Good afternoon, and welcome to the Xencor Second Quarter 2019 Financial Results Conference Call. Please be advised that this call is being recorded at the company's request. At this time, I would like to pass the call to Charles Liles, Associate Director and Head of Corporate Communications and Investor Relations at Xencor. Please proceed.
Thank you, Tiffany. Good afternoon. Welcome to Xencor's Q2 2019 financial results conference call. Earlier this afternoon, we issued a press release, which outlines the topics we plan to discuss today. The press release is available at www.zencor.com.
Today on our call, Bassil Dahiyad, President and Chief Executive Officer, will provide a business overview and review our pipeline and licensing partnerships and John Cush, Senior Vice President of Finance and Chief Financial Officer, will review the financial results from the Q2 and first half of twenty nineteen. Then we will 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 look forward looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management for 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 outcomes 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 sections of our most recently filed Annual Report on Form 10 ks and Quarterly Report on Form 10 Q.
With that, let me pass the call over to Vasyl.
Thanks, Charles, and good afternoon, everyone. The core of Xencor's approach to creating antibody and cytokine therapeutics is our XmAb engineering platform. By making small changes to an antibody structure, specifically in its Fc domain, we can improve its natural functions and performance and create new mechanisms of therapeutic action. The plug and play nature of the suite of XmAb Fc domains we've created allows us to engineer nearly any antibody to have improved potency, longer half life or bispecific structure. This flexibility and portability enables us to take multiple shots on goal simultaneously and generate proof of concept data to guide which programs we will independently advance, which we will partner and which we would terminate.
Bulk of
our R and D is the expansion and use of our XmAb bispecific platform. And over the last 2 years, we've initiated 6 Phase 1 clinical studies evaluating XmAb that combine 2 or more different targets simultaneously. Biosepics are rapidly emerging area of therapeutic development, particularly in oncology. And in order to stay at the forefront of innovation in this space, we use our engineered heterodimeric Fc domain as a robust scaffold to rapidly develop new candidates. We group these drug candidates to use our XmAb bispecific Fc domain into 3 classes: T cell engagers, tumor microenvironment or TME activators and cytokines.
The first and most advanced is a T cell engager class. These are tumor targeted antibodies that contain both a tumor antigen binding domain and a cytotoxic T cell binding domain, specifically a CD3 binding domain. They activate T cells at the site of the tumor in order to potently kill malignant cells. XmAb14045 is our CD123xCD3 bispecific antibody that's being developed in collaboration with our partner Novartis. It's in an open label Phase 1 dose escalation study to assess its safety, tolerability and preliminary anti tumor activity in patients with relapsed or refractory acute myeloid leukemia, as well as other CD123 expressing hematologic malignancies.
Now in the Q2, we worked with investigational sites to resume enrollment following the lifting of the partial clinical hold that have been placed on the study. And in early July, we dosed the 1st patient under this amended protocol, which included more prescriptive guidance on the monitoring and management of cytokine release syndrome. As we continue to assess escalation, we are working with our partner to plan the next phase of clinical development. Our next program XmAb13676, a CD20xCD3 bispecific antibody is also in Phase 1, but for patients with advanced B cell malignancies like non Hodgkin lymphoma and chronic lymphocytic leukemia. We started dosing patients about a year after XmAb14045 in February 2017.
Later this year, we expect to present initial safety and clinical activity data from this study. XmAb18087 is our 3rd CD3 targeting antibody and targets as well SSTR2 or somatostatin receptor 2, an antigen highly expressed on some solid tumors. In February 2018, we started dosing patients in a Phase 1 dose escalation study to assess safety, tolerability and preliminary anti tumor activity in patients with neuroendocrine tumors and gastrointestinal stromal tumors. We're now expecting to present initial data from this study in the first half of twenty twenty. Our second group of bispecific antibodies are our tumor microenvironment activators.
Rather than directly bridging a T cell to a tumor cell, our TME activators seek to more effectively reactivate tumor reactive T cells than existing therapies by engaging multiple T cell targets simultaneously, such as checkpoints or agonists. This approach not only reduces the need for multiple antibodies typically used in combination therapy, but allows for more selective targeting of T cells with high checkpoint expression and multiple checkpoint expression, which are typically found more in the tumor microenvironment than in the periphery. In the Q2, we started dosing the 1st patients in Phase 1 dose escalation studies of both XmAb22841 and XmAb23104, Including the ongoing Phase 1 study of XmAb20717, these three studies are enrolling advanced patients with a number of different solid tumor types. As I mentioned, each candidate simultaneously engages multiple different targets for T cell activation. For 20,717, it's through the most validated checkpoint combination PD-one and CTLA-four.
