Revenue and Financial Performance - The company recorded royalty revenues of $70.3 million, $22.1 million, and $17.8 million in the first, second, and third quarters of 2022, respectively, related to sales of sotrovimab[133]. - Approximately $27.2 million in revenue was generated from partnerships and collaborations during the quarter ended September 30, 2022[131]. - Total revenues for the three months ended September 30, 2022, were $27.3 million, an increase of $7.6 million compared to $19.7 million in the same period of 2021[173]. - Royalty revenues for the three months ended September 30, 2022, were $27.2 million, up from $13.4 million in the same period of 2021, representing a 102.99% increase[173]. - Total revenues for the nine months ended September 30, 2022, were $143.0 million, up from $121.1 million in 2021, representing an increase of $21.9 million[183]. - Royalty revenue surged by $108.5 million to $135.9 million for the nine months ended September 30, 2022, compared to $27.4 million in 2021[183]. - The company reported a net loss of $43.1 million for the nine months ended September 30, 2022, compared to a net income of $9.6 million in 2021, a decline of $52.7 million[183]. - The net loss for the three months ended September 30, 2022, was $32.8 million, a reduction of $7.4 million compared to a net loss of $40.2 million in the same period of 2021[173]. - Other income, net decreased significantly to ($2.2) million for the nine months ended September 30, 2022, down from $57.5 million in 2021, a change of $59.7 million[189]. Research and Development - The company initiated a Phase 1 study of XmAb808, targeting B7-H3, and XmAb662, an IL12-Fc cytokine candidate[134]. - XmAb564 demonstrated a 117-fold mean peak expansion over baseline in CD25bright cells in a Phase 1a study, indicating significant Treg expansion[145]. - The company is currently enrolling patients in multiple clinical trials for six wholly owned or co-development candidates targeting various cancers and autoimmune diseases[135]. - The company plans to submit an IND application for XmAb662 and initiate a Phase 1 study in patients with advanced solid tumors in 2023[155]. - The company is conducting a Phase 1 study to evaluate XmAb819 in patients with advanced clear cell renal cell carcinoma[147]. - The company has decided to discontinue further internal development of tidutamab and XmAb841 due to lack of competitive clinical profiles[148]. - The collaboration with Amgen for the development of AMG 509 has shown encouraging preliminary pharmacodynamic activity in a Phase 1 study for prostate cancer[161]. - The company plans to present data from the Phase 2 study of vudalimab at the Annual Meeting of the Society for Immunotherapy of Cancer in November 2022[136]. Expenses and Cash Flow - Operating expenses for the three months ended September 30, 2022, totaled $65.7 million, an increase of $4.7 million from $61.0 million in Q3 2021[173]. - Research and development expenses increased by $2.7 million to $53.3 million for the three months ended September 30, 2022, compared to $50.6 million in the same period in 2021[179]. - Total research and development expenses for the nine months ended September 30, 2022, were $148.1 million, an increase of $6.6 million from $141.5 million in 2021[187]. - External research and development expenses decreased by $9.0 million to $66.5 million for the nine months ended September 30, 2022, compared to $75.5 million in 2021[187]. - Cash provided by operating activities was $48.9 million for the nine months ended September 30, 2022, compared to cash used of $78.6 million in 2021, an improvement of $127.6 million[191]. - Cash used in investing activities increased by $90.2 million to ($144.3) million for the nine months ended September 30, 2022, compared to ($54.1) million in 2021[190]. - As of September 30, 2022, the company had $654.6 million in cash, cash equivalents, receivables, and marketable debt securities, a decrease from $664.1 million as of December 31, 2021[196]. - The company anticipates that existing cash, cash equivalents, marketable securities, and potential milestone payments will fund operating expenses through the end of 2025[198]. Regulatory and Compliance - Sotrovimab received an EUA from the FDA for treating mild-to-moderate COVID-19 in high-risk patients, with temporary authorization in over 40 countries[131]. - The company recorded a receivable of $3.2 million related to the U.S. Government Employee Retention Tax Credit (ERTC) Program[134]. - The company has over 1,300 issued and pending patents worldwide to protect its XmAb technology platform and drug candidates[169]. - There were no off-balance sheet arrangements during the periods presented[199]. - No material changes occurred in the company's contractual obligations during the three months ended September 30, 2022[200]. - There have been no material changes in the quantitative or qualitative aspects of the company's market risk profile[202]. - The company's disclosure controls and procedures were evaluated as effective as of September 30, 2022[204]. - There were no changes in internal control over financial reporting that materially affected the company during the three months ended September 30, 2022[206].

| --- | --- | --- | --- | --- | |--------------------|-------|-------|-------|-------| | | | | | | | Proteins by Design | | ® | | | Forward-Looking Statements Certain statements contained in this presentation, other than statements of historical fact, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding Xencor's development plans and timelines; potential regulatory actions; ...

