Xencor, inc (XNCR) Q3 2021 Earnings Call Transcript

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Xencor, inc (XNCR 1.54%)
Q3 2021 Earnings Call
Nov 8, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the Third Quarter 2021 Xencor Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations. Please go ahead.

Charles Liles -- Head, Corporate Communications and Investor Relations

Thank you and good afternoon. Earlier today, we issued a press release which outlines topics we plan to discuss today. The press release is available at www.xencor.com. With me on the call today are Bassil Dahiyat, President and Chief Executive Officer; Allen Yang, Chief Medical Officer; John Desjarlais, Chief Scientific Officer; and John Kuch, Chief Financial Officer. After their remarks, we'll open up the call for your questions.

Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management, future operations, the company's partnering efforts, capital requirements, future product offerings and research and development programs. These forward-looking statements are not historical facts, but rather are based on our current expectations and beliefs and are based on information currently available to us. The outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including but not limited to those factors contained in the Risk Factors section of our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

With that, let me pass the call over to Bassil.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Thanks, Charles. And good afternoon, everyone. We've used our array of modular approach in engineering tools that create our internal development portfolio in oncology and autoimmune disease that currently includes six bispecific antibodies, either in Phase 1 or Phase 2 studies, and two cytokines in Phase 1. Our portfolio approach allows us to take multiple simultaneous shots on goal in the clinic and the proof-of-concept data we generate guides which programs we advance, which we terminate or which we partner.

Today, we've announced data from the first of our cytokine programs, XmAb306 or reduced potency long-acting IL-15 Fc fusion protein in co-development with Genentech, which Allen will touch on momentarily. But first, a quick update on our collaborations. Last month, we entered a global collaboration and license agreement with Janssen to Advance Plamotamab, our CD20 by CD3 bispecific antibody and to create novel CD28 bispecific antibodies against malignant B-cells to combine to Plamotamab and potentially other CD3 bispecific cell lymphoma.

The HSR waiting period expired last week and the agreement is closed. We're delighted to expand our ongoing CD28 work with the Janssen team and to plan plamotamab development together. We believe collaborating with Janssen is the best way to broaden and accelerate our efforts in lymphoma and to maximize the opportunity to plamotamab to bring benefit to patients in a very promising and crowded field.

Just a few other updates across our partners programs, which incorporate our plug and play XmAb Fc domains. Now in August, tafasitamab, which was created and initially developed by us, was granted conditional marketing authorization by the European Commission in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma who are not eligible for autologous stem cell transplantation. In the EU, Tafasitamab is marketed by Incyte as Minjuvi, while in the US it's co-marketed by Incyte MorphoSys as Monjuvi.

We're pleased that our partners Vir and GSK continue to receive emergency or temporary authorizations for sotrovimab that are investigational SARS-CoV-2 antibody that incorporates our Xtend technology in countries across the globe for the treatment of mild-to-moderate COVID-19 and high risk adults in pediatric patients. So with these two products, Monjuvi and Sotrovimab, along with Ultomiris from the Alexion unit of AstraZeneca. Our partnerships have resulted now in three marketed XmAb medicines, which are available to treat patients with a range of serious illnesses.

Now with that, we'll turn to Allen Yang, our Chief Medical Officer, who will review our recent clinical highlights and upcoming plans. Allen?

Allen Yang -- Senior Vice President and Chief Medical Officer

Thanks, Bassil. Today, we'll be touching on recent updates across several clinical stage programs, starting with XmAb306. Today, we announced encouraging initial dose escalation data from our first clinical stage cytokine, XmAb306, which is co-developed in collaboration with Genentech, a member of the Roche Group. Exceptional NK cell expansion of 40 to 100 fold increases compared to baseline has been observed and with good tolerability to-date.

As we continue to escalate, we're now observing signs of effector T-cell proliferation in the periphery, XmAb306 safety profile, biological activity and preliminary signs of anti-tumor activity at this early stage provide initial validation of our reduced potency approach to engineering XmAb cytokine therapeutics. And we are considering new trials to study combinations with a range of NK and T-cell recruiting therapies.

Shifting to plamotamab, as you probably saw, we announced that an abstract was accepted for presentation at the American Society of Hematology Annual Meeting in December. In a few weeks, we'll present updated clinical results from the Phase 1 study in patients with non-Hodgkin's lymphoma. We identified a dose regimen 50 milligram flat dosing every two weeks after step up dosing that is much higher than we have previously reported by weight-based dosing. And due to our new step-up schedule, it's generally well tolerated with encouraging monotherapy activity.

We believe that the best opportunities for patients require a focus on setting unique combinations of plamotamab with chemotherapy-free partners and we are working to initiate our randomized Phase 2 combination study with tafasitamab and lenalidomide, a highly active regimen now approved in relapsed lymphoma, with a label and second-line and later. Plamotamab CD20 targeted T-cell redirection of tumors and tafasitamab CD19 targeted enhanced ADCC tumor killing, combined distinct immune pathways and tumor associated antigens.

