XNCR - Xencor: Once-Great R&D Behemoth With Emerging New Pipeline

2023-07-17 06:52:00 ET

Summary

• Xencor is a leader in bispecific antibodies R&D.
• It has developed a number of approved molecules through big pharma partners.
• Its current pipeline is in the early to mid stage for the next phase in its lifecycle.

Xencor ( XNCR ) is a smallcap company developing XmAb Antibody and Cytokine Therapeutics targeting mostly oncology indications. The company has 8 XmAb bispecific antibodies in Phase 1 or 2 clinical trials, and 2 more XmAb cytokines in Phase 1 trials. They have important partnerships with Genentech and Janssen, the research arms of two of the largest biopharma companies in the world, Roche and Johnson & Johnson.

At least 3 of their XmAb antibodies have been commercialized by partners, from whom they get royalties. Thus, Ultomiris, partnered with Alexion, has been approved in multiple indications worldwide. Vir has partnered for Sotrovimab for mild-to-moderate COVID-19. MorphoSys has partnered with Xencor for Monjuvi, approved in the US and EU for relapsed or refractory DLBCL.

Here is the current development pipeline of Xencor:

As you can see, Xencor's self-owned assets are almost all targeting solid tumors, while the partnered programs are not. Lead asset Vudalimab is a PD-1 x CTLA-4 targeting bispecific antibody running phase 2 trials for mCRPC and gynecological tumors. All other programs are in phase 1 stages, or earlier.

Xencor's partnered programs list is equally impressive:

There are assets in every stage of development, and this list proves this company's mettle like nothing else.

In its cytokine portfolio, Xencor does not yet have any patient data. What they do have is healthy volunteer data from multiple trials. There is data from a XmAb564 phase 1 trial in 48 healthy volunteers. This data shows a well-tolerated molecule with high target selection, potential for duration of response, and minimal off-target toxicities. A second molecule, XmAb306, also showed high NK cell expansion in healthy volunteers, and prolonged duration of effect.

There is considerably more data in the bispecific antibody space. For example, lead asset Vudalimab has data which I extracted using our TickerBay Past trials tool:

The data the tool produced for me is as follows:

According to the data presented by Xencor, as of the data cut on September 7, 2022, prostate-specific antigen ((PSA)) reductions of more than 50% from baseline (PSA50) were observed in three out of nine patients in the study. This includes patients from all cohorts and time on study. One patient in Cohort E experienced a partial response ((PR)) with an 89% reduction in PSA from baseline at week 18 and was continuing treatment at 35 weeks. Another patient in Cohort C was continuing treatment at 4 weeks. In addition to the patient with a PR in Cohort E, six other patients had a best response of stable disease (n=5) or non-complete response/non-progressive disease (n=1).

This data, presented in November, is an early look at the phase 2 combo trial in mCRPC. The combination is with chemotherapy regimen of a carboplatin and a taxane. About their effect on tolerability, the company states :

Tolerability was a concern, so we are de-intensifying the chemotherapy regimen and maintaining the vudalimab dose.

That the tox profile was led by the aggressive chemo regimen is shown from the data from cohort C, where…

No immune related adverse events (irAEs) or treatment-related AEs were reported for the patient in Cohort C, who received vudalimab and olaparib, a PARP inhibitor.

From what I understand, Xencor is an R&D leader which once produced a number of great molecules that were taken up by big pharma and successfully developed into major products. Right now, however, their self-owned pipeline is actually quite early stage. It will take years for even the lead asset to get anywhere near the approval stage. There are no major near term catalysts.

Financials

XNCR has a market cap of $1.5bn and a cash balance of $568mn. Revenues for the first quarter ended March 31, 2023 were $19.0 million.

Here's an important update you should be aware of:

Alexion Pharmaceuticals, Inc.: In April 2023, Ultomiris® (ravulizumab-cwvz), which incorporates Xencor's Xtend™ Fc domain, was recommended for marketing authorization in the EU for the treatment of adult patients with neuromyelitis optica spectrum disorder (NMOSD) who are anti-aquaporin-4 antibody positive. In addition, AstraZeneca recently announced that a Phase 3 study of Ultomiris has been initiated in cardiac surgery-associated acute kidney injury. In the first quarter of 2023, Xencor earned $10.5 million of royalty revenue from Alexion on net sales of Ultomiris.

Research and development expenses for the first quarter ended March 31, 2023 were $64.4 million, while general and administrative expenses were $14.0 million. At that rate, the company has a cash runway of 7-8 quarters, if we ignore the revenue generated during each quarter.

Bottomline

A major R&D company like Xencor will have its ups and downs. For every successful product, there will be a number of failures - and Xencor has had its share of those. From CRLs to abandoned drugs to underwhelming data, they have seen it all. However, they have also seen major successes - all from partners - for some of its technology offshoots, and therefore its platform needs no broad validation. Even so, individual assets do need to be proven in clinical trials, and for Xencor, the greatest bane to investment is that such proofs are years away for their self-owned pipelines. I like Xencor, and will closely watch this name for an entry at current lows. But there is no hurry.

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