For 22841, it's CTLA-four and the checkpoint LAG-three. And while we will conduct initial dose escalation as a monotherapy, we designed this molecule to be developed along with a PD-one inhibitor to create a triple checkpoint blockade. Finally, for 23,104, it's a PD-one and the costimulatory T cell agonist receptor ICOS targeting bispecific antibody. We're focused on enrolling patients to all three all of these studies and our hope is to be able to drive strong right to tumor responses in the monotherapy with improved tolerability for patients. For prexmAb20717, we began enrolling patients in the Phase 1 study 12 months ago and we anticipate initial dose escalation of biomarker data in the first half of twenty twenty.
Finally, we're developing a suite of cytokines, which are immune signaling proteins that are built on the XmAb bispecific Fc domain. Using our Fc domain to build the molecule provides more druggable versions of cytokines with potentially superior tolerability, slower receptor mediated clearance and prolong half life. Our first cytokine program and the lead in our collaboration with Genentech is XmAb24306. It's an IL-fifteen receptor subunit fused with a bispecific Fc domain. As noted, it contains both the cytokine and its receptor domain in order to expand and activate immune cells that can be recruited against tumors, specifically T cells and natural killer cells.
24,306 is intended for development with a wide range of combination agents and importantly, we can perform our own clinical trials with both our own pipeline assets and non Genentech agents within this collaboration and subject to some conditions. We look forward to planning a number of these combination studies pending completion of the initial dose escalation study and we will support Genentech's IND application in multiple oncology indications in the second half of twenty nineteen. The next program in our cytokine class, XmAb207,000,000 is an engineered IL-two fused to an XmAb bispecific Fc domain and is intended for autoimmune indications. Low dose IL-two regimens have demonstrated promising results since they were first approved in the early 1990s. However, as a drug, IL-two suffers from fast in vivo clearance in a narrow therapeutic index.
A variety of technologies are being pursued to improve the drug ability of IL-two. At Xencor, we've tuned the IL-two to increase the preference for regulatory T cells and to have a longer half life by reducing its potency. We also incorporated Xtend technology into the Fc domain again to increase the half life of the molecule. Preclinical data were presented at a poster at the American Society of Hematology Annual Meeting last December and the program is currently in IND enabling studies. We anticipate submitting an IND in the second half of twenty twenty and then enrolling healthy volunteers in a first in human study.
I'll now spend a moment reviewing some updates from our licensing partnerships, which provide us with revenues that help fund development of our own internal pipeline candidates. Most of these partnerships usually require very limited resources and effort from us. So we previously discussed our newest collaboration with Astellas. We're applying our bispecific technology to create multiple drug candidates against the target against a target specified by Astellas and then Astellas will conduct all preclinical and clinical development as well as regulatory and commercial activities. Now shifting to Alexion.
In 2013, we licensed Xtend Fc technology to them to create ULTOMIRIS, a complement inhibitor with improved half life, which allows for less frequent dosing regimens compared with SOLIRIS. With ULTOMIRIS' approval in the United States last December, it became the first antibody to incorporate an XmAb technology to be marketed. ULTOMIRIS has now received multiple global marketing authorizations. In Japan this past June and Europe just last month for the treatment of adult patients with PNH. We are receiving milestone payments for each of these approvals and a low single digit royalty on net sales.
Another partner MorphoSys licensed from mustafacitamab, which was previously known as MOR208 and as XmAb5574 before that. It's an anti CD19 antibody that we built ourselves and incorporated our cytotoxic Fc domain for high ADCC function. MorphoSys recently reaffirmed that they intend to complete a BLA submission by the end of 2019 for tafasitamab. If approved, we would receive royalties in the high single digit to low double digit percentage range as well as additional milestones. Finally, I'd like to thank our Chief Medical Paul Foster, who will be retiring from Xencor at the end of October.
His contributions and leadership at Xencor over the past decade enabled us to build an internal clinical development organization as well as launched nearly 10 clinical programs. We've initiated a search for a successor to Pall, who we hope would build on the foundation Pall has created and carry us through the advancement of our pipeline. In addition, we are continuing to expand our senior leadership. In the Q2, we announced the appointment of Jeremy Grenstein as Vice President of Business Development. Jeremy spent more than 15 years in business development at Amgen sourcing and executing a wide range of transactions.
