towards an IL-12 that could be therapeutically dosed. We anticipate submitting an IND for XmAb662 in 2022. Shifting to our antibody work, we have two bispecific antibody candidates that we anticipate will advance to the clinic before that, XmAb819 and XmAb808. Later this year, we anticipate submitting the IND for XmAb819, our ENPP3 x CD3 bispecific for renal cell cancer. That's our first internal program engineered with reduced potency CD3 binding, combined with a multivalent 2+1 bispecific antibody format.
Using two antigen binding domains to the tumor target provides for more selective binding to cells with high ENPP3 density, like tumor cells, compared to lower density that may be found on normal cells. We believe the XmAb two plus one format opens up a wide range of potential solid tumor targets to T-cell redirection. For example, we've incorporated a 2+1 format into our most advanced wholly-owned lead CD28 bispecific candidate, XmAb808, which targets B7-H3. We intend to develop the candidate for potentially broad solid tumor use, including in prostate cancer, where B7-H3 is highly expressed. We anticipate a 2022 IND submission for XmAb808. Finally, I'd just like to mention that we're presenting four preclinical programs at SITC this week. XmAb662, the IL-12 program we discussed. Second one, our PD-L1 x CD28 bispecific antibody program.
Poster on our TGF-beta platform and our initial disclosure of an NK cell engager platform. These programs show the power of our platform to create XmAb drug candidates that access new biologies and continually supply our clinical pipeline with differentiated molecules. With that, I'd like to hand the call over to John Kuch, our CFO, to review our third quarter financials. John?
Thank you, John. A critical part of our business is leveraging our protein engineering capabilities through partnerships and collaborations for XmAb drug candidates and technologies, which generate multiple revenue streams. As Bassil mentioned, there are now three marketed products that have been developed with an XmAb technology that we earn royalties. Additionally, our second Janssen collaboration will generate a significant upfront payment, potential milestones and royalties, and the opportunity to share development costs for our plamotamab program with our partner, Janssen. Revenues from these and other partnerships allow us to maintain a strong balance sheet to support our broad portfolio of bispecific antibody and cytokine programs. Cash, cash equivalents, receivables, and marketable debt securities totaled $537.9 million at September 30, 2021, compared to $610.2 million at December 31, 2020.
The decrease reflects cash used to fund 2021 operating activities, offset by proceeds from royalties, milestone payments, and the sale of an investment security. The September 30 balance excludes payments due to us under our second Janssen collaboration, which include a $100 million upfront payment and a $25 million payment for the sale of Xencor common stock, which we expect to receive before year-end. Based on current operating plans, we expect to have cash to fund research and development programs and operations into 2025, and we currently estimate we will end 2021 with between $575 million-$625 million in cash equivalents, receivables, and marketable debt securities. Now I'll review our third quarter nine-month financials.
Total revenue for the third quarter ended September 30, 2021 was $19.7 million, compared to $35.4 million for the same period in 2020. Revenues in the third quarter were primarily related to revenue earned under the company's first Janssen collaboration and royalty revenue, compared to revenues from the same period in 2020, which was primarily a milestone payment from MorphoSys. Total revenue for the nine months ended September 30, 2021 was $121.1 million, compared to $80.8 million for the same period in 2020. Revenues for the nine months were primarily earned from research collaborations with Janssen, Genentech, and Novartis, milestone revenue from MorphoSys, and royalty revenue, compared to the same period in 2020, which was primarily milestone revenue from MorphoSys and licensing revenue from Gilead and Amgen.
Research and development expenses for the third quarter were $50.6 million, compared to $44.5 million for the same period in 2020. Total R&D expense for the nine-month period were $141.5 million, compared to $121.9 million for the same period in 2020. Increased R&D expenses for the third quarter nine-month period over the same amounts for the same periods in 2020 were primarily due to additional spending on our IL-15 drug candidate programs and other early-stage programs. Additional spending on XmAb819, our ENPP3 x CD3 candidate, also contributed to increased R&D expenses during the third quarter. General administrative expenses for the third quarter were $10.4 million, compared to $7.6 million for the same period in 2020.
