Xencor Inc

NASDAQ:XNCR

Earnings Call Analysis

Xencor Stresses on Flexibility and Runway

In a strategic move to enhance financial flexibility, Xencor sold a portion of their Ultomiris and Monjuvi royalty interests to OMERS for $215 million, bolstering the cash position significantly. The company is refocusing on internal clinical development programs believed to have high potential for success. Xencor has decided to terminate their Phase I PD-1 x ICOS program and close gynecologic tumor cohorts in an ongoing vudalimab study due to unmet prespecified efficacy criteria and shifting competitive environment. With this renewed strategic focus, the deal with OMERS, program terminations, and continued cost reductions, Xencor now projects cash sustainability into 2027.

Xencor Advances Engineered Antibody Portfolio; Focuses on Solid Tumor Treatments

Xencor is diving deep into the development of antibody-based therapeutics, particularly within oncology and autoimmune diseases, leveraging its XmAb protein engineering tools. The company's strategic pivot is towards its bispecific T cell engager antibodies that target solid tumors, a significant endeavor in the landscape of cancer therapeutics. Notably, interim results for xaluritamig, developed in partnership with Amgen for advanced prostate cancer treatment, showed a promising 41% RECIST response rate in higher dose cohorts, with preliminary signs of durability. On the operational side, Xencor has bolstered its financial health by adding $215 million to its balance sheet through a royalty interest sale, while streamlining its portfolio by terminating less promising programs. This reallocation of resources allows the company to advance its potential therapies and achieve financial stability into 2027.

Strategic Pipeline Adjustments Coincide with Executive Transition

As with all biotech endeavors, not all pathways lead to successful therapeutics. Xencor is stopping development on the PD-1 x ICOS program, XmAb104, based on insufficient efficacy data in microsatellite stable colorectal cancer. Moreover, certain gynecologic tumor cohorts in the vudalimab Phase II monotherapy study are also being closed due to a rapidly evolving competitive landscape. Such decisions are critical to ensuring efficient use of resources. Within this context of strategic pipeline management, Xencor also announced the upcoming retirement of its seasoned financial lead, John Kuch, who has been with the company for 23 years, marking an end of an era and the beginning of a new chapter. As Xencor ventures ahead with its reinforced dedication to its pipeline, particularly the T cell engaging bispecifics, the search for a new CFO commences.

Confident Move into the Royalty Market Accompanied by Clinical Updates

Xencor's confidence in the momentum of Ultomiris sales and Monjuvi's unfolding potential led to a tactical foray into the royalty market, with capped royalty gains from both products to alleviate the rough equity cost of capital conditions. Xencor's prudential resource optimization comes amidst promising advancements, including the ongoing Phase I trials for XmAb819 and XmAb808 in solid tumors. Expectations are high for upcoming IND submissions for XmAb541, a CLDN6 x CD3 T cell engager. In tandem with clinical developments, Janssen wrapped up internal clinical work on plamotamab, leaving further development activities in Janssen's hands. Amidst these strategic financial and clinical developments, Xencor restates its promising outlook for its T cell engaging bispecifics moving forward.

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, and thank you for standing by. Welcome to Xencor's Third Quarter 2023 Conference Call. Please be advised that this call is going to be recorded at the company's request.Now, I would like to turn the call over to your speaker today, Charles Liles, Head of Corporate Communications and Investor Relations. Go ahead, Charles.

[Charles Liles, executive]

Thank you, and good afternoon. Earlier today, we issued a press release, which outlines the topics we plan to discuss today. It's available on www.xencor.com.Providing comments on the call is Bassil Dahiyat, President and Chief Executive Officer; and Nancy Valente, Chief Development Officer. Afterwards, we will open up the call for your questions, and we'll be joined by John Desjarlais, Chief Scientific Officer; and John Kuch, Chief Financial Officer.Before we begin, I would like to remind you that during the course of this conference call, Xencor management may make forward-looking statements, including statements regarding the company's future financial and operating results, future market conditions, plans and objectives of management, future operations, 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 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, I'll pass the call over to Bassil.

