Good afternoon. Welcome to the Xencor Third Quarter 2018 financial results conference call. At this time, all participants are on a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the company's request. At this time, I would like to turn the call over to Charles Liles, Associate Director and Head of Corporate Communications and Investor Relations at Xencor. Please proceed.
Thank you, operator. Good afternoon. This is Charles Liles with Xencor. Earlier this afternoon, we issued a press release which outlined the topics we plan to discuss today. The release is available at xencor.com. Today on our call, Bassil Dahiyat, PhD, President and Chief Executive Officer, will discuss the company's business highlights. Paul Foster, MD, Senior Vice President and Chief Medical Officer, will provide an update on Xencor's clinical programs. John Kuch, Senior Vice President of Finance and Chief Financial Officer, will review the financial results from the third quarter. We will open up the call to 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, plans and objectives of management for future operations, 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 Xencor's 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 Xencor's 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 welcome aboard at Xencor. Good afternoon, everybody. At Xencor, we engineer monoclonal antibodies with dramatically enhanced biological functionality and performance versus their natural counterparts. Our proprietary XmAb technology focuses on the bottom half of an antibody structure, its Fc domain, which we tweak to produce antibodies with improved potency, a longer half-life, or bispecific structure. Over the last 15 years, we've created a large intellectual property base around these novel Fc domains, which has enabled us to build a broad and diverse portfolio, with 12 XmAb-based candidates currently being evaluated in the clinic, both internally and by our partners. Recently, we announced data from two internal programs. The top-line results from our phase II study of XmAb5871 in systemic lupus erythematosus, or SLE. That was in October.
Just last week, encouraging initial data from our ongoing phase I clinical trial of XmAb14045 in acute myeloid leukemia, or AML, which we'll present more fully next month at ASH. As you know, XmAb14045 is the lead candidate from our bispecific oncology pipeline. While the first-in-human data from our bispecific platform is a milestone for Xencor, we also believe it is reflective of the emergence of bispecific antibodies as a major part of the field of antibody therapeutics. The concept of bispecific antibodies has been around for decades because the idea of binding two antigens at once to greatly increase the breadth of biology the antibodies can do is highly attractive. The field is only just starting to make progress towards that potential because of the creation of new molecular engineering tools.
We believe the situation today for bispecifics is analogous to that for therapeutic antibodies around 20 years ago. After a decade of limited utility as a therapeutic class, humanization technologies emerged only when they were able to avoid immune rejection by the body, which started the massive expansion of the field. That was the development of humanization technology. In parallel now, the field is developing bispecific antibody technologies. The main challenges with bispecific antibodies had been that they lacked the long half-lives in vivo, high stability, and ease of manufacturing that regular antibodies have, because to create bispecific binding, which is a non-natural property, most designs eliminated Fc domains and simply stitched two different antigen binding domains together. These missing properties are what make antibodies such good drug platforms, however, and those properties they in large part do come from antibodies having Fc domains.
About six years ago, we began working to create bispecific antibodies that contain Fc domains. We used our long experience in Fc engineering. We engineered domains that spontaneously form bispecific structures and can be decorated with nearly any antigen binding domains. They can be made using standard antibody production techniques, and they have antibody-like half-lives. This plug-and-play platform is very flexible and has enabled the rapid and simultaneous development of a wide range of bispecific molecules addressing a breadth of targets. We hope to put Xencor at the forefront of the next wave of antibody engineering, which has the potential to deliver new treatments in oncology and other areas. I'll come back to this later. For now, I'll turn it over to our Chief Medical Officer, Paul Foster, to review our recent clinical data readouts, starting with XmAb5871.
Thanks, Bassil. XmAb5871 is our first-in-class monoclonal antibody that targets CD19 with its variable domain and uses our XmAb immune inhibitor Fc domain to target Fc gamma receptor IIb, a receptor that inhibits B-cell function. While B-cell inhibition is a proven strategy for many autoimmune diseases, we believe 5871 offers patients and physicians a potentially differentiated therapeutic option because of its subcutaneous delivery format and its highly potent and broad blockade of B-cell activation occurs without depleting or destroying B cells. This means that the natural immune system is able to function normally once treatment is no longer needed. We are currently advancing 5871 for the treatment of IgG4-related disease, or IgG4-RD, a newly defined disease characterized by tumor-like swelling, a variable degree of fibrosis, and potentially irreversible organ damage, plus lymphoplasmacytic infiltrate in the affected organs.