And we think the combination is differentiated approach for treating patients with lymphoma. The study should be initiated in late 2021 or early 2022. Going forward alongside Janssen, we look forward to investigating additional mechanisms that avoid the downsides of systemic chemotherapy such as novel CD28 bispecifics that are anticipated under our collaboration.

Moving onto vudalimab, which was formerly known as XmAb717, we have started dosing patients in our Phase 2 study of the PD1 CTLA4 dual checkpoint bispecific antibody. The study is enrolling patients with metastatic castrate-resistant prostate cancer that we classify by molecular subtype as a monotherapy or in combination depending on the subtype. This is an indication with a high unmet need and is currently without much checkpoint inhibitor use beyond MSI high tumors. But earlier studies suggest that PD1 and CTLA4 inhibition has promised in prostate cancer. Therefore, dual targeting of PD1 and CTLA4 with a potentially differentiated tolerability profile could meet an important unmet clinical need.

At the same time, we're initiating a second Phase 2 study in patients with advanced pelvic tumors, including gynecological malignancies, which represent another opportunity for dual targeting of PD1 and CTLA4 to address an unmet need. In addition, this study includes a cohort of clinically defined high risk metastatic castrate-resistant prostate cancer, which will allow us to study vudalimab monotherapy in a specific population of aggressive prostate cancer independent of molecular profiling data. Later this week at SITC, we will present mature data from the ongoing Phase 1 study's expansion cohorts, with a focus on patients with prostate cancer, renal cancer and a basket cohort of tumors without approved checkpoint therapies. These cohorts are those where the data we're still immature at SITC 2020.

Next, tidutamab is our CD3 bispecific that targets SSTR2. And last week, we presented additional follow-up from the Phase 1 study in patients with neuroendocrine tumors. The poster is available on our website. The results from the study indicate that tidutamab was generally well tolerated with a low incidence and severity of cytokine release syndrome and induce meaningful T-cell activation in a challenging disease setting. We've begun dosing patients in the Phase 2 study in patients with Merkel cell carcinoma and small cell lung cancer, which are SSTR2-expressing tumors types known to be responsive to immunotherapies.

Finally, as we noted in our press release, we do not intend to devote additional internal resources to furthering the development of vibecotamab, the CD123 x CD3 bispecific antibody. In addition, Novartis is terminating its rights to vibecotamab, which will be effective early next year. This decision reflects our broad portfolio development strategy, which requires us to make difficult decisions like these so we can dedicate resources to our most promising programs and allow room for exciting new drug candidates to be tested in the clinic.

So moving on to those, I'd like to turn the call over to John Desjarlais, our CSO. John?

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Thanks, Allen. We have dedicated a lot of effort in recent years to using the full range of our protein engineering tools to turn native cytokines into therapeutics. Our approach seeks to create drug candidates with a long duration of therapeutic activity that remain under the threshold for toxicities that has limited the clinical use of cytokines historically.

First, we make small changes in the cytokine to selectively reduce binding affinity to its receptors and that lowers its potency. This alone creates a better tolerated longer acting and far more sustained immune stimulating activity in preclinical models. We take a further step to enhance stability in pharmacokinetics by fusing the cytokines to an XmAb bispecific Fc domain, which includes our Xtend mutations to further enhance persistence.

We're beginning to see clinical data that is now validating our approach as reviewed by Allen with XmAb306. And our second cytokine program designed with the same principles as XmAb564 are wholly owned IL-2 Fc fusion engineered to selectively activate regulatory T-cells or T-regs for the treatment of autoimmune disease. The Phase 1 study for XmAb564 is ongoing.

And our next cytokine program scheduled to enter the clinic is XmAb662, our preclinical IL-12 Fc program. IL-12 is a potent pro-inflammatory cytokine that promotes high levels of interferon gamma secretion from T-cells and NK cells, increasing their cytotoxicity and the immunogenicity of the tumor microenvironment by making tumor antigens more visible to the immune system. It's previously been demonstrated that IL-12 can have strong anti-tumor activity, but as has been the case across therapeutic cytokine development historically, it has a narrow therapeutic index that limits its utility.

We believe that XmAb662, which was designed with our cytokine engineering methodology, to lower the potency and to prolong the duration of action, could be a significant advancement toward an IL-12 that could be therapeutically dosed. We anticipate submitting an IND for XmAb662 in 2022.

Shifting to our antibody work, we have two bispecific antibody candidates that we anticipate will advance the clinic before that, XmAb819 and XmAb808. Later this year, we anticipate submitting the IND for XmAb819, our ENPP3 x CD3 bispecific for renal cell cancer. That's our first internal program engineered with reduced potency CD3 binding, combined with a multivalent 2+1 bispecific antibody format.