[Bassil Dahiyat, executive]

Thanks, Charles. At Xencor, we're advancing a broad internal development portfolio of engineered antibody based therapeutics in oncology and autoimmune disease that we've built with our array of modular, continually advancing XmAb protein engineering tools. We're taking multiple simultaneous shots on goal in the clinic and we use emerging data from clinical studies to guide which programs we advance, which we terminate and which we partner.A stringent review of this data and the status of competitors allows us to prudently focus our resources and cash on programs with the greatest potential.We're now focusing on the tremendous opportunity for our targeted T cell engager bispecifics in solid tumors. The class of CD3 T cell engagers has recently shown great potential for bringing tumor targeted T cell therapy to bear against solid tumors, a long-standing challenge for both antibody and cell therapy modalities.At the recent ESMO conference, our partner Amgen presented highly encouraging interim results from a Phase I study of xaluritamig in patients with advanced prostate cancer. xaluritamig is an XmAb 2+1 CD3 T cell engager targeting STEAP1. We created a 2+1 bispecific to address a challenging target with limited extracellular exposure.Amgen reported that during dose expansion and optimization, a 41% RECIST response rate has been seen in high dose cohorts and the preliminary durability while early, is encouraging. We look forward to further updates and progress with Amgen's plans for additional studies in earlier lines of treatment.The enhanced customization afforded by the 2+1 format enables antibodies to bind more avidly to and selectively kill those tumor cells with higher antigen density, potentially sparing normal cells. As a consequence, opens the door to a wider range of solid tumor targets that were previously accessible to T cell engagers.And leading our own internal pipeline for this modality in Phase I is XmAb819 targeting ENPP3 in renal cell carcinoma, followed by XmAb541 targeting CLDN6 in ovarian cancer and other tumors.Our second set of tumor targeted T cell engagers are costimulatory bispecifics that engage CD28 on T cells for targeted immune activation. CD28 co-stimulation has some promise for enhancing anti-tumor immune activity and Xencor CD28 platform has been engineered to expand the therapeutic window of costim activation by using reduced potency CD28 binding. Our CD28 bspecific XmAb808, which targets the broadly expressed tumor antigen B7-H3 is in a Phase I study in advanced solid tumors.In addition, this quarter, our partner, Janssen, now J&J Innovative Medicine has advanced both of our CD28 collaborative programs, submitting an IND for the prostate cancer candidate and a CTA in Europe for the B-cell malignancy one. We anticipate further expanding our pipeline of T cell engaging bispecifics in the future.As part of our efforts to provide sufficient resources to advance these programs, today, we're announcing that we have added $215 million in cash to our balance sheet from selling a portion of our royalty interest in Ultomiris and Monjuvi to OMERS, a Canadian pension fund.These 2 products were created with Xencor's modular XmAb Fc domains and technologies, which is the foundation that enables our diversified approach to building value. Our platform has been fundamental to the creation of 3 XmAb-based medicines marketed by partners, which generated royalty income that further drives innovations in our protein engineering and supports the advancement of our internal pipeline.We believe that strengthened financial position from this deal offers us additional flexibility to execute on our internal clinical development programs, the greatest potential for success. And the deal structure lets us retain potential economic upside from the sales performance of Ultomiris and Monjuvi.We've also made changes to our pipeline. We're terminating development of our Phase I PD-1 x ICOS program, XmAb104, and are closing with gynecologic tumor cohorts that are ongoing vudalimab Phase II monotherapy study. For XmAb104 efficacy data and expansion cohorts in MSS colorectal cancer did not meet prespecified criteria.And for vudalimab in gyn tumors, we see a rapidly changed competitive environment. We will keep supporting patients currently enrolled in the studies, including by continuing to provide study drug.Now on to Efbalropendekin alfa, formerly XmAb306. That's our co-development program with Genentech, where we have decided to opt out of our cost-sharing arrangement in P&L split because as the clinical trial reach and cost of the program continues to expand, we've had to prioritize it against other highly promising programs.We're still very supportive of the program and Genentech development plans. We elected per the contract to shift to a milestone royalty structure. We'll provide additional detail when the specifics are finalized, but we would anticipate terms commensurate with a license of an asset at this stage of development.As a result of the royalty deal, along with these program reductions and a continuing focus on reducing costs, we are guiding -- we have cash runway into 2027.Now for a review on our wholly owned clinical portfolio, I'll turn it over to Nancy Valente, our Chief Development Officer.