Total G&A expenses for the nine-month period were $27.5 million, compared to $22.1 million for the same period in 2020. Increased G&A expenses for the third quarter nine-month period over amounts for the same period in 2020 were primarily due to increased G&A staffing, spending on professional services, and facility costs. Total other income for the third quarter was $1.1 million, compared to $4.2 million in the same period in 2020. Other income for the nine-month period was $57.5 million, compared to $7.5 million in the same period in 2020. Other income for the nine-month period includes realized gains on the sale of an investment equity security and an increase in unrealized gains on the company's marketable equities investments.
Net loss for the third quarter was $40.2 million, or $0.69 on a fully diluted per share basis, compared to net loss of $12.6 million, or $0.22 on a fully diluted per share basis for the same period in 2020. The increased net loss reported for the third quarter compared to the same period in 2020 was primarily due to lower milestone revenue and higher operating expenses in 2021. For the nine-month period ended, net income was $9.6 million, or $0.16 on a fully diluted per share basis, compared to net loss of $55.6 million, or $0.97 on a fully diluted per share basis for the same period in 2020.
Net income reported for the 9-month period compared to net loss reported for the same period in 2020 was primarily due to higher collaboration revenues and realized and unrealized gains from equity investment securities in 2021 compared to 2020.
Non-cash stock-based compensation expense for the nine-month period was $26.6 million, compared to $23.1 million for the same period in 2020. Total shares outstanding were 58.5 million as of September 30, 2021, compared to 57.4 million as of September 30, 2020. With that, we'd now like to open up the call for your questions. Operator?
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. We have our first question from the line of Ted Tenthoff of Piper Sandler. Your line is now open.
Great. Thank you very much. Impressed by the IL-15 data. Can you share a little bit more in terms of where you and Genentech or Roche intend to take this? Also remind us, do you guys have the ability to do studies on your own? Thank you.
Yeah, thanks, Ted. So I'll start with the second piece. We do have the ability to do studies on our own under the contract with Genentech. Obviously we have to meet certain conditions like the agents we're gonna combine it with have to make sense. We have to go through the kind of process with Genentech to make sure everybody is aware and understands what we're doing. Yes, we do have the ability to do studies on our own, both with compounds in our portfolio as well as with molecules that we don't control. Now, as to where we're going, we can't speak to Genentech's plans exactly. They do lead the collaboration for things that happen within the collaboration, so distinct from the trials we are gonna run ourselves.
We do know they have a lot of engagement and expertise and a lot of potential combination partners in their own portfolio. Now, as for the things that we're interested in, we can't discuss specifics yet, and there's a number of possibilities across both NK cell therapies and T-cell therapies we could combine with. NK cells are critical for the ADCC function of molecules like Rituxan, MONJUVI, Erbitux, of course daratumumab, in myeloma. There's an excellent mechanistic rationale for an agent that boosts NK cell number and activates them or drives them to be more mature, like an IL-15 ought to. We think that's a direction to go is the NK cell angle. Then on T-cell-directed therapies, of course, we're already combining within the collaboration with atezolizumab, their PD-L1 inhibitor.
You know, we can certainly imagine our own programs like vudalimab potentially benefiting and even our CD3 bispecifics as well. There's a lot on that, lots to consider. We're gonna guide-
Yeah.
When we have specifics, but I think we view it as what's the best NK cell approaches to leverage and what's the best T-cell approaches to leverage with this kind of agent if the results we're starting to see in phase I continue to bear fruit.
Yep, fair enough. I'm looking forward to all the data at 15 S. Thanks.
Thank you.
Our next question comes from the line of Mara Goldstein of Mizuho. Your line is now open.
Great, thanks. Just continuing, within, I suppose on that line of questioning, with Ted's question, I'm just curious about, so you've reached the point in which you have reached a therapeutically active dose or. I'm curious as to how you would have us think about benchmarking results seen to date relative to other agents in the space. You know, what, I guess, should we think about from a quantitative perspective that would allow us to see the potential activity that you're seeing so far?