Using two antigen binding domains to the tumor target provides for more selective binding the cells with high ENPP3 density like tumor cells compared to the lower density that may be found on normal cells. We believe the XmAb 2+1 format opens up a wide range of potential solid tumor targets to T-cell redirection. For example, we've incorporated a 2+1 format into our most advanced wholly owned lead CD28 bispecific candidate, XmAb808, which targets B7-H3. We intend to develop the candidate for potentially broad solid tumor use, including a prostate cancer where B7-H3 is highly expressed. We anticipate a 2022 IND submission for XmAb808.

Finally, I'd just like to mention that we're presenting four preclinical programs at SITC this week. XmAb662 at IL-12 program we discussed. Second one, our PDL1 x CD28 bispecific antibody program, poster on our TGF-beta platform and our initial disclosure of NK cell engager platform. These programs show the power of our platform to create XmAb drug candidates that access two biologies and continually supply our clinical pipeline with differentiated molecules.

With that, I'd like to hand the call over to John Kuch, our CFO, to review our third quarter financials. John?

John J. Kuch -- Senior Vice President and Chief Financial Officer

Thank you, John. A critical part of our business is leveraging our protein engineering capabilities through partnerships, collaborations for XmAb drug candidates and technologies, which generate multiple revenue streams.

As Bassil mentioned, there are now three marketed products that have been developed for the XmAb technology that we earn royalties. Additionally, our second Janssen collaboration will generate a significant and upfront payment, potential milestones and royalties and the opportunity to share development costs for our Plamotamab program with our partner Janssen. Revenues from these and other partnerships allow us to maintain a strong balance sheet to support our broad portfolio bispecific antibody and cytokine programs.

Cash, cash equivalents, receivables and marketable debt securities totaled $537.9 million at September 30, 2021 compared to $610.2 million at December 31, 2020. The decrease reflects cash used to fund 2021 operating activities, offset by proceeds from royalties, milestone payments and the sale of an investment security. The September 30 balance excludes payments due to us under our second Janssen collaboration, which includes $100 million upfront payment and a $25 million payment for the sale of Xencor common stock, which we expect to receive before year-end.

Based on current operating plans, we expect to have cash to fund research and development programs and operations into 2025. And we currently estimate, we'll end 2021 with between $575 million to $625 million in cash, cash equivalents, receivables and marketable debt securities.

Now, I'll review our third quarter and nine-month financials. Total revenue for the third quarter ended September 30, 2021 was $19.7 million compared to $35.4 million for the same period in 2020. Revenues in the third quarter were primarily related to revenue earned on the company's first Janssen collaboration and royalty revenue compared to revenues from the same period in 2020, which is primarily a milestone payment from MorphoSys.

Total revenue for the nine months ended September 30, 2021 was $121.1 million compared to $80.8 million for the same period in 2020. Revenues for nine months were primarily earned from research collaborations with Janssen, Genentech and Novartis, milestone revenue from MorphoSys and royalty revenue compared to the same period in 2020, which is primarily a milestone revenue from MorphoSys and licensing revenue from Gilead and Aimmune.

Research and development expenses for the third quarter were $50.6 million compared to $44.5 million for the same period in 2020. Total R&D expense for the nine-month period were $141.5 million compared to $121.9 million for the same period in 2020. Increased R&D expenses for the third quarter and nine-month period over the same amounts for same periods in 2020 were primarily due to additional spending in our IL-15 drug candidate programs and other early stage programs. Additional spending in XmAb819, our ENPP3 x CD3 candidate also contributed to increased R&D expenses during the third quarter.

General and administrative expense for the third quarter were $10.4 million compared to $7.6 million for the same period in 2020. Total G&A expenses for the nine month period were $27.5 million compared to $22.1 million for the same period in 2020. Increased G&A expense for the third quarter and nine months period over amounts for the same period in 2020 were primarily due to increased G&A staffing, spending on professional services and facility costs.

Total other income for the third quarter was $1.1 million compared to $4.2 million in the same period in 2020. Other income for the nine-month period was $57.5 million compared to $7.5 million in the same period in 2020. Other income for the nine-month period includes realized gains on the sale of investment equity security and an increase in unrealized gains on the company's marketable equity investments.

Net loss for the third quarter is $40.2 million or $0.69 on a fully diluted per share basis compared to a net loss of $12.6 million or $0.22 on a fully diluted per share basis for the same period in 2020. The increased net loss for third quarter compared to same period in 2020 was primarily due to lower milestone revenue and higher operating expenses in 2021. For the nine months period ended, net income was $9.6 million or $0.16 on a fully diluted per share basis compared to net loss of $55.6 million or $0.97 on a fully diluted per share basis for the same period in 2020.

Net income reported for the nine-month period compared to net loss reported for the same period in 2020 was primarily due to higher collaboration revenues and realized and unrealized gains from equity investment securities in 2021 compared to 2020.

Non-cash stock-based compensation expense for the nine-month period was $26.6 million compared to $23.1 million for the same period in 2020. And total shares outstanding were 58.5 million as of September 30, 2021 compared to 57.4 million as of September 30, 2020.