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $31 million, and for the first six months, it was $115.6 million, primarily from royalty revenue related to partnerships with Vir and Alexion [20][21] - Total cash equivalents, receivables, and marketable debt securities at June 30, 2022, totaled $679.7 million, an increase of approximately $50 million from the beginning of the year [21][22] - The company updated its year-end guidance, estimating a cash balance between $550 million and $575 million by the end of 2022, sufficient to fund R&D programs through the end of 2025 [22] Business Line Data and Key Metrics Changes - The company has three royalty-producing marketed products, including ULTOMIRIS, which received a positive opinion from CHMP in Europe for generalized myasthenia gravis [8] - The company is advancing multiple clinical programs, including XmAb-564, plamotamab, and vudalimab, with data presentations planned through the end of the year [12][13][14] Market Data and Key Metrics Changes - The company is exploring external collaborations to enhance its technology for creating new drug molecules, exemplified by a partnership with Caris Life Sciences for target discovery [9] - The competitive landscape includes other companies like Amgen, which is advancing similar bispecific programs [18] Company Strategy and Development Direction - The company aims to utilize proof-of-concept data from early-stage studies to guide its development portfolio, focusing on programs with the greatest potential for success [6][7] - The modular approach and engineering tools allow the company to create a broad internal development portfolio in oncology and autoimmune diseases [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to avoid accessing public markets for capital for over four years due to revenue from strategic licensing and collaboration agreements [7] - The management highlighted the importance of differentiating their IL-15 assets from competitors, emphasizing a systemic therapy approach compared to local delivery methods [36][38] Other Important Information - The company is initiating a Phase I study of XmAb808, a CD28 targeting bispecific antibody, in combination with pembrolizumab [19] - The company is also exploring various immune indications for its IL-2 Fc program, with plans to disclose initial indications in the coming months [41] Q&A Session Summary Question: Can you talk about the B7-H3 target and its competitive landscape? - Management indicated that B7-H3 is a broadly expressed target across various solid tumor histologies and expressed no immediate concerns regarding recent adverse events reported by competitors [27][28] Question: What are the differentiating factors for your IL-15 assets compared to competitors? - The company highlighted that their IL-15 program is designed for systemic therapy, contrasting with a competitor's local delivery method, which may limit broader application [36][38] Question: How do you view the upcoming data readout for vudalimab? - Management noted that the initial data readout would be too early to draw conclusions about different patient subtypes but would provide insights into efficacy and tolerability [63] Question: What drove the increase in guidance for cash balance at year-end? - The increase was primarily attributed to higher-than-expected royalty revenue from partnerships, which provided more clarity on timing and amounts [108][109]

Revenue and Financial Performance - In the first half of 2022, the company recorded royalty revenues of $70.3 million in Q1 and $22.1 million in Q2 from sales of sotrovimab, with expectations of declining royalties in subsequent quarters [128]. - The company received approximately $30.0 million in revenue from partnerships and collaborations during the quarter ended June 30, 2022 [129]. - Total revenues for the three months ended June 30, 2022, were $30.2 million, a decrease of $37.2 million compared to $67.4 million in the same period in 2021 [169]. - Royalty revenue increased by $22.7 million to $30.0 million for the three months ended June 30, 2022, compared to $7.3 million in the same period in 2021 [169]. - Total revenues for the six months ended June 30, 2022, were $115.7 million, an increase of 14.3% compared to $101.4 million in the same period of 2021 [178]. - Royalty revenue for the six months ended June 30, 2022, was $108.7 million, a significant increase of 94.7% from $14.0 million in the same period of 2021 [178]. - Net income (loss) for the six months ended June 30, 2022, was a loss of $10.4 million, a decrease of 60.2% compared to a net income of $49.8 million in the same period of 2021 [178]. - Other income (expense), net for the six months ended June 30, 2022, was ($8.9) million, a decrease of $65.3 million compared to $56.4 million in the same period of 2021 [184]. Research and Development - The company initiated a Phase 1 study of XmAb808, its first tumor-selective CD28 bispecific candidate, and plans to present initial data from the vudalimab Phase 2 study in the second half of 2022 [132][134]. - The company is currently enrolling patients in multiple clinical trials for six wholly owned or co-development candidates targeting various cancers and autoimmune diseases [133]. - The company plans to present data from expansion cohorts of plamotamab in the second half of 2022, with ongoing studies in collaboration with Janssen and MorphoSys AG [140][139]. - The company has decided to discontinue further internal development of tidutamab and XmAb841 due to lack of competitive clinical profiles [145]. - The company is advancing its XmAb 2+1 bispecific antibody format, which may preferentially kill tumor cells with high target expression, in multiple clinical-stage programs [149]. - The company plans to initiate a Phase 1 study for XmAb808 in the second half of 2022 after submitting an IND application in Q2 2022 [150]. - The company plans to submit an IND application for XmAb662, a reduced-potency IL12-Fc cytokine, and initiate a Phase 1 study in patients with advanced solid tumors in 2023 [153]. - The company has licensed its Xtend Fc technology to multiple partners for investigational antibodies targeting SARS-CoV-2, eligible for royalties on net sales [129]. - The company has over 1,300 issued and pending patents worldwide to protect its XmAb technology platform and drug candidates [166]. Expenses and Financial Position - Research and development expenses decreased by $2.4 million to $47.1 million for the three months ended June 30, 2022, compared to $49.5 million in the same period in 2021 [175]. - General and administrative expenses increased by $2.2 million to $11.1 million for the three months ended June 30, 2022, compared to $8.9 million in the same period in 2021 [176]. - Research and development expenses increased by $3.9 million to $94.8 million for the six months ended June 30, 2022, primarily due to increased spending on new development programs [182]. - General and administrative expenses rose by $5.3 million to $22.4 million for the six months ended June 30, 2022, mainly due to increased staffing and lease expenses [183]. - The company had an accumulated deficit of $293.5 million as of June 30, 2022, primarily due to expenses related to product candidate development and research activities [168]. - Cash provided by operating activities for the six months ended June 30, 2022, was $50.1 million, compared to cash used of $39.6 million in the same period of 2021, reflecting an increase of $89.7 million [186]. - As of June 30, 2022, the company had $679.7 million in cash, cash equivalents, receivables, and marketable debt securities, up from $664.1 million as of December 31, 2021 [190]. - The company expects that existing cash and potential milestone payments will fund operating expenses through the end of 2025, although this is subject to uncertainties [192]. Product Development and Regulatory Approval - The FDA approved Monjuvi® (tafasitamab-cxix) under accelerated approval in July 2020 for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma [156]. - The company recognized a $5.0 million milestone from Astellas for a development milestone for the six months ended June 30, 2022 [161]. - The company has not generated revenue from product sales to date and does not expect to do so until regulatory approval is obtained for its internal product development candidates [191].