Right. I think there's two pieces to that, how we think about that. Within this, as we continue to escalate, by the way, we're not done escalating, just to be clear.
Correct.
While you maintain, if you can maintain a tolerability profile that's acceptable, and we feel good about the tolerability profile we've seen to date, what you wanna look at are the effector cell populations and the amplification that you're doing of them, how that's sustained, how you can maintain them. That would be NK cells and T cells, so particularly CD8 T cells you wanna look for. So that's one metric, the levels, the durability. You know, you can start getting into details of subtypes. The other metric is, when you get into combination studies, what kind of efficacy you see. Now, at this early of a stage, we think that you wanna look at the magnitude of increases of NK's. As we're, you know, we're clearly very active for NK cells.
We're starting to see the T cells proliferation signals. We think that the initial antitumor activity we're seeing, you know, unconfirmed responses, monotherapy and in combo with atezo, those small numbers and still unconfirmed just indicate there's immunological activity happening at the tumor site, which is what you wanna see. I think, you know, the presence of that is encouraging. That's one piece to benchmark, and then you can't really extrapolate beyond there. Just, do you see something happening in the tumor? Then the magnitude and durability and of the effector cell populations like NKs and Ts.
Okay. All right. Thanks, I appreciate it.
Our next question comes from the line of David Nierengarten of Wedbush Securities. Your line is now open.
Well, continuing on the NK cell therapy and enhancement question theme here. I was curious if you had any
Thoughts or ways to benchmark the activity or the enhancement of NK cell activity in patients compared to engineered NK cells, you know, especially, of course, ones that have the IL-15 engineered to essentially be constitutively active in those cell therapies. I'm obviously curious about that. Thanks.
I know John wants to have this, a few things to say about that. John Desjarlais, our CSO. I think you have two parameters. Count how many cells are there, and are they of the right subtype? Are they active? Maybe you wanna-
Yeah.
touch on that?
Yeah. I'm trying to remember. Remember, I did that back-
Right.
back-of-the-envelope calculation.
Right.
I was comparing to one of the NK therapies, you know, 'cause they state, you know, how many NK they actually, you know, engraft into the human.
Mm-hmm.
I think we are at about a 100-fold higher. Basically you could think of the NKs as they sort of the myeloid of late, and then they replace the NKs that were there with their engineered NKs.
Mm-hmm.
We're taking the NK that exist and expanding those a hundredfold higher.
It's like about a hundredfold more cells than you see with the allogeneic approaches that have been reported to date from, again, our back of the envelope. It's a lot more cells, and we're certainly seeing the mature phenotypes, which, you know, have characteristic markers like CD16 on them.
Yep.
That would imply.
And, and-
That they're active and can do the job. Beyond that, how do things go as we start doing the clinical trials in combination.
You touched on this before, but I wanted to be a little bit more explicit with Genentech. Do you need Genentech to sign off on you guys doing a study with this and an NK cell engager, for example? Or, can you pursue that without their say-so?
We can pursue studies with any third-party agents that we want, as long as we don't create undue safety risks or exhaust drug supply.
Okay.
We can't duplicate something going on within the collaboration. For example.
Yeah.
We couldn't do our own study in combo with atezolizumab. That. Right. We simply can't do that. But outside of that
Sure.
As long as we check basic governance boxes and we're responsible, then we have a lot of flexibility.
Cool. Okay. Thank you.
Our next question comes from the line of Kaveri Pohlman of BTIG. Your line is now open.
Yeah, good afternoon. Thanks for the updates, and thanks for taking my questions. My first question is regarding vudalimab. Your last readout showed a couple of responses in patients pretreated with ipi and PD-1 combination. Do you know what's driving the response there? Is it that the higher doses allow you to push the buttons harder safely?
Oh, gosh. I'll let Allen take that one. This is, well, delving into the realms of the unknown.
I think what you're asking is why we're seeing responses with vudalimab, formerly XmAb717, in patients who had previously been treated with other checkpoint inhibitors, either PD-1 or ipilimumab in combination. The answer is-
Sure.