[Nancy Valente, executive]

Thanks, Bassil. First, vudalimab, our T cell selective checkpoint inhibitor targeting PD-1 and CTLA-4, as Bassil mentioned, in our Phase II monotherapy study, we have closed the cohorts enrolling patients with gynecologic tumors based on data from small cohorts in ovarian cervical and endometrial, where we did not see data that would support moving forward in the rapidly changing competitive landscape. We will now focus our attention on prostate cancer, both in this monotherapy study and in the study in combination with standard of care therapies.And we're on track to initiate our first-line non-small cell lung cancer study by year-end. In this study, we have a design that gives us an early look at safety and efficacy from 2 dose level cohorts in combination with chemotherapy. And this is prior to the second part of the study that randomizes against standard of care pembrolizumab and chemo.Next, with our other dual checkpoint inhibitor targeting ICOS and PD-1, XmAb104, those signs of activity and microsatellite stable colorectal cancer were observed early on. Expansion cohorts did not meet the prespecified activity threshold and we are stopping program development.Before moving to earlier-stage programs, one note on plamotamab, which we licensed to J&J Innovative Medicine in 2021, we are wrapping up our internal clinical work. And we would anticipate further development activities will be done by Janssen.Now among our internally developed cytokines, our Tregs biased IL-2-Fc being developed in autoimmune disease, XmAb564 continues to enroll patients with either atopic dermatitis or psoriasis in multiple dose escalation. In potency modulated IL-12 Fc in advanced solid tumors began dosing patients in a Phase I dose escalation study in the third quarter.Finally, our clinical XmAb 2+1 bispecifics, which Bassil introduced. Both XmAb819 and XmAb808, which respectively are ENPP3 x CD3 and B7-H3 x CD28 antibodies continue in dose escalation. We and the investigators remain enthusiastic about the potential of these programs. We are also on track later this year to submit an IND for a third internal 2+1 bispecific XmAb541, a CLDN6 targeted CD3 engager to be developed in ovarian cancer and other solid tumor types.Since the CLDN6 are so similar in structure, selecting specifically for CLDN6, especially over CLDN9, 3 and 4 is critical. The 2+1 format and our protein engineering really provides for CLDN6 selectivity. And in our preclinical work, we see beautiful selectivity for CLDN6, avoiding CLDN9 and 3 and 4, especially compared to other CLDN6 x CD3. We're really excited about getting this molecule into the clinic, continued progress with 819 and XmAb808 and expanding more into solid tumors with more T cell engagers.With that, Bassil has one more item before moving on to Q&A.

[Bassil Dahiyat, executive]

Thanks, Nancy. First, I'll say, please refer to our press release for financial results. On a related note, for 23 years, all financial functions at Xencor have been led by one person, John Kuch, who has also, at some point, through the years come to oversee Investor Relations, facilities, IT and CMC operations.It is impossible to encapsulate so briefly how much we have relied on John for over 2 decades, pulling us out of some truly dire situations over those years. As we announced last month, John plans to retire early next year in March, and we thank him for his critical role in pursuit of creating and advancing new medicines for patients.Now with that, we'll open up the call for questions. Operator?

[Operator]

[Operator Instructions] Our first question comes from the line of Edward Tenthoff from Piper Sandler.

[Edward Tenthoff, analyst]

So first, John wish you all the best in retirement. I'm sure you're going to miss all the craziness with Bass, so it's been a ton of fun working with you. I appreciate all the color and congrats on the OMERS deal. I wanted to kind of get a little bit more of a sense with respect to plamo, in terms of your comments about stopping internal development. Does this change the ongoing studies at all? Does this change your ownership at all? Just want to get a little bit more color what that means.

[Bassil Dahiyat, executive]

Sure, Ted. Sorry if that came off a little bit confusing. No, this is a no change whatsoever from the plan we've had with Janssen for the last 2 years. The plan was always that we would finish the ongoing Phase I study when we completed the work with our subcutaneous formulation. And then they would just pick up all clinical development activities themselves. The deal structure hasn't changed. It's just whose hands are doing the work. That was more of an update on, we've essentially finished the subcu Phase I. We're wrapping that up and Janssen's picking up their piece. So there's no change. Sorry for the confusion.

[Edward Tenthoff, analyst]

No worries at all. And can you just remind us what studies are ongoing for that one?

[Bassil Dahiyat, executive]

That's the Phase 1 where we're wrapping up the subcutaneous dose escalation and expansion and then we anticipate that the molecule would be studied in combination with the lead B-cell malignancy CD28 program that they just filed a CTA for where they're planning on studying that with multiple agents, both internal for J&J Innovation and us. So that's always been the game plan, and we're anticipating that next step soon, we hope.