Xencor, Inc. (NASDAQ:XNCR) Q1 2022 Earnings Conference Call May 5, 2022 4:30 PM ET Company Participants Charles Liles - Head, Corporate Communications and Investor Relations Bassil Dahiyat - President and Chief Executive Officer Allen Yang - Chief Medical Officer John Kuch - Chief Financial Officer John Desjarlais - Chief Scientific Officer Conference Call Participants Jonathan Chang - SVB Securities Supawat Thongthip - Mizuho Dane Leone - Raymond James Charles Zhu - Guggenheim Securities Etzer Darout - BMO ...

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements based on current expectations and projections, which are subject to risks and uncertainties that could cause actual results to differ materially - This report contains forward-looking statements based on current expectations and projections, which are subject to risks and uncertainties that could cause actual results to differ materially[9](index=9&type=chunk) - Key factors influencing future performance include the effects of the COVID-19 pandemic, the ability to execute R&D plans, success and timing of clinical trials, regulatory approvals, and the ability to accurately estimate expenses and capital requirements[10](index=10&type=chunk)[12](index=12&type=chunk) - The company explicitly states it does not undertake any obligation to update, republish, or revise forward-looking statements to reflect future events or unanticipated occurrences[12](index=12&type=chunk) [PART I. Financial Information](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited interim financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Xencor, Inc.'s unaudited interim financial statements for the quarter ended March 31, 2022, including balance sheets, statements of comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes on significant accounting policies, fair value measurements, and collaboration agreements [Balance Sheets](index=6&type=section&id=Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2022, and December 31, 2021 Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Total Assets | $857,922 | $838,211 | | Cash and cash equivalents | $78,267 | $143,480 | | Marketable debt securities (current) | $278,058 | $153,767 | | Accounts receivable | $88,204 | $66,384 | | Total Liabilities | $94,899 | $104,707 | | Total Stockholders' Equity | $763,023 | $733,504 | - Total assets increased by **$19.7 million**, primarily driven by an increase in marketable debt securities and accounts receivable, while cash and cash equivalents decreased by **$65.2 million**[16](index=16&type=chunk) - Total liabilities decreased by **$9.8 million**, and total stockholders' equity increased by **$29.5 million**[16](index=16&type=chunk) [Statements of Comprehensive Income (Loss)](index=7&type=section&id=Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section outlines the company's financial performance, presenting revenues, expenses, and net income or loss for the three months ended March 31, 2022, and 2021 Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue (Collaborations, milestones, and royalties) | $85,495 | $33,965 | | Research and development expenses | $47,756 | $41,411 | | General and administrative expenses | $11,273 | $8,226 | | Income (loss) from operations | $26,466 | $(15,672) | | Net income (loss) | $23,594 | $(2,487) | | Basic net income (loss) per common share | $0.40 | $(0.04) | | Diluted net income (loss) per common share | $0.39 | $(0.04) | - The company reported a net income of **$23.6 million** for Q1 2022, a significant improvement from a net loss of **$2.5 million** in Q1 2021, primarily due to a substantial increase in revenue[19](index=19&type=chunk) - Total revenue increased by **$51.5 million**, while operating expenses increased by **$9.4 million**[19](index=19&type=chunk) [Statements of Stockholders' Equity](index=8&type=section&id=Statements%20of%20Stockholders%27%20Equity) This section details changes in the company's equity, including comprehensive income, stock issuances, and stock-based compensation, for the three months ended March 31, 2022 Stockholders' Equity Changes (in thousands) | Item | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | | Balance, December 31, 2021 | $733,504 | | Issuance of common stock upon exercise of stock awards | $731 | | Comprehensive income (loss) | $17,983 | | Stock-based compensation | $10,805 | | Balance, March 31, 2022 | $763,023 | - Total stockholders' equity increased by **$29.5 million** from December 31, 2021, to March 31, 2022, driven by comprehensive income and stock-based compensation[22](index=22&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022, and 2021 Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $5,815 | $(29,966) | | Net cash (used in) provided by investing activities | $(71,759) | $38,048 | | Net cash provided by financing activities | $731 | $5,339 | | Net (decrease) increase in cash and cash equivalents | $(65,213) | $13,421 | | Cash and cash equivalents, end of period | $78,267 | $176,965 | - Operating activities generated **$5.8 million** in cash in Q1 2022, a significant improvement from a **$30.0 million** use in Q1 2021, primarily due to increased royalty revenue[25](index=25&type=chunk)[182](index=182&type=chunk) - Investing activities used **$71.8 million** in Q1 2022, mainly for marketable securities purchases, a shift from providing **$38.0 million** in Q1 2021[25](index=25&type=chunk)[183](index=183&type=chunk) [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) This section provides detailed explanations of the accounting policies, fair value measurements, and specific financial statement line items, offering context