Following encouraging data from our phase II trial last year, Because IgG4-RD is a recently characterized disease with no therapeutic options or regulatory precedents for approval, we have been working closely with the U.S. Food and Drug Administration to finalize the trial design and protocol for a proposed phase III study. We expect to initiate a randomized, placebo-controlled, double-blinded phase III study evaluating the addition of 5871 to the standard of care corticosteroids in approximately 200-250 patients with IgG4-RD by early in 2019. In SLE, we reported encouraging top-line results from our phase II study of 5871 at the American College of Rheumatology, or ACR, annual meeting in October. As we described before, this study used a novel trial design intended to more rapidly assess 5871's effect on SLE with a shorter time to endpoint and with fewer patients compared to standard SLE studies.
We enrolled 104 patients with moderate to severe non-organ-threatening SLE. Patients discontinued their background immunosuppressant medications after receiving a short course of IM steroids to quiet their SLE disease activity. Patients who achieved the required dose improvement were then randomized one to one to receive 5871 or placebo every 14 days for up to 16 doses. The primary endpoint of the study was the proportion of patients with no loss of improvement, or LOI, in the efficacy-evaluable population, defined as those who completed date 225, experienced LOI, or discontinued due to a drug-related adverse event. LOI was defined as an increase of greater than or equal to four points on the SLE Disease Activity Index, or SLEDAI scale, or a new British Isles Lupus Activity Group, or BILAG, A or B score. Importantly, physician intent to treat with rescue therapy.
While the study did not achieve statistical significance on the primary endpoint, data trended positively, with improvement maintained at day 225 by 42% of the patients treated with XmAb5871 compared to 28.6% of patients treated with placebo. Additionally, the efficacy-evaluable population excludes 10 placebo patients and two XmAb5871-treated patients who withdrew from the study for reasons other than LOI or adverse events. These exclusions led to higher placebo response rates compared to the intent to treat population. In the intent to treat population, improvement was maintained by 40.4% of patients in the XmAb-treated arm, compared to 23.1% of the patients in the placebo arm at day 225. Predefined secondary endpoints included evaluations of time to loss and improvement and safety and tolerability.
XmAb5871-treated patients in the efficacy evaluable population experienced a statistically significant longer time to loss of improvement compared to placebo-treated patients, a 76% improvement in median time to LOI, and a 47% reduction in the risk of LOI. Safety was consistent with previous trials. We are encouraged by these results, which mark the third autoimmune disease to demonstrate responsiveness to XmAb5871 treatment. As we devote our internal resources to developing 5871 and IgG4-RD, we look forward to exploring potential partnership opportunities to further develop XmAb5871 for SLE. I'll now turn to our bispecific pipeline. At the American Society of Hematology meeting next month, we will share initial clinical data from an ongoing phase I trial of XmAb14045, a CD123/CD3 bispecific antibody in development for acute myeloid leukemia and other CD123-expressing hematologic malignancies.
As we discussed in the abstract released last week, these early data show encouraging signs of efficacy in a heavily pretreated population for weekly administered 14045. At the time of data cutoff, 63 patients with relapsed or refractory AML and one patient with B-cell acute lymphoblastic leukemia were enrolled. These patients had a median age of 61 years, had experienced a median of three prior therapies, and 30% had undergone prior allogeneic stem cell transplantation. To date, a maximum tolerated dose has not been determined. As expected, cytokine release syndrome, or CRS, was the most common adverse event occurring in 77% of patients and was generally managed with pre-medication. Seven patients, or 11%, experienced Grade 3 or Grade 4 CRS.
Regarding efficacy, 23% of evaluable patients at the two highest dose levels studied, 1.3 and 2.3 micrograms per kilogram, with AML, achieved either a complete remission or a complete remission with incomplete hematologic recovery. While the AML treatment landscape has improved in recent years with the approvals of new drugs, there remains an urgent need for effective new therapies. Based on these early data, we believe 14045 may have meaningful potential, and we look forward to continuing to optimize our dosing regimen as we progress through phase I. I'll now turn it back to Bassil to review our bispecific antibody platform and earlier-stage pipeline.