With that, we'd now like to open up the call for your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] We have our first question from the line of Ted Tenthoff of Piper Sandler. Your line is now open.

Ted Tenthoff -- Piper Sandler -- Analyst

Great. Thank you very much. And first, on the IL-15 data, can you share a little bit more in terms of where you and Genentech, Roche tend to take us? And also remind us, do you guys have the ability to do studies on your own? Thank you.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah. Thanks, Ted. So I'll start with the second piece. We do have the ability to do studies on our own under the contract with Genentech. Obviously we have to meet certain conditions like the agents were going to combine and we would have to make sense. We have to go through the kind of process with the Genentech to make sure everybody is aware and understands what we're doing. But, yes, we do have the ability to do studies on our own, both with the compounds in our portfolio as well as with molecules that we don't control.

Now as to where we're going, we can't speak to Genentech's plans exactly. They do leave the collaboration for things that happen within the collaboration, so distinct from the trials we are going to run ourselves. But we do know they have a lot of engagement and expertise and a lot of potential combination partners in their own portfolio.

Now [Technical Issues] the things that we're interested in, we can't disclose specifics yet, and there's a number of possibilities across both NK cell therapies and T-cell therapies, we could combine with. So NK cells are critical for the ADCC function of molecules like Rituxan, Monjuvi, Rubitox, Erbitux, of course daratumumab in myeloma. There is an excellent mechanistic rationale for an agent that boosts NK cell number and activates them or drives them to be more mature like an IL-15 ought to.

So we think that's a direction to go with the NK cell angle. And then on T-cell directed therapies, of course, we're already combining within the collaboration with tafasitamab their PD-L1 inhibitor. And we can certainly imagine our own programs like vudalimab, potentially benefiting and even our CD3 bispecifics as well. So there is a lot on that -- lots to consider. We're going to guide when we have specifics, but I think we view it as what's the best NK cell approaches to leverage and what's the best T-cell approaches to leverage with this kind of agents if the results we're starting to see in the Phase 1 continue to bear fruit.

Ted Tenthoff -- Piper Sandler -- Analyst

Yeah, fair enough. I'm looking forward to all the data at SITC. Thanks.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Thank you.

Operator

Our next question comes from the line of Mara Goldstein of Mizuho. Your line is now open.

Mara Goldstein -- Mizuho -- Analyst

Great, thanks. I'm just continuing within, I suppose, on that line of questioning with Ted's question. I'm just curious about -- so you've reached a point in which you have reached therapeutically active dose. And so I'm curious as to how you would have us think about benchmarking results seen to-date relative to other agents in the space? What I guess should we think about from a quantitative perspective that would allow us to see the potential activity that you're seeing so far?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Right. So I think there is two pieces to that, how we think about that. Within this, as we continue to escalate by the way, we're not done escalating just to be clear.

Mara Goldstein -- Mizuho -- Analyst

Correct.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

While you maintain -- if you can maintain a tolerability profile that's acceptable and we feel good about the tolerability profile we've seen to-date, what you want to look at are the effector cell populations and the amplification that you're doing of them, how that sustained, how you can maintain them and that would be NK cells and T-cells. So particularly CD80 cells you want to look for. So that's one metric, the levels, the durability. You can start getting into the details of subtypes.

The other metric is when you get into combination studies, what kind of efficacy you see now? This early of a stage, we think that you want to look at the magnitude of increases of NKs as we're clearly very active for NK cells. We're starting to see the T-cells proliferation signal. And we think that the initial anti-tumor activity we're seeing in unconfirmed responses monotherapy and in combo with atezo, the small numbers and still unconfirmed just indicate there is immunological activity happening at the tumor site, which is what you want to see. So I think the presence of that is encouraging. So that's one piece to benchmark and then you can't really extrapolate beyond there, do you see something happening in the tumor and then the magnitude and durability in bit effector cell populations like in NKs and Ts.

Mara Goldstein -- Mizuho -- Analyst

Okay. All right. Thanks. I appreciate it.

Operator

Our next question comes from the line of David Nierengarten of Wedbush Securities. Your line is now open.

David Nierengarten -- Wedbush Securities -- Analyst

Well, continuing on the NK cell therapy and enhancement question thing here. I was curious if you had any thoughts or ways to benchmark the activity or the enhancement of NK cell activity in patients compared to engineered NK cells, especially of course ones that have the IL-15 engineered to essentially be constituent to be active in those cell therapies? And obviously, curious about that. Thanks.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

So, I know John wants to have a few things to say about that. John Desjarlais is our CSO. I think, in two perimeters, count how many cells are there and are they the right subtype or the active? John, do you want to?

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Yeah, I'm trying to remember. I did that back of the envelope calculation and I was comparing to one of the NK therapies because they state how many in-case they actually engraft into the human. And I think we are at about a 100-fold higher. So basically you can think of the NKs, they sort of the mile of late and then they replace the NKs that were there with their engineered NKs. We're taking the NKs that exist and expanding expand those 100-fold higher.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

And so that's like about a 100-fold more cells than you see with the allogeneic approaches that have been reported to date from again our back of the envelope. So it's a lot more cells and we're certainly seeing the mature phenotype, which have characteristic markers like CD16 on them. So that would imply that they are active and can do the job. Beyond that it's going to be -- how do things go as we start doing the clinical trials in combination.