We also appointed Kirk Rosemark as Vice President, Regulatory Affairs and Quality Assurance to lead our regulatory strategy. He joins us most recently from Beijing and brings nearly 25 years of experience in biopharmaceutical regulatory affairs. We're happy to have both Jeremy and Kirk join our team and look forward to their leadership and contributions. With that, I'll turn the call over to John Cush to review our Q2 2019 financial results.
Thank you, Bassil. In the first half of twenty nineteen, Xencor continues to build a strong financial position, which enables us to support a broad pipeline of development and research programs. Our cash, cash equivalents and marketable securities totaled $626,100,000 at June 30, 2019 compared to $530,500,000 at December 31, 2018. The increase reflects upfront proceeds of $135,000,000 received in the first half of twenty nineteen from our Genentech and Astellas collaborations, offset by cash used to fund operating activities in the first half of twenty nineteen. Total revenue for the 2nd quarter ended June 30, 2019 was $19,500,000 which reflects revenue recognized from our Astellas collaboration and from our Alexion collaboration, which includes $5,500,000 in milestones and royalty received.
Total revenue for the 6 months ended June 30, 2019 was $131,400,000 and includes revenue earned from our Genentech collaboration in addition to Astellas and Lexion revenue. No revenue was recorded for similar periods in 2018. Research and development expenses for the Q2 were $33,300,000 compared to $23,300,000 for the same period in 2018. Total R and D expenses for the 6 months ended June 30, 2019 were $61,500,000 compared $49,400,000 for the same period in 2018. The increased spending on R and D for the 3 6 months ended June 30, 2019 reflects increased stock based compensation charges and additional spending on our CD3 bispecific antibody and cytokine development candidates and technologies.
General and administrative expense for the Q2 were $5,800,000 compared to $5,000,000 in the same period 2018. Total G and A expenses for the 6 months ended June 30, 2019 were $11,300,000 compared to $9,500,000 for the same period in 2018. The increased spending on G and A expenses for the 3 6 months ended June 30, 2019 reflects additional spending on intellectual property which includes patents and licenses and additional expenses related to personal and professional services. Non cash stock based compensation expense for the 6 months ended June 30, 2019 was $15,200,000 compared to $9,400,000 for the same period in 20 18. Net loss for the Q2 was $16,000,000 or $0.28 on a fully diluted per share basis compared to a net loss of 25 point $9,000,000 or $0.46 on a fully diluted share basis for the same period in 2018.
The lower net loss reported for the Q2 over the net loss for the same period in 2018 is primarily due to revenue recognized from our Astellas and Lexion collaborations in 2019. For the 6 months ended June 30, 2019 net income was $64,000,000 or 1 point $10
on a fully diluted per share basis compared to
a net loss of $55,400,000 or $1.07
on a fully diluted per share basis. The net income report for the 6 months ended June 30, 2019 over the loss report for the same period in 2018 is primarily due to revenue recognized from our Genentech collaboration. The total shares outstanding were 56 1,529,390 as of June 30, 2019 compared to 55,821,310 as of June 30, 2018. Based on current operating plans, we expect to have cash to fund research and development programs and operations beyond 2024 and to end 2019 with between $575,000,000 to $600,000,000 in cash, cash equivalents and marketable securities. With that, we would now like to open up the call for your questions.
Operator?
Our first question comes from Ed Tenthoff with Piper Jaffray. Please proceed.
Great. Thank you very much and thanks for the update. I'm wondering if you could provide some guidance on what the portfolio's royalties are presently and whether or not you'll be breaking those out in a separate line in the queue.
Hey, Ted, you kind of broke up for a second in the beginning of your question. Could you just repeat? We couldn't hear your first few words.
Sure. Sorry, Basil. So I was wondering if you could provide some color on what the ULTOMIRIS royalties are and whether you'll be breaking them out in the Q?
Yes. We will be breaking them out for the Q. For the 6 months reported royalty of $1,100,000 It is low single digit royalties and it's an estimate based on the sales reported by Alexion.
Right. And that's for the 1st 6 months of the year?
Yes.
Excellent. And just a quick question, I'm just seeing, is there any push out in the expectations from the tumor microenvironment data readouts? I was thinking we might get something this year, but it now looks like we'll be getting data in 2020. Is there any push out there or is it just the desire to have a fuller data set to be reporting? Thanks so much.