[Operator]

Our next question comes from the line of Dane Leone from RJS.

[Dane Leone, analyst]

Congrats on the progress. And John, I wish you the best in retirement. It's been a pleasure working with you over the years.Maybe we could expand a little bit on the design of the frontline non-small cell lung cancer study with vudalimab. It sounds pretty interesting. I think probably 2 questions for us on the study design.Firstly, how much of the dose finding do you already have an idea about, given the ongoing prostate and other solid tumor studies that could be informative?Two, what would be the actual patient population with regards to mutational burden, PD-1 status, cut points, et cetera, that you would envision? And presumably, this would be an ex U.S. study primarily.

[Bassil Dahiyat, executive]

I'll let Nancy pick up the volume that one.

[Nancy Valente, executive]

Yes. So the study design is the Phase IB/II. We're going to study 2 different cohorts of -- 2 different doses of vudalimab and 2 cohorts and then make a determination of those dose or even a dose between that to take into combination with standard care chemotherapy for non-small cell non-squamous. We do have a lot of information about the dose from our prior Phase I dose escalation from -- as you said, our studies in gynecologic malignancies prostate cancer. And so we use that to pick these doses to look at. The other part of the question was?

[Dane Leone, analyst]

The patient population like PD-L1 status.

[Nancy Valente, executive]

Yes. PD-L1 status is 0 to 49%. And yes. And it's -- so it's 0 to 49 first-line standard of care treatment. We're going to -- we're opening the study in the United States and also ex U.S. as well. So we do plan to enroll patients in the United States.

[Dane Leone, analyst]

Do you have a general time line at this point of when you would have initial outcomes-based results that would be informative of potential next steps or just even the correct dose?

[Nancy Valente, executive]

Yes. So we're in the process of initiating the study right now. It's really hard to tell right now when we'd have the Part 1 and the Part 2. Part 1, obviously, would come first. We'd be able to look at that data, share that data externally. It's very hard to predict when that would happen. And then once we see that, we'll move on to the randomized Phase II portion against pembro and chemo.

[Operator]

Our next question comes from the line of Etzer Darout from BMO Capital Markets.

[Etzer Darout, analyst]

Just maybe the first one, just maybe for modeling purposes. If you could sort of maybe help us understand to the extent that you can sort of the residual royalties or milestones that you would receive for Monjuvi, Ultomiris? Just as how we should think about how to model any residual sort of upside here from the deal?And then secondly, just curious on sort of the focus on the 2+1. We saw some encouraging data from AMG 509 at ESMO. Just wondering if you're seeing any other kind of interesting clinical signals so far from your other 2+1 molecules in the clinic. I know they're early, but just wondering if maybe you're starting to see sort of an evolution here of a profile that you really like that you're sort of doubling down, if you will, on sort of solid tumors.

[Bassil Dahiyat, executive]

Thanks, Etzer. I'll answer the second question first before I turn it over to John Kuch on the royalty deal. So we're not disclosing any data around any of our ongoing programs or for that matter, some of our partners still have ongoing 2+1 programs like Astellas is moving forward their Claudin 18.2. So we'll give data later.I will say that we and our investigators remain enthused and there's a really great unmet need for certainly an EMP -- renal cell carcinoma highly cytotoxic antibody. And so we're pedal to the metal. But we're not going to share any details about the trial just yet. On the royalty deal and some of the residuals, John, you going for that?

[John Kuch, executive]

Yes, sure. There's -- it's 2 separate transactions. One is the Ultomiris deal, which there's caps from $26 million to $28 million, the first $35 million OMERS, we gets the excess over that. Beginning '29, the first $12 million goes to OMERS and we get the excess. There's also a potential milestone of $12 million for sales, which we could earn for Ultomiris sales from July 1, '23 to June 30, '24.The second transaction is the Monjuvi, which we received $22.5 million upfront. OMERS gets 130% of that upfront payment or $29.5 million and any excess we received the residuals.

[Operator]

Our next question comes from the line of Charles Zhu from Guggenheim Securities.