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

And you touched on this before, but I wanted to be a little bit more explicit with Genentech. Do you need Genentech to sign off on you guys doing a study with this kind of NK cell engager, for example, or can you pursue that without their say so?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

We can pursue studies -- with any third-party agents that we want as long as we don't create undue safety risks or exhaust drug supply. Or we can't duplicate something going on within the collaboration. For example, we couldn't do our own study in combo with atezolizumab, right. We simply can't do that. But outside of that, as long as we check basic governance boxes and we're responsible, then we have a lot of flexibility.

David Nierengarten -- Wedbush Securities -- Analyst

Cool. Okay. Thank you.

Operator

Our next question comes from the line of Kaveri Pohlman of BTIG. Your line is now open.

Kaveri Pohlman -- BTIG -- Analyst

Yeah, good afternoon. Thanks for the update and thanks for taking my questions. My first question is regarding vudalimab. Your last readout showed a couple of responses in patients pre-treated with EPNPD-1 combination. But do you know what's driving the response there? Is it that the higher doses allow you to push the buttons harder safely?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Oh gosh. I'll let Allen take that one. But this is -- delving into the realms of the unknown.

Allen Yang -- Senior Vice President and Chief Medical Officer

Yeah. So I think what you're asking is, why we're seeing responses with vudalimab, formerly 717 and patients who had previously been treated with other checkpoint inhibitors, either PD1 or vudalimab in combination. The answer is, we don't know for certain. But what we do know is that the way that the molecule was designed was to favor PD1 binding and to diminished the CTLA4 binding. So in other words, you only get CTLA4 being employed and after PD1 binds. And we believe that, that minimizes the toxicity, but encourages the dual activity.

So one of the things is, we think that it could be more tolerable and you can get more doses in or, more specifically, you could be recruiting T-cells that are both PD1 and CTLA4-expressing. So the ones that are enriched in the tumor. And so that dual targeting in a single molecule may have a molecular advantage over giving the agents independently. I don't know, if you want to add anything John or?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

I think you covered it. I mean, it's -- yeah, you're potentially zeroing in on the most tumor reactive T-cell population.

Kaveri Pohlman -- BTIG -- Analyst

Got it. Thanks. And for tidutamab study, how much do you think that the recent data is an indication of the limitation of the approach? Because you have a very cold tumor, but you're dragging T-cells there. Do you think that tells us that the approach is unlikely to be useful in really cold tumors? You need some neoantigens or perhaps some priming cytokines like IL-12?

Allen Yang -- Senior Vice President and Chief Medical Officer

That's a interesting question. I think the one thing I will say is that, we are seeing the -- biomarkers we reported for the tidutamab study where in the periphery. So a lot of increased T-cells in the periphery, a lot of activation of them in the periphery. You raised a good point. We don't know what's happening. There is very limited biopsy data in the tumor. Could that be enhanced by other therapies that change how the T-cells behave? Have them home or migrate? Have them to be more pro immunogenic? Quite possibly. I mean, that's part of the driver of us going into small cell lung cancer and Merkel cell carcinoma, which are hotter tumors for immune therapy. But your question there, that we don't have a perfect answer for is, why we have reagents that we're building to make our next programs come along.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah, I'd also like to add. We mentioned our XmAb808 program, our B7-H3 by CD28 bispecific. I mean, one of the whole points of interrogating these CD28 bispecific antibodies is they could potentiate CD3s, particularly in the cold tumor setting, because CD28 causes a much stronger proliferative signals.

Allen Yang -- Senior Vice President and Chief Medical Officer

Yeah, and I would add along those lines. There's been a lot of investigator interest in combining tidutamab with either a PD1 within our portfolio or later on with a CD28. And I think there is a lot of interesting science there. However, immediately, we're going to test small cell lung cancer and Merkel cell cancer that Phase 2 has started enrolling and addressed an important scientific question that you're asking, is it the Cedar, the soil hypothesis which is a ongoing debate on oncology. But clearly, Amgen has seen responses with their AMG757. So we're very excited about our Phase 2. And if we see responses, I think that will add a lot of information for the field.

Kaveri Pohlman -- BTIG -- Analyst

That's helpful. Thank you.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Sure.

Operator

Our next question comes from the line of Charles Zhu of Guggenheim Securities. Your line is now open.

Charles Zhu -- Guggenheim Securities -- Analyst

Hey, guys. Thanks for taking my questions. Congrats on the early XmAb306 data. You obviously have considerable expansion of the NK cells with this drug. And on that note, I was also kind of wondering, to what extent are the peripheral effector T-cells potentially driving any early signs of efficacy you're observing? And any potential color you can also provide around things like peripheral versus intratumoral presence of these cells? Thanks.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah, I don't believe we have data on intratumoral biomarkers or cells yet. I think maybe, John, if you want to go to the mechanistic mystery of T-cells in the periphery then -- and what do they do?