You know, we don't know for certain, but what we do know is that, you know, the way that the molecule was designed was to favor PD-1 binding and to diminish the CTLA-4 binding. In other words, you only get CTLA-4 being employed only after PD-1 binds. We believe that that minimizes the toxicity but encourages the dual activity. One of the things is we think that it could be more tolerable, and you can get more doses in. Or more specifically, you could be recruiting T cells that are both PD-1 and CTLA-4 expressing, so the ones that are enriched in the tumor. That dual targeting in a single molecule may have a molecular advantage over giving the agents independently. I don't know if you wanna add anything, John, or.
No, I think you covered it. I mean, that's. Yeah, you're potentially zeroing in on the most tumor-reactive T cell population.
Got it. Thanks. For tidutamab study, how much do you think that the recent data is an indication of the limitation of the approach? Because you have a very cold tumor, but you're driving T cells there. Do you think that tells us that the approach is unlikely to be useful in really cold tumors? Do you need some neoantigens or perhaps some priming cytokines like IL-12?
That's an interesting question. I think the one thing I will say is that we are seeing the biomarkers we reported for the tidutamab study were in the periphery, so a lot of increased T cells in the periphery, a lot of activation of them in the periphery. You know, you raise a good point. We don't know what's happening. There's very limited biopsy data in the tumor. Could that be enhanced by other therapies that change how the T cells behave, have them home or migrate, have them be more pro-immunogenic? Quite possibly. I mean, that's part of the driver of us going into small cell lung cancer and Merkel cell carcinoma, which are hotter tumors for immunotherapy.
Your question there that we don't have a perfect answer for is why we have reagents that we're building to make our next programs come along.
Yeah. I'd also like to add, you know, we mentioned our XmAb808 program, our B7-H3 x CD28 bispecific. I mean, one of the whole points of interrogating these CD28 bispecific antibodies is they could potentiate CD3s, particularly in the cold tumor setting because CD28 causes a much stronger proliferative signal.
Yeah, I would add along those lines, you know, there's been a lot of investigator interest in combining tidutamab with either a PD-1 within our portfolio or, you know, later on with the CD28, and I think there's a lot of interesting science there. However, immediately we're gonna test small cell lung cancer and Merkel cell carcinoma. That phase II has started enrolling, and it'll address an important scientific question that you're asking, is it the seed or the soil hypothesis, which is an ongoing debate on oncology. You know, clearly Amgen has seen responses with their AMG 757, so we're very excited about our phase II. If we see responses, you know, I think that will add a lot of information for the field.
That's helpful. Thank you.
Sure.
Our next question comes from the line of Charles Zhu of Guggenheim Securities. Your line is now open.
Hey, guys. Thanks for taking my questions. Congrats on the early XmAb 306 data. You obviously have considerable expansion of the NK cells with this drug. On that note, I was also kind of wondering, you know, to what extent are the peripheral effector T cells potentially driving any early signs of efficacy you're observing? Any potential color you can also provide around things like peripheral versus intratumoral presence of these cells? Thanks.
Yeah. I don't believe we have data on intratumoral biomarkers or cells yet. I think maybe, John, if you wanna go to the mechanistic mystery of T cells in the periphery then and what do they do.
Yeah. Yeah, you know, it is a big mystery. I mean, I don't think anybody knows if you need a particular level of T-cell expansion in the periphery to promote antitumor activity. Really the big question is what's going on in the tumor. Again, we don't have any data on that yet. You know, and there's a lot of hypotheses for why you would see, you know, more activity in the tumor T cells than the peripheral. In particular, we had shown early on in preclinical data that when you stimulate a T cell, say, through CD3 engagement or TCR engagement, it actually upregulates the IL-2 receptors, which of course are the same receptors that IL-15 works through. You can imagine those intratumoral T cells actually being more responsive to IL-15 than the peripheral T cells.