[Unknown Analyst]

This is [ Rosie ] on for Charles. Congrats on all the progress. So I have 2 questions regarding vudalimab. So in the frontline non-small cell and cancer setting, could you maybe comment on how vudalimab is compensated from the competitor bispecific?And then for the monotherapy setting, you provided guidance to data for the prostate cohort in early 2024. Could you maybe talk a little bit regarding how you're setting expectations for that data readout?

[Bassil Dahiyat, executive]

So I'll take the second one first, and then Nancy, you can want to take one on the frontline one. So we're going to have a greater end that we're going to report. So we've reported relatively small numbers of patients out of the trial so far, and we haven't reported any out of the monotherapy trial. So we're just going to -- really it's about increasing the numbers so we can zero people in on where we think the strongest potential is of the various cohorts in our combo study as well as in the monotherapy.And in terms of setting expectations, I think the landscape is shifting a lot in prostate cancer. I think we're certainly very aware of the xaluritamig data from Amgen in a similar line of therapy, showing a 41% OR, obviously, very excited because we made the thing, but also mindful of that. And so I think we're looking at a bar that might be shifting a little bit. And just this is about us determining where we follow relative to that bar with a higher number of patients. So I don't think we can offer too much more than that.

[Nancy Valente, executive]

And I think you asked about differentiating from our competitor or competitors? Yes. And so John can also, I guess, chime in here, but vudalimab was designed specifically and optimized to have reduced potency in some ways to be very effective, but also to be very tolerable as far as toxicity goes.The idea is that it would bind to duly bind to T cells that have both expressed and these are in the tumor itself versus the circulation. The data so far when we compared our data to some of the competitors, it's a little bit hard. But when we look at -- when we try to look at Phase I or dose escalation compared to dose escalation, what we saw was -- we have very heavily pretreated patients that are checkpoint failed or experienced.And our competitors often have checkpoint-naive patients. So it's very hard to do that apples-to-apples comparison. But even with that, by doing so, when we looked at the efficacy across products and the safety, we thought we had something that was probably similar and likely to be less toxic as we moved in into earlier settings. So that's what is how I would summarize the differentiation.

[Unknown Analyst]

Great. And maybe just a follow-up on XmAb564. Is there -- can you provide any color on how enrollment has progressed with the multiple ascending dose study?

[Bassil Dahiyat, executive]

The enrollment is really not -- it's a relatively small study. The number of patients, relatively small. Enrollment is not really the driver of the time line at all. It's the escalation safety windows that you have to wait through to go to the next dose level in the next cohort in the multiple ascending dose.

[Operator]

Our next question comes from the line of Gregory Renza from RBC Capital Markets.

[Unknown Analyst]

This is [indiscernible] on for Greg. I have a question on the T cell engager. I'm just curious if you can talk about the learning from xaluritamig data, particularly on the adverse events. I'm just curious if you think the adverse event is within the acceptable and expected level for the class. And if that's something that you can do to mitigate that for your study?

[Bassil Dahiyat, executive]

Yes, I'll take that. I think it's -- the adverse events they saw, I think, are redeemed certainly by Amgen quite within the range of acceptable. They're aggressively expanding the program. I think one of the things they're going to have to work on, and I think they're well positioned is educating a new community of oncologists about T cell engagers and cytokine release syndrome. This is the prostate cancer community.They're not used to it. They're not used to IRAEs because they're not used to checkpoints, but I think they'll get there. I think we've seen these kinds of adoption of highly active agents work its way through the oncology community when we saw ADC start to emerge about 4 or 5 years ago, more broadly.So I think it's well within the range. And we saw, the learnings we saw from them were really nothing new. It's you use priming doses and step-ups. You have to be thoughtful about optimizing them. And one of the things they did is they adopted a somewhat more aggressive premedication routine before the infusions while they're stepping up the doses when they're jumping from a prior dose being lower to the next one higher. And that's just the usual premedication people have done with Rituxan for decades a Tylenol, Benadryl and then a corticosteroid, they just intensified that someone that had a big impact. So those are the kind of things we're considering and being very aware of. Anything to add there, Nancy?

[Nancy Valente, executive]

I agree. I think it's -- this class of drugs does have cytokine release that's expected. And I think as people get more comfortable managing it, it won't be a deal breaker. The efficacy is really strong. And you have to remember, these are patients that are multiply pretreated. Say a median of 4 prior therapies, yes. So to see a response rate like they saw 41%. It's pretty amazing for these kind of patients. And so it's great to see this and other CD3s moving forward and showing this kind of activity because it shows that by T-cell engaging bispecifics are going to have a role in the treatment of solid tumors, which is very exciting for patients as well.