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Yeah. It is a big mystery. I mean, it's -- I don't think anybody knows if you need a particular level of T-cell expansion in the periphery to promote anti-tumor activity. Really the big question is, what's going on in the tumor? Again, we don't have any data on that yet. And there is a lot of hypothesis for why you would see more activity in the tumor T-cells than the peripheral. And in particular, we had shown early on in preclinical data that when you stimulate a T-cell, say, through CD3 engagement or TCR engagement, it actually up regulates the IL-2 receptors, which of course are the same receptors that IL-15 works through. So, you can imagine those intratumoral T-cells actually being more responsive to IL-15 than the peripheral T-cells.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah. But I guess to really get at the point of what might be going on in the tumor, if you can observe tumor shrinkage whether in combination with a checkpoint inhibitor like atezolizumab or even in monotherapy. I think that's in a sense a marker of what's happening in the tumor immunologically, right. Because these are immune therapies. These are in very advanced solid tumor patients who have exhausted all prior therapies. So many of them would have seen checkpoint inhibitors in the past and progressed on those or not respond to those.

So I think that's an important piece of the puzzle when you put it together with the biomarker data you're seeing and the kind of increases in cell counts in the periphery. We don't know exactly what's going on in the tumor yet. We're eager to see that biopsy data that's starts coming in, but obviously much harder to get in the blood cells.

Charles Zhu -- Guggenheim Securities -- Analyst

Got it. Got it. Thanks for that color. And maybe just one more, a big picture question from me on this front. So you have multiple different approaches of engaged -- multiple and distinct approaches of engaging the immune system through multiple different to means, whether it's recruiting T-cells, recruiting NK cells and now it looks like you're also going to be able to make them proliferate as well.

And a lot of your combination partnership strategy seems to have been more external facing I guess, to what extent are really more internal combinations on your mind? And what are your thoughts around potentially realizing synergy of something like an NK cell and tumor specific NK cell engagers with NK cell expansion agent? And also what are your thoughts on potential for synergistic toxicity as well?

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Regarding the toxicity question, it's hard to say, of course. We do know that NK cell mediated agents like the classic antibodies, Rituxan or [Indecipherable] or daratumamab, it tend to be fairly well tolerated with regard to their immune stimulation, right. Immune-related reactions -- infusion really reactions are what they see.

I think, from a potential of internal combination, that's really why we're making these agents for combination. Of course, the nearer term opportunity might be with marketed agents. But we want to be able to create an internal pipeline that has the best combination partners, say, with the best checkpoint inhibitor. We hope we can establish vudalimab as an important option, because it has a differentiated profile for both PD1 CTLA-4 inhibition.

We think our CD28 bispecifics as well as the cytokines we're trying -- are giving us those tools to figure it out. It's an experiment to figure out which combinations. And I think we mentioned Monjuvi as potential combination partner for NK cell expansion. Recall, we created that molecule and we still have a pretty important economic stake. So, the vudalimab internal, it is important to us. We are, I think, talking about some of our NK cell engaging novel molecules at SITC next or this week. So that's really the big drive for it, where the short-term pieces to do the combinations with external parties.

Charles Zhu -- Guggenheim Securities -- Analyst

Got it. Thanks.

Operator

Our next question comes from the line of Gregory Renza of RBC Capital Markets. Your line is now open.

Xinyue Lu -- RBC Capital Markets -- Analyst

Hi. This is Xinyue Lu for Greg. Thank you for taking our questions and congrats on the progress. Maybe first question on XmAb808. Can you remind us of the rationale selecting B7-H3 as your first target for the CD28 platform versus the more tumor specific approach? And how does your design methodology give you confidence in the safety profile that could avoid some of the concerns from the past programs? Thank you.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah, sure. I mean, really it was a pragmatic decision selecting B7-H3. First of all, it's very broadly and high density expression of B7-H3 across multiple solid tumor histologies. I kind of wanted a one-size-fits-all solution that could potentially couple with PD1 inhibitors or other checkpoint inhibitors as well as CD3 bispecifics. And the justification for going with a fairly broad tumor expressed antigen was that CD28 engagement by itself, and we've shown this in all of our preclinical studies, it's not expected to do anything unless there is also a signal one coming from a TCR recognition of a tumor cell or in combination with the CD3 bispecific.

We had also thought that some of the drug conjugate programs that are out there seem to be safely targeting such a broadly expressed antigen. So, all of those things put together led us to that as our first target. But of course, we are considering more tumor-specific markets as well.