Yes. It's sort of the balance between the desire to have a fuller data set to be reported and the resource allocation it takes to generate the data cut, data cleaning and reporting as we balance it across launching 2 other programs a couple of months before and rapidly advancing the 7/17 program itself. So everything is on track. It's just more of a resource allocation balance weighed with wanting to have fuller data.
Great. I appreciate that and I'll wait patiently for it. Thanks so much guys.
Thank you. And our next question comes from Arlinda Lee with Canaccord Genuity. Please proceed.
Hi, guys. Congrats on all the progress. I had a couple of questions on the IL-fifteen partner with Genentech. If you don't, can you maybe provide color on how the collaboration has been working to date? It seems like the time to IND is accelerated and then also the timing of when we might see DUET 3 and 4 datasets?
Thanks.
There's been no shift in any of the timing for the program. It really was fairly seamless with regard to the collaboration. I think Genentech is a company with enormous amount of skill and history in developing biologics. So we're happy to have them as a partner. In addition, they have a really deep and robust oncology pipeline.
So again, they're really ideal partner in that regard. With regard to the DUET 3 and 4, we haven't really guided on timing for data yet. We just started the dose dosing of patients a couple of months ago. We'll be able to give more clarity probably later in this year as that ball gets rolling.
Okay. And then I guess you had talked about, maybe just a follow-up, a triple combination. Can you talk about how that dose escalation would work? Thanks.
Yes, sure. So you're probably referring to XmAb22841, which is our CTLA-four and LAG-three dual checkpoint inhibitor bispecific. So the way that the clinical trial is constructed is to run dose escalation cohorts with the monotherapy and after a few of those cohorts to add a parallel set of dose escalation cohorts that treat patients with the 22841 on top of pembrolizumab. So you'd have a little bit ahead in dose the monotherapy and a parallel set of cohorts a dose behind in the combination.
Great. Thank you very much.
Thank you.
Thank you.
And our next question comes from Jonathan Chang with SVB Leerink. Please proceed.
Hi, thanks for taking my questions. First question, can you help set expectations ahead of the initial Phase 1 data for XmAb13676 in the 4th quarter?
Yes. So we expect have data that shows given where we are with the dose escalation, what we see in terms of safety as well as efficacy in our patients, which all have advanced B cell malignancy. So it's really that combination of safety efficacy profile as we proceed through dose escalation. We've certainly made good progress, but we're not expecting to be completely done by the data report. But that's sort of the picture, efficacy, safety.
And then, we are certainly right now thinking very hard about what next steps in development would be, but the next phase of development would look like. Not sure whether we'll be able to guide on that this year or whether we'd want to push that a little bit. But those are the that's sort of the expectations we want to set. So how we stack up and how we, of course, look relative to the competitive landscape in B cells.
Got it. And just to follow-up on that, how do you see the competitive landscape for this program? And how are you thinking about not just next steps of potentially repartnering this asset? Yes.
So I think the competitive landscape for B cell malignancies is one of the densest in the industry. I think you've got this baseline of long established use of Rituxan in combination with chemo that sort of sets the bar and that there's a number of different emerging modalities people are trying. I think CD3 bispecifics are going to be a very compelling approach there. I think early data from some of the competitive programs that have CD20, CD3s looks promising and I hope that we can fit very well within that. We designed our molecule really with the eye towards B cell malignancy being really treated by combination therapy.
Monotherapies are unlikely to carry the day and therefore we designed our molecule with that sort of mix of tolerability and dosing convenience along with the potency. As for partnering it, I think we're driven by the strategy of the development of the molecule, which is we want to advance it quickly, we want to advance it for as many patients as possible and being thoughtful and aggressive about using combination with different agents. And so that would really drive our partnering strategy, not the need for cash or the need for anything like that. So we're open to it. And I think that we will also give a very strong eye towards maintaining significant commercial rights.
You could never predict the precise structure, so talking about it doesn't make sense, but we would also look towards preserving significant commercial rights. And that said, we're happily running along and happy to develop this molecule for a while without any part of it. We think there's a lot of avenues to do that.
Got it. Thanks for taking the questions.
Thank you.
And our next question comes from Shanshan Xu with Berenberg Capital. Please proceed.