Yeah. But I guess to really get at the point of what might be going on in the tumor, if you can observe a tumor shrinkage, whether in combination with a checkpoint inhibitor like atezolizumab or even in monotherapy, I think that's, in a sense, a marker of what's happening in the tumor immunologically, right? Because these are immune therapies, these are in very advanced solid tumor patients who've exhausted all prior therapies, so many of them would have seen checkpoint inhibitors in the past and progressed on those or not responded to those. So I think that's an important piece of the puzzle when you put it together with the biomarker data you're seeing and the kind of increases in cell counts in the periphery. We don't know exactly what's going on in the tumor yet.
We're eager to see that biopsy data as it starts coming in, but obviously much harder to get than the blood cells.
Got it. Thanks for that color. Maybe just one more big picture question from me on this front. You have multiple different approaches of multiple and distinct approaches of engaging the immune system through multiple different means, whether it's recruiting T cells, recruiting NK cells, and now it looks like you're also going to be able to, you know, make them proliferate as well. You know, a lot of your combination partnership strategies seems to have been more external facing, I guess. You know, to what extent are really more internal combinations on your mind, and what are your thoughts around potentially realizing synergy of something like, you know, an NK cell and tumor-specific NK cell engager with an NK cell expansion agent? And also, what are your thoughts on potential for synergistic toxicity as well?
Regarding the toxicity question, it's hard to say, of course. We do know that NK cell mediated agents like the classic antibodies Rituxan or Gazyva or now daratumumab tend to be fairly well tolerated with regard to their immune stimulation, right? Infusion related reactions are what they see. I think from a potential of internal combination, that's really why we're making these agents for combination. Of course, the nearer term opportunity might be with marketed agents, but we wanna be able to create an internal pipeline that has the best combination partners, say, with the best checkpoint inhibitor. We hope we can establish vudalimab as an important option because it has a differentiated profile for both PD-1 and CTLA-4 inhibition.
We think our CD28 bispecifics as well as the cytokines we're trying are giving us those tools to figure it out. It's an experiment to figure out which combinations. You know, I think, you know, when we mentioned MONJUVI as potential combination partner for NK cell expansion, you know, recall we created that molecule, and we still have a pretty important economic stake. Though while not internal, it is important to us. We are, I think, talking about some of our NK cell engaging novel molecules at SITC next or this week.
Yeah.
That's really the big drive for it, whereas the short-term piece is to do the combinations with external parties.
Got it. Thanks.
Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is now open.
Hi, this is Xinyue Lu for Greg. Thank you for taking our questions, and congrats on the progress. Maybe first question on 808. Can you remind us of the rationale of selecting B7-H3 as your first target for the CD28 platform, you know, versus a more tumor-specific approach? And how does your design methodology give you confidence in the safety profile that could avoid, you know, some of the concerns from the past program? Thank you.
Yeah.
Yeah, sure. I mean, you know, really, it was a pragmatic decision, selecting B7-H3. You know, first of all, it's a very broadly and, you know, high density expression of B7-H3 across multiple solid tumor histologies. I kinda wanted a one-size-fits-all solution that could, you know, potentially couple with PD-1 inhibitors or other checkpoint inhibitors as well as CD3 bispecifics. You know, the justification for going with a fairly broad tumor-expressed antigen was that CD28 engagement by itself, you know, and we'd shown this in all of our preclinical studies, doesn't. It's not expected to do anything unless there's also a signal 1 coming from a TCR recognition of a tumor cell or in combination with a CD3 bispecific.
We'd also thought, you know, some of the drug conjugate programs that are out there seem to be safely targeting such a broadly expressed antigen. All of those things, you know, put together led us to that as our first target. But of course, we are considering more tumor-specific markers as well.
Great. Thank you. Maybe just another one on the IL-2 program. When should we expect to learn initial data from that program, and what's your development strategy ultimately, you know, considering the recent pharma interest as well as your strategy with other autoimmune programs? Thanks.
For XmAb564, we hope to have initial data from the single ascending dose in healthy volunteers next year. That trial's ongoing. In terms of development strategy, you know, we see this new modality that's in early phase development at a number of parties, T-reg expansion, right? T-reg stimulation as really an unproven therapeutic hypothesis. We think that as that validation happens in phase II, we wanna have our irons in two fires.