Thanks, Paul. As we outlined at the start of the call, all our bispecific antibodies are built on our proprietary XmAb Fc domain to preserve natural antibody stability, long half-life, and ease of production. This plug-and-play approach provides great flexibility for designing a range of different bispecific structures. To date, we've created seven bispecific oncology candidates, which can be grouped into three distinct classes. The first and most advanced group are our CD3 bispecific antibodies, XmAb14045, XmAb13676, and XmAb18087. These compounds are tumor-targeted antibodies that contain both a tumor antigen binding domain and a cytotoxic T cell binding domain, CD3 binding domain. They activate T cells at the site of the tumor in order to potently kill malignant cells. Now, all three of these CD3 bispecific antibodies are in phase I development.
In addition to the XmAb14045 data described by Paul, we expect to report initial clinical data in 2019 for XmAb13676, our CD20 x CD3 bispecific antibody for B-cell malignancies, and XmAb18087, our SSTR2 x CD3 bispecific antibody for neuroendocrine tumors and gastrointestinal stromal tumors. Our next class 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 eliminates the need for the multiple antibodies usually used for combination therapy, but allows for more selective targeting of T cells with high checkpoint expression, which are typically overrepresented in the tumor microenvironment.
We currently have three TME activators in development, each testing a distinct mechanism for TME activation. First, XmAb20717, a PD-1 x CTLA-4 bispecific antibody is currently being evaluated in a phase I trial for patients with advanced solid tumors. We dosed the first patient of this study, which we call DUET-2, in July 2018, and we expect to report initial data on safety, tolerability, pharmacokinetics, pharmacodynamics, immunogenicity, and preliminary antitumor activity in 2019. Additionally, the IND for XmAb23104, our PD-1 x ICOS bispecific antibody, was recently allowed to open by the FDA, and we expect to initiate a phase I trial in patients with select solid tumors in 2019. We also plan to submit an IND for XmAb22841, our CTLA-4 x LAG-3 bispecific antibody, by year-end, and to initiate a phase I trial in multiple oncology indications next year.
Finally, we're developing a suite of bispecific cytokines, which contain both cytokine and cytokine receptor domains to selectively expand and activate immune cells that can be recruited against tumors. The first of these programs is XmAb24306, an IL-15 therapeutic, which we designed specifically to create sustained T cell and NK cell expansion via modulated potency and builds it upon an XmAb bispecific Fc domain that contains our extend technology for longer half-life. We hope that it will provide a more druggable version of IL-15 with improved tolerability, slower receptor-mediated clearance, and prolonged half-life. We expect to submit an IND for XmAb24306 in multiple oncology indications in 2019.
We believe this broad pipeline of bispecific oncology candidates provides us multiple distinct opportunities to impact the treatment of patients with cancer, and we're committed to exploiting the full potential of our bispecific platform, both internally and through potential collaborations. To that end, business development remains a key pillar of our corporate strategy, in large part due to the flexibility of our platform. Licensing transactions provide us with multiple revenue streams that help fund the development of our most promising wholly owned product candidates while requiring limited resources from our internal team in providing external validation of our XmAb technology. Today, eight pharmaceutical companies and the National Institutes of Health are advancing novel drug candidates that were either discovered at Xencor or that rely on our XmAb technology for bispecific structure, higher cytotoxicity, longer half-life, or improved stability.
Four such programs are currently in clinical development, including MOR208, a compound which we discovered and initially developed internally at Xencor and which MorphoSys is evaluating in multiple pivotal trials for patients with relapsed or refractory large B-cell lymphoma, diffuse large B-cell lymphoma, or DLBCL. A compound called AMG 424, a CD38 x CD3 bispecific antibody is being progressed by Amgen into phase I for patients with multiple myeloma, and they initiated that trial this past quarter. Additionally, in the third quarter, we received $9 million in milestone payments from Alexion in connection with their recent submission of marketing authorizations for ALXN1210 to the FDA and EMA for patients with paroxysmal nocturnal hemoglobinuria or PNH. In October, Alexion announced that it has submitted an additional marketing authorization to regulatory authorities in Japan and that the U.S. FDA set a review date for its application in February 2019.