[Operator]

Our next question comes from the line of Alec Stranahan from Bank of America.

[Alec Stranahan, analyst]

Just a couple from us. One more on AMG 509. We've heard some differences in opinion on PSA50 reductions as a good surrogate for response, although it seems consistent in the 5 patients that the maximally tolerated dose. So any thoughts on PSA50, how we should be thinking about that in terms of response. And then I've got a follow-up.

[Bassil Dahiyat, executive]

I think PSA50 is definitely an indicator that something is happening to the patient. I'm not aware of comprehensive data sets to let you really look at that versus RECIST response. And that's what I'm assuming your question was. I'm not aware of good data set to let you look at accordance there because it hasn't been standard to look at RECIST in the clinical trials in that prostate community over the years.Now I think that's changing, but we'll wait and see. I just want to emphasize that in accordance with PSA50s are not, that program, xaluritamig saw really outstanding RECIST responses in people with measurable tumors. I do know that just from all of the prostate cancer doctors we've worked with and talked to, they view PSA50 as a good thing if it drops, sorry, a good thing if you can achieve it, how it concords with the specifics of in an individual patient, there is not enough data.

[Alec Stranahan, analyst]

Okay. Got it. That's helpful. And then just one more on the royalty sale. Is the decision to do this versus another financing option that you may have at your disposal, just in terms of the pull forward of the expected economics? What -- and how important was it to maintain the upside on the 2 assets? Just trying to get a sense of your conviction on the opportunity.

[Bassil Dahiyat, executive]

I think it was very important to maintain the upside on the assets because there's a lot of momentum in certainly Ultomiris sales. And I think there's a lot of data still coming for Monjuvi as that landscape in lymphoma continues to evolve. And so it was absolutely critically important for us to have the caps for Monjuvi that sort of total overall cap and then the annual caps for Ultomiris. We're excited by both molecules.I think why we did the deal, I think it's because the equity cost of capital now in the markets is very challenging. And we've got a lot of programs that we want to invest in, particularly around these T cell engagers. So it made sense to do the royalty deal. We've been monitoring the royalty markets now for, gosh, 4 years now since we started and we're always looking for when the timing is right from both the deal side and our need side, and this was when it all came together.

[Operator]

Our next question comes from the line of Boris Peaker from Cowen.

[Unknown Analyst]

This is [ Nick ] on for Boris. Just a quick one for me. But for XmAb 808, I know it's targeting B7-H3, there are a lot of companies who are now looking at B7-H4 that's kind of become like an interesting space for our people, I mean, for some docs. So I was just wondering what you guys think about that and like the difference between B7-H3 versus B7-H4 and how B7-H3 could potentially outperform B7-H4. What -- just general thoughts on that.

[Bassil Dahiyat, executive]

Yes. I mean they are 2 really different targets. I mean the reason they're called B7s is they're part of the B7 family, which includes CD80, CD86, PD-L1, so on and so forth. But when we look at them in terms -- as targets for T cell engagers or ADCs, they have like kind of some overlap but lots of non-overlaps which histologies that are over-expressed in. I think a B7-H4 as like a cervical cancer, triple-negative cancer marker, whereas I think a B7-H3 as being broadly over-expressed across a much wider range of histologies.

[Unknown Analyst]

That's helpful. Would you ever think about going into B7-H4 then? Or is that like a later down the line --

[Bassil Dahiyat, executive]

We've certainly thought about it. I mean there's already -- there is a B7-H4 CD3 T cell engager in Phase I, I believe. And we're -- we would prefer to work on targets that somebody else isn't already tackling. And we're making a lot of internal investments on finding novel targets for placing our T cell engagers.

[Operator]

Our next question comes from the line of Peter Lawson from Barclays.

[Unknown Analyst]

This is [ Alex ] on for Peter. Just on 819, ENPP3 bispecific program. Have you started dosing patients with the subcu formulation? Or are you just -- are you still dose escalating with the IV formulation at this point?