to the reported figures [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and estimation methods used in preparing the interim financial statements, covering revenue recognition, asset valuation, and expense recognition - Interim financial statements are prepared in accordance with U.S. GAAP, requiring management estimates for items like royalty revenue, R&D expenses, and stock-based compensation[27](index=27&type=chunk)[29](index=29&type=chunk) - Definite-lived intangible assets are amortized over their useful lives; no impairment charges were recorded for Q1 2022 or Q1 2021[30](index=30&type=chunk) - Marketable debt securities are available-for-sale and carried at fair value; an unrealized loss of **$5.6 million** was recorded in Q1 2022 due to changing interest rates, not credit quality[33](index=33&type=chunk) - Equity securities are carried at fair value, with changes recognized in other income (expense); those without readily determinable fair value are recorded at initial cost minus impairment[34](index=34&type=chunk)[35](index=35&type=chunk) [2. Fair Value of Financial Instruments](index=13&type=section&id=2.%20Fair%20Value%20of%20Financial%20Instruments) This section details the valuation methodologies and hierarchy used for financial instruments, categorizing assets based on the observability of inputs used in fair value measurements - Financial instruments are measured at fair value using a three-level hierarchy based on input observability[39](index=39&type=chunk) Fair Value of Financial Assets (in thousands) | Asset Category | March 31, 2022 (Total Fair Value) | March 31, 2022 (Level 1) | March 31, 2022 (Level 2) | December 31, 2021 (Total Fair Value) | December 31, 2021 (Level 1) | December 31, 2021 (Level 2) | | :------------------- | :-------------------------------- | :----------------------- | :----------------------- | :-------------------------------- | :----------------------- | :----------------------- | | Money Market Funds | $20,742 | $20,742 | $— | $123,892 | $123,892 | $— | | Corporate Securities | $167,984 | $— | $167,984 | $144,418 | $— | $144,418 | | Government Securities | $349,109 | $— | $349,109 | $309,814 | $— | $309,814 | | **Total** | **$537,835** | **$20,742** | **$517,093** | **$578,124** | **$123,892** | **$454,232** | - As of March 31, 2022, most marketable debt and equity securities were classified as Level 2, with money market funds in Level 1; no transfers between Level 1 and Level 2 occurred[40](index=40&type=chunk) [3. Net Income (Loss) Per Common Share](index=14&type=section&id=3.%20Net%20Income%20%28Loss%29%20Per%20Common%20Share) This section presents the calculation of basic and diluted net income or loss per common share, considering the impact of potentially dilutive securities Net Income (Loss) Per Common Share | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to common stockholders | $23,594 | $(2,487) | | Basic weighted average common shares outstanding | 59,407,829 | 57,997,313 | | Diluted weighted average common shares outstanding | 61,078,494 | 57,997,313 | | Basic net income (loss) per common share | $0.40 | $(0.04) | | Diluted net income (loss) per common share | $0.39 | $(0.04) | - Basic net income per common share was **$0.40** for Q1 2022, a significant increase from a loss of **$0.04** in Q1 2021[42](index=42&type=chunk) - Potentially dilutive securities (**2,556,779 shares** in Q1 2022) were excluded from diluted EPS calculations when their inclusion would have an anti-dilutive effect[42](index=42&type=chunk) [4. Comprehensive Income (Loss)](index=14&type=section&id=4.%20Comprehensive%20Income%20%28Loss%29) This section defines comprehensive income (loss) and details its components, including net income (loss) and other comprehensive income (loss) from marketable securities - Comprehensive income (loss) is composed of net income (loss) and other comprehensive income (loss)[43](index=43&type=chunk) - For Q1 2022 and Q1 2021, the only component of other comprehensive income (loss) was net unrealized gain (loss) on marketable securities[43](index=43&type=chunk) - Comprehensive income for Q1 2022 was **$18.0 million**, compared to a comprehensive loss of **$2.5 million** in Q1 2021, reflecting the net income and an unrealized loss on marketable debt securities[19](index=19&type=chunk) [5. Marketable Debt and Equity Securities](index=15&type=section&id=5.%20Marketable%20Debt%20and%20Equity%20Securities) This section provides a breakdown of the company's marketable debt and equity securities, detailing their fair values and the recognition of unrealized gains or losses Marketable Debt Securities (in thousands) | Category | March 31, 2022 (Fair Value) | December 31, 2021 (Fair Value) | | :------------------ | :-------------------------- | :--------------------------- | | Money Market Funds | $20,742 | $123,892 | | Corporate Securities | $167,984 | $144,418 | | Government Securities | $349,109 | $309,814 | | **Total** | **$537,835** | **$578,124** | - Unrealized losses on available-for-sale debt securities totaled **$(7.1) million** at March 31, 2022, primarily due to changes in the interest rate environment, not credit quality[44](index=44&type=chunk)[45](index=45&type=chunk) Equity Securities with Readily Determinable Fair Value (in thousands) | Security | March 31, 2022 (Fair Value) | December 31, 2021 (Fair Value) | | :-------------------- | :-------------------------- | :--------------------------- | | Astria Common Stock | $4,294 | $3,449 | | INmune Common Stock | $15,876 | $19,233 | | Viridian Common Stock | $13,260 | $14,178 | | **Total** | **$33,430** | **$36,860** | - A net unrealized loss of **$3.4 million** was recognized on equity securities for Q1 2022, compared to a gain of **$13.0 million** in Q1 2021[52](index=52&type=chunk) [6. Stock Based Compensation](index=18&type=section&id=6.