One of those is in smaller indications, perhaps rare or at least uncommon indications that have a high unmet need that you can try this new mechanism in, and one is in more larger indications with perhaps other established therapeutic mechanisms of action, but where you can rapidly understand whether you're actually impacting disease because you have clear endpoints and clear markers. You really wanna have both of those pieces of ground covered, something that you could be really pioneering in to maybe accelerate development opportunities and create your own little bailiwick, and then really answer the scientific question crisply and cleanly, not one or the other, but both.
Great. Thank you.
Our next question comes from the line of Peter Lawson of Barclays. Your line is now open.
Hey, thanks for taking the questions. Thanks for the update as well on 306. Just around that, the responses you've seen to 306, do they correlate with the CD16 isotype or the high affinity CD16 on NK cells? Just your thoughts there. What kind of CD8 T-cell expansion do you think you'd want to see, if that's a relevant question here?
Yeah, we have no idea whether there's what the phenotype is of CD16, whether it's the high affinity valine 158 or the lower affinity phenylalanine 158. It's not clear what the underlying mechanisms are that are driving response. You know, even though you again are seeing just the beginnings of T-cell proliferation markers in the periphery, that doesn't tell us what's happening with the T cells in the tumors. The NK cells, I think, are very much underappreciated, by the way, across all the different oncology indications because they're part of driving immune responses more broadly than just maybe the obvious ADCC function. We don't have any correlation or understanding beyond that. You know, what number of T-cell increase do you need to see in the periphery?
I think, you know, we talked about that earlier. There is no clarity there, right? I think you'd certainly wanna see activation markers just to let you know that your molecule's doing the things it ought to do. We're certainly seeing activation and proliferation markers of T cells and in addition to this, you know, really encouraging and dramatic NK cell expansion that can play in a lot of different ways. Mechanistic understandings, I think we're still a ways off.
Does the NK cell expansion correlate with activity, or that's too kinda simplistic?
Too few patients and too few data points now to understand that. Whether it correlates with activity, I couldn't tell you. I do think that within the realm of ADCC-driven antibodies, like for example Rituxan, there's growing literature validating that NK cell counts in patients, high NK versus low NKs, correlates with response or likelihood of benefit. I think even, not even response, actual clinical benefit like OS. That's pretty clearly established. More NKs are better for ADCC antibodies. In particular Rituxan has been well documented, and I think suggestions of that for a number of other antibodies. For T-cell-mediated therapies like checkpoint inhibitors, nobody knows the role of NKs. There's a lot of opportunity we think in NK cell-driven therapies.
The current generation, we think there's gonna be a lot more on the horizon in the future, and particularly now that you're starting to have tools like these cytokines to make more NK's when you want them.
Yeah. There's also a school of thought that with a lot of patients under a lot of different checkpoint therapies and various T-cell therapies that NK cell, you know, tools are gonna be more important over time as the MHC status of those patients changes due to selective pressure.
Gotcha. Thank you. The reason Novartis or yourself kind of moved away from your CD123 construct is. Any details there would be great. Is that a target you'd pursue with your CD28 construct as well?
I'll answer the first one, then John can talk about the CD28 construct concept. The landscape in AML has gotten, I think, a lot more challenging as venetoclax has become more and more entrenched with an earlier line and now moving to later line. That's changed the landscape and made it more challenging and the opportunity, I think, shrunk. But also CD123 is a difficult target with a very narrow therapeutic window and, you know, challenges in PK and dosing frequency. In spite of the very encouraging early complete remissions that we've had and, you know, continuing additional activity we've seen, all those pieces make the product profile and the competitive landscape tough. Really, frankly, tough for us to wanna pursue and our partner, Novartis, agree.
There's certainly investigator interest in niches, and we're very supportive of trying to help patients when sophisticated investigators think there could be a role for the agent in trials. Maybe the CD28 combination with CD123 intriguing but.
Yeah, again, due to the competitive landscape, I'm not sure that's where we wanna put our effort.
Gotcha. Okay. Thank you so much. Thanks for the updates.