Hi, good afternoon. This is Shanshan Xu from Berenberg Capital Markets. I think with XmAb Fc Engineering Technology, especially with functions to increase the half life and enhance the ADCC, you potentially create a next generation SOLIRIS and next generation rituximab. So investors ask, did Gencor actually find a skeleton key to upgrade the entire class of therapeutic antibodies? I think this is a complicated question to answer.
But can you please help us to understand a little bit better with which subclasses of therapeutic antibodies are candidates within for an upgrade by XNAT SC technology? And I have two follow ups.
I would say that there's a set of different XmAb Fc domains that we've created each that has a different purpose. The primary are the half life extension 1 or the Xtend. And I think in that case, there's a very wide range of therapeutics that could benefit from that. I think it really more fits to that question of in what instances is the extension of half life or reducing dosing frequency or dose amount going to be a compelling competitive edge where it might not matter. So I think it's a wide range of therapeutics and we certainly expect and we have been seeing a lot more interest in it as the Alexion programs advanced.
I think for cytotoxic Fc's, it's a narrow range. I think it's in the slices of indication where the really compelling balance of tolerability and heightened potency of tumor killing that was seen with tafasitamab conservative use, I don't want to get into the weeds of different oncology drug target and drug targets and their various merits. But I think that agents with that kind of scope really there's a broad range, but perhaps not as broad as the half life extension ones. I think our bispecific Fc domains, that's one where the future for multi specific antibodies is so wide open and unclear the world doesn't know. And I think what we're really talking about there is creating new therapeutic classes.
And I think that's just going to be limited by the imagination that protein engineers have, whether it's the Xencor tools or other people's tools that we use. It's a vast array of opportunities in bispecific antibodies that I think we're just starting to scratch the surface of. And I think, yes, does that kind of get at what you were asking?
Yes, absolutely. Actually, you read my mind. So my next question is that actually we saw success with the Fc engineering technology applied to the monoclonal antibody. And I was just about to ask, how is that applied? I mean, just educate us a little bit more about how Fc engineering is applied to different franchises of your bispecific antibodies?
I know for the cytokines, you probably have extended half life and maybe for others, you mute the immune cells, maybe elaborate a little bit on this front, please?
Sure. I think you want to combine different feature sets in any protein therapeutic in particular with Fc Engineered Antibodies suited the purpose when it makes sense. So it's nice having these plug and play tools you can mix and match and add together. For example, all of our tumor microenvironment activators and cytokine Fc fusions have on top of their heterodimeric Fc domain are extended half life variants. Just that made sense for all of those to have longer dosing interval and higher exposure as goals at least, right?
So I think, again, it's all suit to purpose and it's hard to be overly specific about it when the number of opportunities are so broad and we're just learning how to use these drugs. But I would say that in general for the field, which is using these Fc containing IgG like platforms for creating bispecific antibodies and certainly Xencor feels it's playing an important role there that the field is about as rapidly as you can plugging in different biologies and testing them. And I think that's why we specifically made our platform as robust and sort of reusable as possible in the standard antibody manufacturing processes just to simplify the engineering part, so if we can focus on what's important, which is the biology. I think once we can start ignoring the nuts and bolts of the engineering tools and focus on making good drugs and studying the biology, that's where you really get the advances like what happened with monoclonal antibodies being humanized 20 years ago.
Absolutely. So the last one for me, just very specific question for XmAb13,673, should we think about an ASH data release? And what is the bar for the efficacy and the safety to constitute a goal decision? Thank you.
Yes, I think we're looking at a Q4 data release hopefully at a medical conference until you know where you're going to present you don't. I never like front run that, but we're targeting Q4 for sure. And I think in gono go, it really depends on having clarity on you've completed your dose selection and escalation and then you can start looking at your numbers relative to the competition. I'm not sure we're going to be all the way there yet at this data release. We might or might not be, but I think we should be able to see given the different subtypes of B cell malignancy that have been studied with bispecifics recently.
Though again, the data sets are not large, these are just 1 or 2 data releases we're talking about. We know we have to have pretty robust activity against different NHL subtypes, multiple different NHL subtypes really feel compelled. And again, I wouldn't want to get into the numbers just yet without having numbers to talk, specifics to talk about.
Thank you so much for your time.
Thank you. And our next question comes from Dane Leone with Raymond James. Please proceed.
All right. Thanks for the call. Congratulations. On 14,045, what's kind of your updated thoughts in terms of how the clinical algorithm has now evolved, what that kind of means for treatment protocol and kind of next steps and what you need to see out of the program in and of itself clinically?