Under the terms of our collaboration with Alexion, we'll be eligible for additional regulatory milestone payments of up to $28 million and sales milestones up to $30 million, in addition to royalties on future sales of ALXN1210. With that, I'll turn the call over to our Chief Financial Officer, John Kuch, to review our third quarter 2018 financial results.
Thank you, Bassil. Xencor continues to operate from a strong financial position. In this afternoon's press release, we reported cash equivalents, and marketable securities totaling $547.8 million as of September 30, 2018, compared to $363.3 million on December 31, 2017. This increase reflects net proceeds of $245.5 million from our underwritten public offering in March 2018, partially offset by cash used to fund operating activities in the first nine months of 2018. Before turning to our third quarter P&L, I'd once again like to remind everyone that our financial statements reflect adoption of Accounting Standards Codification Topic 606, the Financial Accounting Standards Board's revised accounting rules on revenue recognition, which went into effect this year. The company earns revenues from technology licensing fees and milestone payments from our partners for the license of our drug candidates and use of our proprietary XmAb antibody engineering technologies.
As such, we adopted ASC 606, effective January 1 of this year, and revised revenue report for the prior period ending September 30, 2017, to reflect this new standard. Revenues for the three months ended September 30, 2018 were $29 million compared to no revenue reported for the three months ended September 30, 2017. Revenues for the nine months ended September 30, 2018, were also $29 million compared to $16 million for the nine months ended September 30, 2017. Revenue in the three and nine-month periods ended September 30, 2018, were from revenue recognized under our Novartis collaboration and milestones received under our Alexion collaboration. This compares the revenue from the same period in 2017, which were from milestones received under our CSL and MorphoSys collaborations.
Research and development expenditures for the three months ended September 30, 2018, were $21 million compared to $19.4 million for the three months ended September 30, 2017. R&D expenditures for the nine months ended September 30, 2018, were $70.4 million compared to $51.4 million for nine months ended September 30, 2017. Increased R&D spending in the three and nine months ended September 30, 2018, over R&D spending in the same period as 2017 is primarily due to additional spending on our expanding pipeline of bispecific oncology candidates. General administrative expenses for the three months ended September 30, 2018, were $7.4 million, compared to $4.2 million for the three months ended September 30, 2017. G&A expenses for the nine months ended September 30, 2018, were $17 million, compared to $13.1 million for the nine months ended September 30, 2017.
Increased G&A spending in the three and nine months ended September 30, 2018, over G&A spending in the same period 2017 reflects additional compensation costs, including increased stock-based compensation charges. Non-cash share-based compensation expense for the second quarter ended September 30, 2018, was $15.5 million, compared to $10.2 million for the same period in 2017. Net income for the three months ended September 30, 2018, was $3.2 million, or $0.05 on a fully diluted per share basis, compared to a net loss of $22.7 million, or $0.48 on a fully diluted per share basis for the same period in 2017. Net income for the three months ended September 30, 2018, over loss reported for the same period in 2017 is primarily due to revenue recognized from our Novartis and Alexion collaborations in 2018.
Net loss for the nine months ended September 30, 2018, was $52.2 million, or $0.98 on a fully diluted per share basis, compared to a net loss of $45.9 million, or $0.98 on a fully diluted per share basis for the same period in 2017. The increased revenue for the nine months ended September 30, 2018, over amounts for the same period in 2017 was offset by increased spending in R&D in 2018. The earnings per share loss for the nine months ended September 2018 was equal to the earnings per share loss in 2017 due to the increase in shares outstanding during 2018. Total shares outstanding was 56,212,449 as of September 30, 2018, compared to 46,955,365 as of September 30, 2017. The increase in total shares reflect our underwritten public offering of approximately 8.4 million shares in March 2018.
Based on our current operating plans, we expect to have cash to fund research and development programs and operations into 2023, and to end 2018 with approximately $525 million in cash equivalents, and marketable securities. With that, we'd now like to open the call up for your questions. Operator?
Thank you. Ladies and gentlemen, if you have a question at this time, please press star then the number one key on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, to ask a question, that's star one. Our first question is from Ted Tenthoff with Piper Jaffray. Your line is open.