%20Stock%20Based%20Compensation) This section details the stock-based compensation expense recognized by the company, categorized by functional area and equity instrument type Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | General and administrative | $3,674 | $2,737 | | Research and development | $7,131 | $5,556 | | **Total** | **$10,805** | **$8,293** | Stock-Based Compensation by Type (in thousands) | Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------- | :-------------------------------- | :-------------------------------- | | Stock options | $6,833 | $6,530 | | ESPP | $301 | $248 | | RSUs | $3,671 | $1,515 | | **Total** | **$10,805** | **$8,293** | - Total stock-based compensation expense increased by **$2.5 million** to **$10.8 million** in Q1 2022, primarily due to higher RSU and stock option expenses[58](index=58&type=chunk) - As of March 31, 2022, unamortized compensation expense related to unvested stock options was **$72.9 million** (to be recognized over 3.0 years) and for unvested RSUs was **$42.3 million** (over 2.3 years)[61](index=61&type=chunk)[62](index=62&type=chunk) [7. Leases](index=22&type=section&id=7.%20Leases) This section describes the company's operating lease arrangements for office and laboratory spaces, including future undiscounted cash flows and key lease terms - The company leases office and laboratory space in Monrovia, San Diego, and Pasadena, California, with a new Pasadena lease expiring in July 2035[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) Undiscounted Operating Lease Cash Flows (in thousands) as of March 31, 2022 | Years ending December 31, | Amount | | :------------------------ | :----- | | For the remainder of 2022 | $1,376 | | 2023 | $5,566 | | 2024 | $5,713 | | 2025 | $5,817 | | 2026 | $5,279 | | 2027 | $5,433 | | Thereafter | $46,685 | | **Total undiscounted lease payments** | **$75,869** | - As of March 31, 2022, the weighted-average remaining lease term for operating leases is **12.3 years**, and the weighted-average discount rate is **5.8%**[68](index=68&type=chunk) [8. Commitments and Contingencies](index=23&type=section&id=8.%20Commitments%20and%20Contingencies) This section addresses potential future obligations, including litigation and in-license agreements, and clarifies that no material losses are currently deemed probable or estimable - The company does not believe it is currently subject to any material litigation or matters where a material loss is reasonably possible[69](index=69&type=chunk) - Future payments under in-license agreements (sublicense fees, royalties, development/commercialization milestones) are not included on the balance sheet as their amount and timing are not probable and estimable[70](index=70&type=chunk) [9. Collaboration and Licensing Agreements](index=25&type=section&id=9.%20Collaboration%20and%20Licensing%20Agreements) This section details revenue generated from various collaboration and licensing agreements, disaggregated by licensee and revenue type, highlighting key partnerships and performance obligations Revenue by Licensee (in millions) | Licensee | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------- | :-------------------------------- | :-------------------------------- | | Alexion | $6.1 | $5.3 | | Astellas | $5.0 | $— | | Genentech | $— | $0.2 | | Janssen | $1.8 | $14.6 | | MorphoSys | $2.3 | $13.9 | | Vir | $70.3 | $— | | **Total** | **$85.5** | **$34.0** | Disaggregation of Revenue (in millions) | Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------- | :-------------------------------- | :-------------------------------- | | Research collaboration | $1.8 | $14.8 | | Milestone | $5.0 | $12.5 | | Royalties | $78.7 | $6.7 | | **Total** | **$85.5** | **$34.0** | - Total revenue from collaboration and licensing agreements increased significantly to **$85.5 million** in Q1 2022 from **$34.0 million** in Q1 2021, primarily driven by **$70.3 million** in royalty revenue from Vir Biotechnology, Inc. for sotrovimab[124](index=124&type=chunk)[125](index=125&type=chunk)[114](index=114&type=chunk) - The company recognized **$5.0 million** in milestone revenue from Astellas Pharma Inc. and **$6.1 million** in royalty revenue from Alexion Pharmaceuticals, Inc. for Ultomiris® in Q1 2022[80](index=80&type=chunk)[74](index=74&type=chunk) - Remaining performance obligations as of March 31, 2022, totaled **$35.5 million**, related to research activities under the Second Janssen Agreement, classified as current liabilities[126](index=126&type=chunk) [10. Income taxes](index=35&type=section&id=10.%20Income%20taxes) This section explains the company's income tax position, including the absence of a tax provision, the full valuation allowance against deferred tax assets, and the impact of recent tax law changes - No provision for income taxes was recorded for the three months ended March 31, 2022, or 2021[127](index=127&type=chunk) - Deferred income tax assets, primarily from net operating loss and tax credit carryforwards, are fully offset by a valuation allowance[127](index=127&type=chunk) - The Tax Cuts and Jobs Act (TCJA) requires capitalization and amortization of R&D costs starting in 2022, which may increase taxable income and federal income tax payments[127](index=127&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2022, discussing business overview, the impact of COVID-19, updates on clinical-stage drug candidates, advancements in technology platforms, progress across