Yes. I think what it really means is the monitoring and treatment of CRS, cytokine release syndrome is getting more specific. And I think also becoming more and more uniform across the field generally as people realize you need to treat it aggressively, rapidly, stabilize patients, then you can really move on. 1, because if you can catch it, it doesn't create this cascade of sort of autocatalytic T cells activating more T cells with more cytokines. But also after initial exposure with CD3 bispecific, that first exposure, the incidence and severity of CRS does go down, right?
And people are seeing this. So I think you want to be aggressive and catch it fast. I think that implication is now spreading around across really across the industry and that's a good thing. I think for this program in particular, we've aside from instituting those kind of CRS protocols, we are also continuing to dose escalate. We of course have to be very mindful of CRS.
There's of course heightened scrutiny now. Just once you have the FDA has around you, they're of course going to keep it on you. But I think we also are right now planning that hopefully this imminent completion of our dose escalation exercise in the next phases of development both exploring earlier line in combination in the right settings as well as this current relapsed refractory line. I wish I could be more specific. We just got the ball rolling again and we should be back on track in a few months.
Is the algorithm sorry, I should probably know this, but is the new algorithm like prophylactic steroids or tocilizumab or something?
The use of prophylactic steroids isn't new. It's certainly been done and we've mandated it. I think it's really more how rapidly and without waiting for full blown CRS symptoms to manifest, there's a number of different symptoms that could be first ones that manifest whether it's fever, whether it's initial hypertension, there's a variety of others that the minute you see any of those assume CRS and start treating for it with additional steroids and or tocilizumab. That's the logic. Once you see that first glimmer, just treat it, because it almost certainly is that and you can really catch it and really save a lot of risk for the patient after that.
That's really what it amounts to.
Yes. We like generally speaking, we haven't really seen an impact on the efficacy with the CAR Ts once you're resolving CRS. Is there any reason to think that the bispecific CD3 T cell redirected antibodies would behave any differently in terms of clinical effect? I
don't think there's any basis for expecting there to be a difference. And I think the data that we've seen published from others that we've seen ourselves, whether public or not public, there doesn't seem to be a strong any kind of signal that you see when you pretreat with either steroids or TOSI that has any effect whatsoever later on. Again, with much larger numbers in the future, we might glean something. But I think so far, it does not seem to be an impediment that is these aggressive CRS treatments do not seem to be impediment for whatever efficacy you might be achieving.
Right. And how many is it like are all the trial sites back open now and enrolling or what's how is it how are
things rolling? Well, we got our first patient on back on last month and I know there's a number that are open. I don't know the full answer to that question. There's a number of sites. There's multiple open.
First patient was on almost exactly a month ago. So I don't know the specifics, though.
Any chance we get an update on the patients because when you had the hold, you still have patients on that were allowed to still be treated and followed. Would we is there any chance we get an update on those patients at least in the back half this year?
Not in the back half of this year. We're targeting next year for that.
Okay. All right. Thank you.
Thank you. And our next question comes from Mara Goldstein with Mizuho Securities. Please proceed.
Great. Thanks very much. Just a quick follow-up and then another question. On the change in protocol for CRF, at some point is tocilizumab mandated in the updated protocol?
I'm trying to remember the verb that was used and I'm the wrong person to ask. I think very you can never dictate a physician's treatment decision of a patient they're caring for. They are always the final word. I think that what you can have in your algorithm is, if you see this kind of symptom, you will treat with this. But of course, that's all under the heading of any clinical protocol and any decision under that is up to the discretion of the physician for what they think is best for the patient.
So I guess in essence, we strongly sort of guide to that, but you could never really dictate what a doctor will do.
Okay. And then just actually a question on guidance because your actual expectation to end year with cash actually went up, which we don't see all that often. And I'm just curious, is that more a function of just the deals in the quarter or in the first half of this year or just forward looking at potential royalty revenue? How should we think about that?
Yes. We try to we're fairly conservative on our guidance because there's a lot of milestones and events from partners we really can't control. I mean sometimes they give us public guidance and we'll use that information. For example, MorphoSys guided on submitting the BLA, that's public knowledge, but it's just updated based on new information that we've had. And like I said, we try to be a little bit conservative on these things.
So when we have more information and better idea for spending as well as milestones, we'll update it.
All right. Thank you very much.
Thank you. And our next question comes from Tom Shrader with BTIG. Please proceed.