Great.
Thank you very much for the update, guys. I'll save the questions on the ASH data for presentation when we're out in San Diego. I have kind of a higher level question. Just as the bispecific pipeline advances, obviously decisions are gonna be data-driven, but how do you foresee balancing which drugs to keep, which drugs to potentially partner? How will you be making those kinds of decisions with such a rich pipeline?
Thanks, Ted. We've been stating our strategy for a while now as use both the data and the market potential and clinical and commercial costs and infrastructure needed for a program to sort of guide our thinkings on a program. We've always worked to create a diversity across those different parameters within our pipeline. We've selected some indications as small ones with a very high unmet need, small in terms of the number of patients, in terms of the kind of marketing approach you'd have to have, because we do have ambitions to be a commercial organization one day. Those small indications would be exemplified by our molecules in AML, XmAb14045, and neuroendocrine tumors and GIST, XmAb18087. Those are molecules that if the data bears out, could be molecules we could potentially take forward alone.
I'll remind you that for 14045, though it is partnered with Novartis commercially
In the outside of U.S. territories. In the U.S.-
US
we have full commercial rights. I think for other assets like our tumor microenvironment bispecifics, we've been stating this since we kicked off those efforts a couple of years ago, we view those as ones where we want to build scientific knowledge of the different hypotheses we're testing for the tumor microenvironment between, say, XmAb20717 versus XmAb22841. As we build data around those hypotheses, for the ones with strong data, we feel we'll be very well-positioned to find partnerships that can let us retain a larger fraction of commercial potential, though we do think that broad solid tumor drug development in the late phase, in particular in immuno-oncology, would be challenging as well as-
Yeah
marketing would be even more challenging for a smaller organization. We sort of balance it that way. I hope that gives clarity on how-
Yep
we view the specifics of our pipeline.
Makes a lot of sense. I appreciate it. Thanks so much.
Thank you. Our next question is from Jonathan Chang with Leerink Partners. Your line is open.
Hi, guys. This is David Ruch dialing in for Jonathan. Thanks for taking my questions, and congrats again on the progress. First question, could you help to set investor expectations ahead of ASH in terms of how much more data we could see versus what was disclosed in the abstract?
Yeah. It's only a few months of additional time between data cutoffs, and we'll of course show any new data on patients that we didn't have to disclose prior and be able to discuss some of our thinking for going forward around regimens, but perhaps not in exquisite detail. Does that sort of answer your question? I don't want to suggest anything about data we might show in a few weeks right now.
No, that's helpful. Thank you. Second question is just with regard to other CD123 presentations expected at ASH. We touched on this a little bit on the call already. How are you thinking about the competitive landscape there, and what are some things you'll be looking for in those competitor presentations?
Well, I think, for us, we've tried to be the leader in having an agent that can be delivered intermittently. That is, our initial dosing schedule is weekly. We're obviously going to work on optimizing the regimen, but our goal is to have something that can be delivered in that weekly timeframe, at least at steady state. That's how we position ourselves. That's an important, I think, movement for the whole bispecific antibody field, having dosing that can be done as a regular therapy when you come into the hospital, come into the physician's office to get your drug, and then you don't have to be there or have to have drug continuously infused. I think that's an important differentiator parameter that we view as really important for our whole CD3 portfolio.
I think you have to look at that combination of how tolerability and response rate play off of each other. I think we're well-positioned in both at the outset of our work in this phase I, now we're getting down to the next step of trying to find the best possible regimen.
Great. Thank you, and congrats again.
Thank you. Our next question is from Arlinda Lee with Canaccord Genuity. Your line is open.
Hi, guys. Thanks for taking my questions. Maybe first on the patients that were enrolled in your phase I XmAb14045 trial, can you characterize these patients and whether those overall patient characteristics were representative of those treated at your go-forward 1.3 micrograms per kilogram dose and the higher one, 2.3?
Well, first, I want to caution, we're not posing those as go forward dose. Those are where we got to in our weekly. We're also looking at other doses and dosing regimens. Putting that aside, without getting out of ourselves, just to be clear we understand your question is how representative were the patients at those 2 dose levels of the overall population in our trial? What we disclosed in the abstract was sort of the overall population. Nobody was selected or stratified. I don't know, Paul, if the details you can even really get into right now.