partnerships, and detailed financial results [Company Overview](index=35&type=section&id=Company%20Overview) This section introduces Xencor as a clinical-stage biopharmaceutical company focused on developing engineered monoclonal antibody and cytokine therapeutics for cancer and autoimmune diseases - Xencor is a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibody and cytokine therapeutics for cancer and autoimmune diseases[129](index=129&type=chunk) - The company leverages proprietary protein engineering and XmAb Fc domain technologies to create drug candidates with improved properties and functionality, including novel bispecific antibodies and enhanced antibody performance[129](index=129&type=chunk)[132](index=132&type=chunk) - Three marketed XmAb medicines, developed with Xencor's protein engineering technologies, are currently generating milestones and royalties[132](index=132&type=chunk) [COVID-19 Impact](index=37&type=section&id=COVID-19%20Impact) This section discusses the evolving impact of the COVID-19 pandemic on business operations, including revenue generation from sotrovimab and potential future disruptions to clinical trials and supply chains - While the COVID-19 pandemic did not significantly disrupt business operations in Q1 2022, its evolving nature creates uncertainties for future financial condition, results of operations, and cash flows[134](index=134&type=chunk) - Sotrovimab (VIR-7831), a COVID-19 antibody incorporating Xencor's Xtend Fc technology, generated approximately **$83.7 million** in revenue from partnerships and collaborations in Q1 2022[135](index=135&type=chunk) - Sotrovimab is not currently authorized in any U.S. region due to the Omicron BA.2 subvariant, and royalties from its sales are expected to substantially decline in subsequent quarters of 2022[135](index=135&type=chunk)[137](index=137&type=chunk) - Potential impacts on the business include slower patient enrollment in clinical trials and supply chain issues for research and manufacturing materials[138](index=138&type=chunk)[141](index=141&type=chunk) [Clinical-Stage XmAb Bispecific Antibody and Cytokine Drug Candidate Updates](index=39&type=section&id=Clinical-Stage%20XmAb%20Bispecific%20Antibody%20and%20Cytokine%20Drug%20Candidate%20Updates) This section provides updates on the company's clinical-stage drug candidates, including progress in Phase 2 studies for vudalimab and plamotamab, and the discontinuation of certain internal development programs - Xencor and its partners are advancing a broad portfolio of clinical-stage XmAb drug candidates, including six wholly owned or co-development candidates for cancer and one for autoimmune disease[139](index=139&type=chunk) - Vudalimab (PD-1 x CTLA-4) is in Phase 2 studies for metastatic castration-resistant prostate cancer (mCRPC) and other solid tumors, with initial data expected in H2 2022[140](index=140&type=chunk) - Plamotamab (CD20 x CD3), co-developed with Janssen, showed encouraging clinical activity in Phase 1 for B-cell malignancies; subcutaneous administration and expansion cohort data are planned for 2022[141](index=141&type=chunk)[144](index=144&type=chunk) - The company has discontinued internal development of tidutamab (SSTR2 x CD3) and XmAb841 (CTLA-4 x LAG-3) to focus resources on new clinical programs[149](index=149&type=chunk) [Advancements Expanding XmAb Bispecific and Cytokine Platforms](index=41&type=section&id=Advancements%20Expanding%20XmAb%20Bispecific%20and%20Cytokine%20Platforms) This section highlights the company's efforts to expand its XmAb technology platforms through new bispecific antibody formats and cytokine programs, with several candidates advancing to clinical studies - Xencor is expanding its XmAb technology platforms by developing new bispecific antibody formats, such as the XmAb 2+1 bispecific antibody, designed for enhanced tumor selectivity[151](index=151&type=chunk) - Lead XmAb 2+1 bispecific antibody candidate, XmAb819 (ENPP3 x CD3), is initiating a Phase 1 study for renal cell carcinoma (RCC)[152](index=152&type=chunk)[153](index=153&type=chunk) - The company is advancing wholly owned CD28 bispecific antibody candidates, including XmAb808 (B7-H3 x CD28), with an IND application planned for H1 2022 and a Phase 1 study in H2 2022 for solid tumors[154](index=154&type=chunk) - Preclinical data for new cytokine programs, XmAb143 (IL18-Fc) and a LAG-3 targeted IL15/IL15Rα-Fc fusion protein, were presented, and an IND application for XmAb662 (IL12-Fc) is planned for 2022[156](index=156&type=chunk)[157](index=157&type=chunk) [Progress Across Partnerships](index=43&type=section&id=Progress%20Across%20Partnerships) This section details the revenue generated from key partnerships, including royalties from Monjuvi®, Ultomiris®, and sotrovimab, underscoring the importance of collaboration in the company's business strategy - Partnerships are a key business strategy, generating revenue through upfront payments, milestone payments, and royalties from product licenses, novel bispecific antibody collaborations, and technology licensing agreements[158](index=158&type=chunk) - Monjuvi® (tafasitamab), an FDA-approved CD19-directed cytolytic antibody, generated **$2.3 million** in estimated royalties from MorphoSys in Q1 2022[160](index=160&type=chunk)[162](index=162&type=chunk) - Alexion's Ultomiris®, utilizing Xencor's Xtend Fc technology, generated **$6.1 million** in royalties in Q1 2022, following its approval for PNH, aHUS, and gMG[167](index=167&type=chunk) - Vir Biotechnology's sotrovimab, using Xencor's Xtend Fc technology for COVID-19 treatment, generated **$70.3 million** in royalties in Q1 