Xinyue Lu -- RBC Capital Markets -- Analyst

Great. Thank you. And then, maybe just another one on the IL-2 program. When should we expect to learn initial data from that program? And what's your development strategy ultimately considering the recent pharma interest as well as your strategy with other autoimmune programs?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

So, for 564, we hope to have initial data from the single ascending dose in healthy volunteers next year. That study is -- that trial is ongoing. We -- in terms of development strategy, we see this new modality that's in early stage development in a number of parties. T-reg expansion, right, T-reg stimulation has really an unproven therapeutic hypothesis. We think that as that validation happens in Phase 2, we want to have our irons in two fires. One of those is in smaller indications, perhaps rare or at least uncommon indications that have a high unmet need that you can try this new mechanism in and one is in more a larger indications with perhaps other established therapeutic mechanisms of action, but where you can rapidly understand whether you're actually impacting disease, because you have clear endpoints and clear markers. So you really want to have both of those pieces of ground covered, something that you could be really pioneering in to maybe accelerate development opportunities and create your own little bailiwick and then really answer the scientific question crisply and clearly not one or the other for both.

Xinyue Lu -- RBC Capital Markets -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of Peter Lawson of Barclays. Your line is now open.

Peter Lawson -- Barclays -- Analyst

Hey. Thanks for taking the questions. Thanks for the update as well on XmAb306, just around that. The responses you've seen to XmAb306, do they -- do you think they correlate with the CD16 isotype, the high-affinity CD16 on NK cells? Just your thoughts there. And then, what kind of CD8 T-cell expansion do you think you'd want to see if that's a relevant question here?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Yeah, we have no idea whether there's -- what the phenotype is of CD16, whether it's the highest anity-vailing 158 or the lower affinity penalanine. I mean, it's not clear what the underlying mechanisms are that are driving response. Even though you, again, are seeing just the beginnings of T-cell proliferation markers in the periphery, that doesn't tell us what's happening with the T-cells in the tumor. The NK cells, I think -- NK cells are very much underappreciated by the way, across all the different oncology indications because they're part of driving immune responses more broadly than just maybe the obvious ADCC function. But we don't have any correlation or understanding on that.

And what number of T-cell increase do you need to see in the periphery? I think we talked about that earlier. There is no clarity there, right? I think you'd certainly want to see activation markers just to let you know that your molecule is doing the things it ought to do, and we're certainly seeing activation and proliferation markers of T-cells. And in addition to this really encouraging and dramatic and NK cell expansion that can play in a lot of different ways. But mechanistic understandings, I think, we're still ways off.

Peter Lawson -- Barclays -- Analyst

And does that T-cell -- sorry, does the NK cell expansion correlate with activity or that's too simplistic?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Too few patients and too few data points now to understand that. Whether it correlates with activity? I couldn't tell you. I do think that within the realm of ADCC-driven antibodies, like, for example, Rituxan, there is growing literature validating that NK cell counts in patients, high NK versus low NKs correlates with response or likelihood of benefit. I think even not even response actual clinical benefit like OS. So that's pretty clearly established. More NKs or better for ADCC antibodies, in particular, Rituxan has been well documented and I think suggestions of that for a number of other antibodies.

For T-cell-mediated therapies like checkpoint inhibitors, nobody knows the role of NKs. But there's a lot of opportunity, we think, in NK cell-driven therapies. The current generation, we think there's going to be a lot more on the horizon in the future, in particular, now that you're starting to have tools like these cytokines to make more NKs when you want.

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Yeah. There's also a school of thought that with a lot of patients under a lot of different checkpoint therapies in various T-cell therapies that NK cell tools are going to be more important over time as the MHC status of those patients changes due to selective pressure.

Peter Lawson -- Barclays -- Analyst

Got you. Thank you. And then, the recent Novartis or yourself kind of moved away from your CD-123 construct, any details there would be great. And then is that a target you would pursue with your CD28 construct as well?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

So, I'll answer the first one and John can talk about the CD28 construct concept. So, the landscape in AML has gotten, I think, a lot more challenging as venetoclax has become more and more entrenched with an earlier line and now we've been a later line. So that's changed the landscape a minute more challenging and the opportunities, I think, shrunk.

But also, CD123 is a difficult target with a very narrow therapeutic window, and challenges in PK dosing frequency. And so, in spite of the very encouraging early complete remissions that we've had and continuing additional activity we've seen, all those pieces make the product profile and the competitive landscape tough, really frankly tough for us to want to pursue and our partner, Novartis, agree. There's certainly investigator interest in niches, and we're very supportive of trying to help patients when sophisticated investigators think there could be a role for the agent in trials. Maybe the CD28 combination with CD123 intriguing, but...

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Yeah. But again, due to the competitive landscape, I'm not sure that's where we want to put our efforts.

Peter Lawson -- Barclays -- Analyst

Got you. Okay. Thanks so much. Thanks for the updates.

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

Thank you.

Operator

Our next question comes from the line of Arlinda Lee of Canaccord Genuity. Your line is now open.