I can't get into right now. I don't have it at my fingertips. We don't expect they're any different from the overall population.
Okay. Can you talk about the overall population, the 30% allogeneic stem cell transplant, how at median three prior therapies, those strike me as fairly sick patients, but I would love to hear what you guys think. How sick were the patients that you enrolled?
Well, this was a relapsed refractory disease, we were trying to dose escalate, there were exclusion criteria, but it was a pretty broad set. We got a lot of really sick patients. Paul, if you want to elaborate on this.
They do not get a whole lot of extra therapy in this disease. You relapse a couple times, and that is usually as long as they survive. This is a very sick population. We took all comers that were relapsed refractory. The allo transplants, these are patients who have failed allo transplants, so they either had relapsed after that or were primarily refractory to that transplant. Very sick population.
Okay, great. Thanks. Maybe one for John on the milestones. What constituted the rest of the $20 million in revenue thing?
Yes. Well, there was two pieces of revenue of the $29 million. $9 million was a milestone from Alexion, and $20 million was recognized under the Novartis collaboration related to-
Delivery of one of the bispecifics under the contract. That was just out of deferred revenue.
Okay, got it. Thanks. Thank you. Our next question is from Bill Tanner with Cantor. Your line is open.
Yeah. Thanks for taking the question. Bassil, I had a couple for you, if I could, on XmAb7195. You mentioned the likelihood of partnering the asset for SLE, and I think you've talked in the past about keeping IgG4-RD, and just some commentary on being able to thread the needle there, in terms of being able to keep something in partner something and, depending on the circumstances, sometimes that's maybe less tenable than others. And then, the other one on 5871. Sorry. And then the other one on 5871, just on the SLE results, just any read-through or not, any commentary on IgG4-RD.
Yeah. On the partnering front, just to be clear, I would anticipate a partnership for this program would be around all indications.
Okay.
I know that can get tricky when you're juggling multiple indications, but I think that the way I've tried to pose it has been, in a go-it-alone scenario where a lupus trial had not worked out in a way that suggested there was future potential, and we think it certainly did work out in a way that suggests its future potential. In that scenario, we would pursue alone IgG4-related disease, and try to build from there, because that is a smaller indication. There's not a deep competitive landscape there, like in some other autoimmune diseases like in rheumatoid arthritis. In the context of partnering, you really do need to put all the indications together, but I think that a partnership that we could draw what the most successful kind of partnership would be, it would involve us retaining some kind of commercial rights around all indications by territory.
Ideally in the United States, I think that's the only one that makes sense. Retaining some portion of that commercial marketplace for ourselves. That's how we view partnerships now in the context of having lupus data that suggests there's potential going forward in that disease. Yeah, we wouldn't split indications. If I suggested that, I'm sorry for the confusion.
No. Sorry, you didn't suggest. You would contemplate that the partner would likely carry most of the freight for
Yeah
the SLE?
Yes. That's right.
Okay. Got it. Yep.
That's right. On the issue of read-through from lupus to other diseases like IgG4-RD, Paul, you want to comment on that?
We've seen a positive trend now in rheumatoid arthritis and IgG4-RD and lupus. We think this is a very active molecule in the autoimmune space. It's hard to try and correlate response in one to a specific disease. We think it has potential broad applications.
Got it. Bassil, maybe then back on XmAb7195 that I misspoke about at first. I know you've been talking for a number of quarters about potential partnering. Any progress there? Anything to share?
It's been challenging. I'll be clear.
Okay.
It's been challenging. The landscape in allergic disease has shifted a lot in the last couple of years with the advent of a number of other agents, biologics as well. That's been difficult. We still see that there's value in the asset, it's been a hard slog.
Are people looking then at more direct cytokine blockers then as cleaner, perhaps, as it were and
I don't know about cleaner. I think the most simple mechanism for blocking allergic responses is still blockade of IgE, which is at the base of how that response then expands, it's at the base of going from allergic recognition to actually the cascade of inflammatory consequences. I think it's been a combination of new agents. Those new agents having, I would say, challenging launches, or maybe not quite as explosive as was hoped and just overall landscape is getting a little more crowded and seems a little tougher commercially.