Good afternoon. Kind of related questions, as you get into the CD20 trial, are you seeing CRS at the same place? Are you getting confidence that you sort of know where things get tricky and maybe dosing in the future could start higher? Just can you tell us where you are there?
Without getting into talking about data that we haven't pulled together to release yet, I think all of these CD3s do have CRS in all cases reported to date and I could say with our experiences generally that CRS is most pronounced upon the first exposure of the drug and attenuates significantly as you go through as you do your 2nd dose, 3rd dose, etcetera. And that's attenuation in both frequency, how many patients get it and in severity that you see. The tools of the trade that have emerged are in addition to management of CRS in a proactive way and as mandate as much as you can that proactive treatment. The other real tool of the trade is that you do step dosing. You start out with a slightly lower exposure enough to get the T cells going and cause that sort of conditioning that reduces CRS upon subsequent exposures and then you step up the doses on subsequent exposures and doses.
We've implemented that with our 14,045 protocol. It's been shown for CD20, CD3s from our competitors. And I think that's going to be a general tool that you use first exposures, the most delicate sensitive one and the subsequent doses and exposures can be more confidently done. And I think that's really going to help the whole class of drugs be used more confidently. These lessons have all emerged really over the last 2, 3 years.
So the pace of learning for how to use these drugs is really rapid and I'm very optimistic for the future for this whole class.
I guess but you're not saying that the CRS sort of appears at the same level of CD3 binder?
The same amount of dose of drug you meant. I misunderstood your question. Now each drug is going to have a completely different offset, so to speak, of what mass of drug per body mass of patient causes CRS. It depends on the density of the antigen, right, CD123 versus CD20. It's going to also depend on the design of the molecule, how tight of a binder did you make in terms of either the CD3 or the antigen binding, I mean both of those have an impact, a really nice publication by our partner Amgen on their CD38, CD3 program, which was built on our tools, really nice recent publication demonstrates how you can tune those things and completely raise or lower the offset for what dose has caused CRS.
This was in their primate model at least. So it all depends on the program, but the primate is a reasonable way of 0ing in on about where you're going to start seeing it, so far that we've seen with our experience and what we've seen from our partners.
Okay. And then on the Astellas IL-two program, you talked in more detail than I've heard you before. What's the opportunity here? Is it PEG accumulation? Or do you think there's more safety to be had by attuned IL-two?
You have more efficacy?
Our work with IL-two has nothing to do with Astellas. It just we happen to those they're just near each other in the phone call. Our Celeste collaboration is for a bispecific antibody program, not cytokine. Our IL-two program is internal. The idea there is that really tuned potency can give you benefits whether you're trying to jack up the effector T cells like with our IL-fifteen case or the regulatory T cells for autoimmune disease like in our IL-two case.
And so I think that the strongest distinction we have is that we really reduce the potency to try to broaden the therapeutic window as well as slow down the expansion of that antigen sync that you create that sucks away all your drugs. You want to balance out that T cell Treg expansion with the presence of the drug for a while. So I think that's really the opportunity. There wasn't any kind of specific counter engineering we were doing relative to other approaches like PEGylation. It's just we think that an Fc domain is a great way to extend half life and with tuned potency, you really get a double win.
All right, got it. Thank you.
Thank you. And our next question comes from Alethia Young with Cantor Fitzgerald. Please proceed.
Hi. This is Eileen on for Alethia. Thank you very much for taking the question. Just so as these tumor microenvironment antibodies advance through the clinic, can you just discuss the safety considerations that you're most focused on, particularly as we think about, 2717? And then for the initial data for that asset, I believe you mentioned sort of biomarker data that we should be expecting.
But should we be thinking about this in terms of across all of the tumor types in the study? Or can you characterize one that's maybe enrolling well or showing any early efficacy that you might be able to comment on? Thanks.
Okay. So the kind of safety signals that we're looking for really are around the pretty well characterized now immune related adverse events or IRAEs that have been seen across the class of checkpoint inhibitors, but that also seem most pronounced when using an anti CTLA-four therapy like a iptolimimab and that those get even more severe and pronounced and frequent when you combine CTLA-four blockade with PD-one blockade. So even though in indications like melanoma and RCC, you see really promising and usually superior activity of those that combination relative to say PD-one alone, the adverse offense, specifically the IRAEs in their severity and frequency really I think limit use and enthusiasm for those. So how do you get that efficacy with the safety? We tried to design a molecule to be more specific and selective for double positive cells and of course have that those are more prevalent generally believed in the tumor microgram.