2022[168](index=168&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, examining changes in revenues, research and development expenses, general and administrative expenses, and other income or expense [Revenues](index=47&type=section&id=Revenues) This section analyzes the company's revenue streams, highlighting the significant increase in royalty revenue, primarily from Vir Biotechnology, and changes in research collaboration and milestone revenues Revenue Breakdown (in millions) | Revenue Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :------------------- | :-------------------------------- | :-------------------------------- | :------- | | Research collaboration | $1.8 | $14.8 | $(13.0) | | Milestone | $5.0 | $12.5 | $(7.5) | | Royalties | $78.7 | $6.7 | +$72.0 | | **Total revenues** | **$85.5** | **$34.0** | **+$51.5** | - Total revenues increased by **$51.5 million** to **$85.5 million** in Q1 2022, primarily driven by a **$72.0 million** increase in royalty revenue, largely from Vir Biotechnology[173](index=173&type=chunk)[174](index=174&type=chunk) - Research collaboration revenue decreased by **$13.0 million**, and milestone revenue decreased by **$7.5 million**[173](index=173&type=chunk) [Research and Development Expenses](index=48&type=section&id=Research%20and%20Development%20Expenses) This section details the changes in research and development expenses, attributing increases to new development programs and stock-based compensation, while noting shifts in spending across specific programs Research and Development Expenses (in millions) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Total CD3 programs | $13.7 | $16.9 | $(3.2) | | XmAb808 (B7-H3 x CD28) | $4.8 | $— | +$4.8 | | Tumor micro environment (TME) activator programs | $13.6 | $11.5 | +$2.1 | | Total cytokine programs | $9.1 | $7.1 | +$2.0 | | Other, research and early stage programs | $6.5 | $5.9 | +$0.6 | | **Total research and development expenses** | **$47.7** | **$41.4** | **+$6.3** | - Research and development expenses increased by **$6.3 million** to **$47.7 million** in Q1 2022, primarily due to increased spending on new development programs, XmAb808 and XmAb662[176](index=176&type=chunk)[178](index=178&type=chunk) - Internal R&D expenses increased by **$4.9 million**, and stock-based compensation increased by **$1.5 million**[176](index=176&type=chunk) [General and Administrative Expenses](index=49&type=section&id=General%20and%20Administrative%20Expenses) This section explains the increase in general and administrative expenses, primarily due to higher staffing costs and additional lease expenses General and Administrative Expenses (in millions) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | General and administrative | $11.3 | $8.2 | +$3.1 | - General and administrative expenses increased by **$3.1 million** in Q1 2022, primarily due to increased staffing and additional lease expenses[179](index=179&type=chunk) [Other Income (Expense), Net](index=49&type=section&id=Other%20Income%20%28Expense%29%2C%20Net) This section analyzes the shift in other income (expense), net, from a gain to a loss, primarily driven by unrealized changes in the fair value of equity investments Other Income (Expense), Net (in millions) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Other income (expense), net | $(2.9) | $13.1 | $(16.0) | - Other income (expense), net, shifted from a net gain of **$13.1 million** in Q1 2021 to a net loss of **$2.9 million** in Q1 2022[180](index=180&type=chunk) - This change was primarily due to an unrealized loss recognized from the change in fair value of equity investments in Q1 2022, compared to an unrealized gain from the exchange of shares in Q1 2021[180](index=180&type=chunk) [Cash Flows](index=49&type=section&id=Cash%20Flows) This section provides a summary of cash flows from operating, investing, and financing activities, highlighting the significant improvement in operating cash flow due to increased royalty revenue Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------- | | Net cash provided by (used in) operating activities | $5,815 | $(29,966) | +$35,781 | | Net cash (used in) provided by investing activities | $(71,759) | $38,048 | -$109,807 | | Net cash provided by financing activities | $731 | $5,339 | -$4,608 | | **Net increase (decrease) in cash** | **$(65,213)** | **$13,421** | **-$78,634** | - Cash provided by operating activities significantly improved to **$5.8 million** in Q1 2022 from a **$30.0 million** use in Q1 2021, mainly due to additional royalty revenue[182](index=182&type=chunk) - Investing activities used **$71.8 million** in Q1 2022, primarily for purchases of marketable securities, intangible assets, and property and equipment[183](index=183&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's financial liquidity, detailing available capital and expectations for funding future operating expenses and capital expenditures, while acknowledging potential COVID-19 impacts - As of March 31, 2022, Xencor had **$683.6 million** in cash, cash equivalents, receivables, and marketable debt securities[186](index=186&type=chunk) - The company expects existing capital and certain potential milestone payments to fund operating expenses and capital expenditure requirements through the end of 2025[188](index=188&type=chunk) - Funding requirements are difficult to predict, and the COVID-19 pandemic could materially alter these estimates, potentially causing capital resources to be used sooner than expected[188](index=188&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements during the reported periods, indicating no material unrecorded obligations