Yep. Okay. All right. Thanks very much.
Thank you. Our next question is from David Nierengarten with Wedbush Securities. Your line is open.
Hey, thanks for taking the question. I just had a quick couple. Maybe to follow up on an earlier question, to be clear, have you continued dosing at higher levels for 045, or are you working on different dose schedules, or are you just straight up continuing the dose escalation?
I would say yes to both.
Okay. Fair enough, yeah. Higher doses, maybe different schedule. Okay, good.
Yeah.
Yeah. Okay, cool. The second one, I think you had prior guidance for starting the IgG4-RD phase III this half, and you're just talking about early 2019. Is there any reason for pushing it out a little bit? Is it getting sites on board or anything else we should know about? Thanks.
I think, currently we're in the midst of working through the process with FDA and finalizing trial specifics. Since this is the first randomized study in IgG4-RD, and we're trying to be very thoughtful with trial design to best support establishment of clinical benefit at the end of the trial.
Okay. Thanks.
Thank you. As a reminder, if you wish to ask a question at this time, that's star one. Our next question is from Tom Schrader with BTIG. Your line is open.
Hello. Thank you for taking the questions. I just wanted to get a little bit of a sense of the SLE data. Is there anything you could've seen that would've made you say, "This is the one"? Was it always just sort of a quick way to get a read on inhibition of B-cells? Just your thoughts there. Along those lines, did you have a good sense of what really good data would look like based on kind of a novel trial design?
Just to be clear, when you say that this is the one, that if this trial design I wasn't clear on that first part.
I mean, what would it have taken for you to say, "We're going to fund phase III here?" Was that never on the table?
That was never on the table that we would fund phase III ourselves because the combination of the safety data you'd need, the infrastructure you'd need to do the trials that would have to be large enough in order to power things properly. I think I'll let Paul speak to what our thoughts were on what a meaningful effect would be and how that drove the powering of the study and then what we did see.
We picked what we thought would be a clinically meaningful effect in terms of response over placebo like you do in most trials. We didn't quite hit it on this trial, but we think this is a positive trend. Most people we've talked to all think this is a true signal. The trial design itself. This is not a registrational trial design. This is a trial design that really puts stress on showing a positive response because you're in fact inducing a situation where these patients are going to relapse because you've taken them off their background immunosuppressants. You've cooled them down initially with corticosteroids, and then they will all eventually have a flare. We put the drug in that situation, and we've shown that we're able to at least have a certain landmark in time have a greater proportion that didn't flare.
Those that did, we have a much longer time to that event occurring. We see this as very positive.
Okay. If I can, on the DUET, is it really response data that matters, or do you think demonstration that you can push doses or get to dose levels or inhibition levels that can't be gotten to with the individual antibodies? Are you going to look for that kind of stuff, or are we really looking for response data here?
Yeah. You're talking about the XmAb20717 study or the DUET-2 study, which is our PD-1 CTLA-4. I think what you're getting at is, people have tried and have been forced to try a lot of different dose level combinations-
Right
for those two targets because of toxicities that emerge, in particular probably from CTLA-4 blockade, right?
Right.
I think it is very important to see how high we can escalate dose if the selectivity we built into the molecule to favor binding and therefore in a blockade of the two targets on the double positive cells to see if that changes therapeutic window. I think that is an important metric. I think we do want to tie that maybe with that higher therapeutic window into some kind of response activity. I think we've got to be careful in the very small number of patients we'll have in our first data readout to try to not do direct head-to-head numerical comparisons. I think response data activity of the molecule being demonstrated early is important for us to have confidence going forward. You hit on a good point.
Can we open up that therapeutic window? Will that allow us the possibility of having a higher response later in studies when we have more patients?
Okay, perfect. Thank you.
Thank you. That does conclude our Q&A session for today. I'd like to turn the call back over to Xencor for any further remarks.
Thanks very much, operator, and thank you all for joining today's call. We look forward to updating you again soon as we conclude 2018 and enter 2019 with several data readouts and new clinical trial initiations on the horizon. Thank you again.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a great day.