Xencor(US:XNCR)2025-05-07 20:09PART I. FINANCIAL INFORMATION Financial Statements Xencor reported Q1 2025 revenues of $32.7 million and a net loss of $48.4 million, a significant improvement from the prior year, with total assets at $904.7 million Consolidated Balance Sheets Total assets decreased to $904.7 million as of March 31, 2025, primarily due to reduced marketable debt securities, while liabilities and equity also declined Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $39,675 | $40,875 | | Marketable debt securities (current & long-term) | $653,836 | $665,804 | | Total assets | $904,689 | $951,945 | | Liabilities & Equity | | | | Total liabilities | $264,815 | $277,919 | | Liabilities related to sales of future royalties | $154,379 | $163,606 | | Total stockholders' equity | $639,874 | $677,611 | Consolidated Statements of Operations and Comprehensive Loss Q1 2025 revenues more than doubled to $32.7 million, narrowing the operating loss to $43.2 million and significantly improving net loss to $48.4 million Q1 2025 vs Q1 2024 Performance (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $32,732 | $15,997 | | Research and development | $58,578 | $56,873 | | General and administrative | $17,337 | $13,787 | | Operating Loss | ($43,183) | ($54,663) | | Asset impairment charges | ($4,865) | ($20,650) | | Net Loss Attributable to Xencor | ($48,418) | ($73,440) | | Net Loss Per Share (basic and diluted) | ($0.66) | ($1.20) | Consolidated Statements of Cash Flows Net cash used in operating activities significantly decreased to $16.2 million in Q1 2025, resulting in a net decrease in cash of $1.3 million for the quarter Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($16,220) | ($56,859) | | Net cash provided by investing activities | $13,668 | $32,318 | | Net cash provided by financing activities | $1,249 | $1,787 | | Net decrease in cash | ($1,303) | ($22,754) | Notes to Consolidated Financial Statements Notes detail revenue recognition from collaborations, a $4.9 million asset impairment, the $154.4 million royalty liability, and ongoing patent litigation Q1 2025 Revenue by Partner (in thousands) | Partner | Revenue | Notes | | :--- | :--- | :--- | | Alexion | $15,469 | Non-cash royalty revenue for Ultomiris® | | Incyte | $15,263 | Includes $12.5M milestone and non-cash royalties for Monjuvi® | | Vir Bio | $2,000 | Milestone payment for tobevibart | | Total | $32,732 | | - The company recorded a $4.9 million asset impairment charge in Q1 2025 related to its decision to pause further development of certain programs and reallocate resources56 - In November 2023, the company sold rights to future royalties for Ultomiris and Monjuvi to OMERS. This transaction is accounted for as debt, with a remaining liability of $154.4 million as of March 31, 2025596064 - Xencor is a party to a patent infringement lawsuit initiated by Merus N.V. in August 2024. The company believes it has strong defenses but cannot guarantee a favorable outcome66 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical pipeline, significant Q1 2025 revenue increase driven by milestones, rising R&D expenses, and a strong liquidity position expected to fund operations into 2028 - The company's clinical pipeline is focused on advancing multiple drug candidates, including XmAb819 (renal cell carcinoma), XmAb541 (ovarian cancer), and XmAb942 (inflammatory bowel disease)99100102 Q1 2025 vs Q1 2024 Operating Results (in thousands) | Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $32,732 | $15,997 | $16,735 | | R&D Expenses | $58,578 | $56,873 | $1,705 | | G&A Expenses | $17,337 | $13,787 | $3,550 | | Operating Loss | ($43,183) | ($54,663) | $11,480 | - The increase in revenue for Q1 2025 was primarily due to a $12.5 million milestone from Incyte and a $2.0 million milestone from Vir Bio112115126 - As of March 31, 2025, the company had $693.5 million in cash, cash equivalents, and marketable debt securities and believes these resources will fund operations into 2028134140 Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's exposure to market risk have occurred since the prior fiscal year-end - There have been no material changes in the Company's exposure to market risk from the end of the previous fiscal year143 Controls and Procedures Management concluded that disclosure controls were ineffective as of March 31, 2025, due to material weaknesses in accounting for royalties and tax legislation, with a remediation plan underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2025145 - The ineffectiveness was due to material weaknesses in controls related to accounting for the sale of future royalties (a non-routine transaction) and the evaluation of tax legislation145 - Management has implemented a remediation plan that includes engaging third-party advisors for complex transactions and enhancing internal review processes146147 PART II. OTHER INFORMATION Legal Proceedings Xencor is involved in a patent infringement lawsuit initiated by Merus N.V., asserting strong defenses against the allegations - Xencor is being sued by Merus N.V. for alleged patent infringement related to its antibody technologies153 - Xencor has responded by filing a motion to dismiss and challenging the validity of the patents in question before the U.S. Patent and Trademark Appeal Board153 Risk Factors The company faces increased risks from unfavorable global economic and political conditions, supply chain disruptions, and potential delays from government agency disruptions - The company's business is susceptible to unfavorable global economic conditions, political disruptions, and changes in international trade policy, which could strain suppliers and weaken demand155156 - Disruptions at the FDA and other government agencies, caused by factors like budget issues or personnel shortages, could delay the review and approval of new products, negatively impacting the business158 Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the current reporting period - Not applicable159 Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated Rule 10b5-1 or other trading arrangements during the quarter162 Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and officer certifications - Lists all exhibits filed with the report, including officer certifications (31.1, 31.2, 32.1) and iXBRL data files (101, 104)163