or commitments - The company did not have any off-balance sheet arrangements during the periods presented or currently[189](index=189&type=chunk) [Contractual Obligations and Commitments](index=51&type=section&id=Contractual%20Obligations%20and%20Commitments) This section states that there were no material changes to the company's specific contractual obligations outside the ordinary course of business during the three months ended March 31, 2022 - There were no material changes to the company's specific contractual obligations outside the ordinary course of business during the three months ended March 31, 2022[190](index=190&type=chunk) [Critical Accounting Policies](index=51&type=section&id=Critical%20Accounting%20Policies) This section directs readers to the 'Summary of Significant Accounting Policies' for a discussion of material changes in critical accounting policies - For a discussion of material changes in critical accounting policies, refer to 'Recent Accounting Pronouncements' in Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's market risk profile during the three months ended March 31, 2022, and refers to the prior Annual Report on Form 10-K for additional information - There have been no material changes in the quantitative or qualitative aspects of the company's market risk profile during the three months ended March 31, 2022[192](index=192&type=chunk) - Additional information regarding market risk exposure is available in the Form 10-K for the fiscal year ended December 31, 2021[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the supervision of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2022, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter, despite remote work arrangements due to COVID-19 - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of March 31, 2022[194](index=194&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2022[196](index=196&type=chunk) - Remote work arrangements due to the COVID-19 pandemic have not materially impacted the design and operating effectiveness of internal controls over financial reporting[196](index=196&type=chunk) [PART II. Other Information](index=54&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the disclosure on legal proceedings from Note 8, Commitments and Contingencies, of the Notes to Financial Statements - The disclosure on legal proceedings is incorporated by reference from Note 8, 'Commitments and Contingencies,' in the Notes to Financial Statements[199](index=199&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section advises readers to consider the risk factors detailed in the Annual Report on Form 10-K for December 31, 2021, and the 'Special Note Regarding Forward-Looking Statements' in this report, noting that additional unknown risks may also affect the business - Readers should carefully consider the risk factors discussed in Part I, 'Item 1A. Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2021[200](index=200&type=chunk) - Reference is also made to the 'Special Note Regarding Forward-Looking Statements' included in this Quarterly Report on Form 10-Q[200](index=200&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also materially and adversely affect the business[200](index=200&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, investor agreements, and certifications from principal executive and financial officers, along with Inline XBRL documents - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Form of Common Stock Certificate, and Third Amended and Restated Investor Rights Agreement[202](index=202&type=chunk) - Certifications from the Principal Executive Officer (Rule 13a-14(a) and Section 1350) and Principal Financial Officer (Rule 13a-14(a) and Section 1350) are included[202](index=202&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase Documents) are also filed[202](index=202&type=chunk) [Signatures](index=56&type=section&id=SIGNATURES) This section formally attests to the accuracy and completeness of the report, signed by the company's President and Chief Executive Officer and Chief Financial Officer - The report was duly signed on behalf of Xencor, Inc. by Bassil I. Dahiyat, Ph.D., President and Chief Executive Officer, and John J. Kuch, Chief Financial Officer, on May 5, 2022[204](index=204&type=chunk)[206](index=206&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36182 Xencor, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware (State or Other Jurisdiction of I ...

Xencor, Inc. (NASDAQ:XNCR) Q4 2021 Earnings Conference Call February 22, 2022 5:00 PM ET Company Participants Charles Liles - Associate Director and Head, Corporate Communications & IR Bassil Dahiyat - Co-Founder, CEO, President & Director Allen Yang - SVP & Chief Medical Officer John Kuch - SVP & CFO John Desjarlais - SVP, Research & Chief Scientific Officer Conference Call Participants Jonathan Chang - SVB Leerink Kaveri Pohlman - BTIG Mara Goldstein - Mizuho Securities Charles Zhu - Guggenheim Arlinda Le ...

Xencor, Inc. (NASDAQ:XNCR) Q3 2021 Earnings Conference Call November 8, 2021 4:30 PM ET Company Participants Charles Liles – Head-Corporate Communications and Investor Relations Bassil Dahiyat – President and Chief Executive Officer Allen Yang – Chief Medical Officer John Desjarlais – Chief Scientific Officer John Kuch – Chief Financial Officer Conference Call Participants Ted Tenthoff – Piper Sandler Mara Goldstein – Mizuho David Nierengarten – Wedbush Securities Kaveri Pohlman – BTIG Charles Zhu – Guggenh ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number: 001-36182 Xencor, Inc. (Exact name of registrant as specified in its charter) Delaware 20-1 ...