And so what we're going to look for is really kind of IRAE profile do we have? How does it as you grow in patient number, how does that stack up against the sort of baseline set by the combo therapy? So it's really all about IRAs and their frequency and severity. And can we have this dual blockade be done in a context where it's more tolerable and easily used and better adapted. And certainly we're looking at all sorts of biomarkers, peripheral and when possible tumor biopsy to look at immune activation, right.
We're doing that in this initial dose escalation across a wide range of indications generally skewed towards those 2 that have seen activity for checkpoint inhibitors that's on the web and the clinicaltrials dot gov entries. I don't think there's really any guidance I can give right now on particular slices or indications of that set just yet, but we're of course characterizing for everybody and the kind of markers we're looking for are things like TF vector count CD8s, also CD4 counts, looking at when possible, again, they're more difficult to get biopsy of tumor and T cells there when possible. So in general, how hard are we activating the immune system efficacy data that we have will obviously share, But how hard are we activating the immune system versus how much how tolerable is it? That's where we'll see whether there's anything really new that we've got with these agents across all of them.
Okay. Thanks so much. That's helpful.
Thank you. And our next question comes from Michael Schmidt with Guggenheim Securities. Please proceed.
Hey, guys. This is Charles Zhu on for Michael Schmidt. Thanks for taking the questions and congrats on the quarter. Broadly speaking, how are you thinking about T cell engagers in solid cancers and how might the 18,087 readout impact your thinking?
T cell engagers, we think should have significant promise. I think it's early days for that for CD3s in solid tumor. I mean, it's early days everywhere, but it's really early days in solid tumor. I think we've all seen glimmers of activity from some programs out there like the CEACD3 program, from Roche. So I think that it's early days and I think that we're going to learn a lot by how these initial set of molecules perform and what kind of design decisions we made around them and what kind of activity and tolerability we see.
Obviously, the issue with solid tumors is that those antigens tend to be expressed all over the place. It's not just in the tumor, they tend to be a lot less restricted than hematologic malignancy targets or even in the cases where those are unhealthy tissue, those are on heme cells and depleting those often can be tolerated. So I think we've got this tolerability and selectivity issue and how we design these bispecifics, whether we valencies like 1 to 1, 2 to 1, the affinities that we pick for our CD3s and how hot we make these molecules, those are all going to be a lot of learnings. So whatever specific learnings we see around the efficacy, tolerability window for 18087, I think they're going to play into that generally. And every solid tumor is also different.
I think it's really dangerous to lump these altogether. Neuroendocrine just within 18087, the neuroendocrine tumor, both the way the patient presents, the way the tumors are distributed, their treatment history like in these NET patients they've often been treated for many, many years. It's rather indolent, but it can relentlessly grind on and are generally unresponsive. And then we're looking at gastrointestinal stromal tumors and these GIST tumors have a whole different set of behaviors. So I don't think you can over generalize, but I think in general that selectivity and can you get efficacy against the tumors and activate that tumor, the T cells around that tumor and how it plays against safety is going to be the big data sets we're all going to learn from all of these solid tumor programs out there.
Got it. That makes sense. And given that the dual checkpoint or co stimulatory bispecifics have a similar design rationale where bivalent interactions result in enhanced avidity. How much read through would you say with the XmAb207 17 readout have on 23,104 and 22,841?
I wouldn't over read out anything there. I think that the targets are really quite different. And whether you can get an avidity effect for binding, that's great, but those targets are all expressed with different kinds of densities at different sort of stages of T cell exhaustion. I wouldn't overstate the read through there.
Okay. And last question from me. How many patients do you think you'll have treated by the 4Q update for the CD20 bispecifics? And if you could provide any incremental color around how many you would anticipate within the therapeutic doses? Thank you.
I really don't think we can comment on that at this time. We've certainly been working through quite a number of dose escalation cohorts, as is typical for a CD3 bispecific given the policy set by regulators around where you can start. So I just I wouldn't want to try to guide too specifically the numbers. I think it should be enough numbers to see what's going on. I don't know if that's terribly helpful, but until we're ready to really lay it out, it's really I think it's imperative for me to say in particular because the trial is moving very rapidly.
Got it. Thanks for taking the questions.
Thank you.
Okay. And I am currently showing no further questions in queue. I'd like to turn the call back over to Vasyl Dahiyat for closing remarks.
Thank you, operator, and thank you all for joining today's call. We look forward to updating you all again later this year.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.