Thank you.
Our next question comes from the line of Arlinda Lee of Canaccord Genuity. Your line is now open.
Hey, guys, it's Ben on for Arlinda. Thanks for taking my question. Congrats, belated congrats on your Janssen partnership. I just wanted to dovetail on the most recent comments you made about CD28. Does the Janssen partnership give you flexibility to pursue collaborations with other partners in CD28 combinations? Is there an appetite for it?
The Janssen collaboration is very narrow to within B-cell malignancies. B-cell malignancy targets combined with CD28, and it's got a time bound on it, whereas targets that we don't advance to certain development stages within the two-year collaboration period, you know, that's it. We like to control things. It would be a very limited number of just B-cell targets, and we could go and partner with whomever. I think now that we've gotten the ball rolling with XmAb808, which is a broad tumor marker, and now that we've got, you know, Janssen is pushing hard in prostate cancer and is gonna really work with us on plamotamab and really accelerate that program with the CD28s, we think that it might not be.
Now's the time to sort of pull in and focus on internal work for CD28 and not really look at partnering around the CD28 platform now and wait until we've really built up a data set and understand its full potential and value, after we've been in the clinic for a while.
Okay. That makes a lot of sense. Regarding the Janssen partnership itself, can you give us an idea of what the next near-term milestones will be after you get the stock purchase done this quarter?
Let's see. I mean, of course, as part of the collaboration, we're gonna start our tafasitamab lenalidomide trial either late this year or early next year. We would expect to get the subcutaneous formulation of plamotamab in the clinic in 2022 as well. We're well on our way manufacturing it and having a formulation we think is quite promising to use in humans next year. You know, with the earlier collaboration, our collaboration around prostate cancer with the CD28 bispecific, the next milestones, we can't guide exactly on timing 'cause it's up to them, but would be taking a candidate into full development, into IND-enabling development. We've been making rapid progress on that collaboration. It's been less than a year now, and we've made. We've gotten a long way.
Great. That's very helpful. Thank you very much.
Our next question comes from the line of Alethia Young of Cantor Fitzgerald. Your line is now open.
Hi. Thanks for taking my question, and congrats on all the progress this quarter. This is Nina for Alethia. We are curious if you could speak more on your CD20 program with Janssen and how it differentiates in the competitive landscape. If you think, at ASH, if you'll get high enough doses that we may be able to make any conclusions around efficacy. Thanks.
I guess on the first one, on the differentiation, you know, I think we believe we have now with a good monotherapy step up to a much higher dose we had before now at 50 mg. You know, we're very encouraged by both the tolerability profile there as well as the efficacy we're seeing in admittedly a relatively small number of patients at that dose. I think the real differentiation is about the development strategy. Allen, you wanna speak to that?
Yeah. I think biologically it'll be hard to distinguish these antibodies from each other, but the development strategy is key here. You know, we've sort of gone for this chemotherapy-free sort of strategy, combining with tafasitamab and lenalidomide, the CD19 versus CD20 targeting, the ADCC versus the T-cell engaging, and the potential that lenalidomide could potentiate both. On the other front, you know, another chemo-free strategy would be combining with a B-cell CD28-directed modality, and that's our partnership with Janssen as well. We think that the molecules look fairly similar early on. And the data to date, I think we have good activity, and we've seen good activity. We'll be reporting additional activity.
I think we've done a lot of time sort of figuring out our dose and schedule to optimize much higher dose than previously reported with a very good step-up strategy, which minimizes CRS. We're excited about moving to the next phase, which is our randomized phase II in combination with tafasitamab and lenalidomide.
To be clear, that additional data will be presented at ASH with still a small, but we think it's a growing number of patients, giving us a clearer picture of where we are on efficacy and safety with this new step-up regimen.
Thank you.
There are no further questions at this time. I'm now turning the call back to Bassil Dahiyat, President and Chief Executive Officer. Thank you.
Thank you very much, operator, and thanks everybody for joining us today. We look forward to updating you guys again over the coming weeks, and have a terrific evening. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.