Ben -- Canaccord Genuity -- Analyst

Hey, guys. It's Ben [Phonetic] on for Arlinda. Thanks for taking my question. Bleated congrats on your Janssen partnership. I just wanted to dovetail on the most recent comments you made about CD28. Does the Janssen partnership give you flexibility to pursue collaborations with other partners in CD28 combinations? And is there an appetite for it?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

The Janssen collaboration is very narrow to within B-cell malignancies. So, B-cell malignancy targets, combined with CD28, and it's got a time bound on it. Whereas targets that we don't advance to certain development stages within the two-year collaboration period, that's it. So, we like to control things. So, it would be a very limited number of just B-cell target. So, we could go and partner with whomever.

I think now that we've gotten the ball rolling with XmAb808, which is a broad tumor marker. And now that we've got -- Janssen is pushing hard in prostate cancer and is going to really work with us on plamotamab and really accelerate that program with the CD28, we think that it might not be -- now is the time to sort of pull in and focus on internal work for CD28, not really look at partnering around the CD28 platform now and wait until we've really built up a data set and understand its full potential and value after we've been in the clinic for a while.

Ben -- Canaccord Genuity -- Analyst

Okay. That makes a lot of sense. Regarding the Janssen partnership itself, can you give us an idea of what the next-term milestones will be after you get the stock purchased on this quarter?

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Let's see. That would be -- I mean, of course, as part of the collaboration, we're going to start our tafasitamab lenalidomide trial either late this year or early next year. And we would expect to get the subcutaneous formulation of plamotamab in the clinic in 2022 as well. We're well on our way manufacturing it and having a formulation we think is quite promising to use in humans next year.

And then, with the earlier collaboration, our collaboration around prostate cancer, with a CD28 bispecific, the next milestones, we can't guide exactly on timing because it's up to them, but would be taking a candidate into full development -- into IND-enabling development. We've been making rapid progress on that collaboration. It's been less than a year now and we've gotten along the way.

Ben -- Canaccord Genuity -- Analyst

Great. That's very helpful. Thank you very much.

Operator

Our next question comes from the line of Alethia Young of Cantor Fitzgerald.

Nina Daniels -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my question and congrats on all the progress this quarter. This is Nina for Alethia. We were curious if you could speak more on your CD28 program with Janssen? And how it differentiates in the competitive landscape? And also, if you think at ASH, if you'll get high enough doses that we may be able to make, any conclusions around efficacy? Thanks.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

So, I guess, on the first one on the differentiation, I think, we believe we have now with a good monotherapy step-up and up to a much higher dose we had before now 50 milligrams. We're very encouraged by both the tolerability profile there as well as the efficacy we're seeing in admittedly a relatively small number of patients at that dose. But I think the real differentiation is about the development strategy.

Allen, do you want to speak to that?

Allen Yang -- Senior Vice President and Chief Medical Officer

Yeah. I think biologically, it will be hard to distinguish these antibodies from each other, but the development strategy is key here. So, we've sort of gone for this chemotherapy-free sort of strategy mining with tafasitamab and lenalidomide, the CD19 versus CD20 targeting, the ADCC versus the T-cell engaging and the potential that lenalidomide could potentiate both. On the other front, another chemo-free strategy would be combining with a B-cell CD28 directed modality and that's our partnership with Janssen as well.

So, we think that the molecules look fairly similar early on. And the data today, I think, we have a good activity and we've seen good activity, we'll be reporting additional activity. I think we've done a lot of time sort of figuring out our dose and schedule to optimize much higher dose than previously reported with a very good step-up strategy, which minimizes CRS. And so we're excited into moving to the next phase, which is our randomized Phase 2 in combination with tafasitamab and lenalidomide.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

And to be clear, that additional data will be presented at ASH with still a small, but we think it's a growing number of patients, giving us a clear picture where we are on efficacy and safety with this new step-up regimen.

Nina Daniels -- Cantor Fitzgerald -- Analyst

Thank you.

Operator

There are no further questions at this time. I'm now turning the call back to Bassil Dahiyat, President and Chief Executive Officer. Thank you.

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Thank you very much, operator. And thanks, everybody, for joining us today. We look forward to updating you guys again over the coming weeks, and have a terrific evening. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Charles Liles -- Head, Corporate Communications and Investor Relations

Bassil I. Dahiyat -- President, Chief Executive Officer and Director

Allen Yang -- Senior Vice President and Chief Medical Officer

John R. Desjarlais -- Senior Vice President, Research and Chief Scientific Officer

John J. Kuch -- Senior Vice President and Chief Financial Officer

Ted Tenthoff -- Piper Sandler -- Analyst

Mara Goldstein -- Mizuho -- Analyst

David Nierengarten -- Wedbush Securities -- Analyst

Kaveri Pohlman -- BTIG -- Analyst

Charles Zhu -- Guggenheim Securities -- Analyst

Xinyue Lu -- RBC Capital Markets -- Analyst

Peter Lawson -- Barclays -- Analyst

Ben -- Canaccord Genuity -- Analyst

Nina Daniels -- Cantor Fitzgerald -- Analyst

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