[Bassil Dahiyat, executive]

We expect to have -- honestly, I don't know if as of today, the subcu started, but it's very imminent. We've opened it, and I just don't know. We'd have to text our medical lead on that one. So it's up and running and if not today, very, very shortly on the subcu. We're planning on running them in parallel. We wanted to get the IV going at first just to get a little data, get the ball rolling. And then that way, we could start the subcu with a little bit of knowledge. But no, the boats going to go parallel.

[Unknown Analyst]

Okay. Great. And so when you report Phase I data, would you anticipate having a recommended Phase II dose at that point?

[Bassil Dahiyat, executive]

I'm sorry, could you repeat? I was distracted for a second.

[Unknown Analyst]

No worries. When you report Phase I data, would you anticipate having a recommended Phase II dose?

[Bassil Dahiyat, executive]

That's the idea, yes.

[Operator]

Our next question comes from the line of Mara Goldstein from Mizuho.

[Jiayuan Gong, analyst]

This is Jerry Gong on from Mara Goldstein. First on XmAb306, could you share when you might expect to be eligible to receive milestones? And for the second question, vudalimab, what are your thoughts on positioning that candidate in renal cell, given competitor PD-1 and CTLA-4 bispecific data in that indication?

[Bassil Dahiyat, executive]

So first, I'll just touch on the 306. We're finalizing the details of the contract conversion, and we do have development and we expect to have development and regulatory and commercial milestones and a sort of a standard structure. I couldn't speculate as to the timing yet, unfortunately. But we'll, of course, disclose a lot of details commensurate with how we usually disclose for licensing contracts when that amendment is finalized.For vudalimab, if I understood properly, you have -- your question is about positioning in RCC.

[Nancy Valente, executive]

Yes. Because of the [ reset ].

[Bassil Dahiyat, executive]

Right, right. You want to take that one, Nancy?

[Nancy Valente, executive]

Yes. I mean we're aware of -- I can't say that the 5752 products in renal. Some of these names are challenging. And it's very interesting with great high efficacy. It looks like it -- toxicity is manageable. And so we're pleased to see a product in the same class as vudalimab showing activity like this. I mean it helps us -- it helps confirm that this is a product that's going to be important in different tumor types. We're not going into renal cancer cells.We made decisions a few years ago on -- based on Phase I data into which tumor types we go into. It was a span of tumor types. And eventually, we decided to go into some that were checkpoint sensitive and some that were checkpoint resistant and that's kind of where we are right now. We're probably not going to add another tumor type after we added lung in the last year.

[Jiayuan Gong, analyst]

Got it. And if I may ask one more question, also wishing John, best wishes. When do you expect to target a new CFO in your search?

[Bassil Dahiyat, executive]

Sorry, what do you expect to -- when? Yes, we are starting the search right now. We're starting the search right now. This is going to be a long hard search to replace John. So we got to start now if we're going to be ready by end of March.

[Operator]

One moment for our last question. Our last question comes from the line of Brian Cheng from JPM.

[Lut Ming Cheng, analyst]

John also sad to see you go, looking forward to reconnecting in the future. But just on 564, I recall that we may be expecting some psoriasis data sometime in the early part of next year. So the first is, can you just talk about the timing of the data read? Have you been able to narrow the timing of the -- your also guidance?And also, as you think about psoriasis as a testing ground for 564 mechanistically, do you have a sense of what we should expect in terms of using PASI score? What PASI score are you aiming for, so that you can have a strong conviction to move this specific program into other diseases where Treg is as important?

[Bassil Dahiyat, executive]

Thanks, Brian. I'll take the second one first. So we've always intended psoriasis as a population where we could gather the critical biomarker data, which is the peripheral biomarker -- peripheral blood biomarker data is on Treg count, the opposing cell types that you don't want to have to expand because we have to, from regulatory reasons, do our multiple setting dose in patients, not in healthy volunteers. So psoriasis is a great way to do that and you have easy access to biopsy samples if you want to go there to get additional information.So we've always been targeting in the psoriasis population, Treg counts and numbers to select the dose and a dosing interval rather than looking at PASI score as a driver. That's something I think we've guided since we started.We did add the atopic dermatitis based on intriguing very early and small numbers durability data we saw last year from a competitor program as a way to sort of glean potential there and so that's -- that was sort of the rational for AD. But in that case as well, it was to glean durability and long-term potential -- sorry, long-term sort of disease remitted potential generally for the class.We think both of those areas are difficult and challenging in very large indications. And we've, of course, been looking around in other smaller indications, as we've mentioned, we'd be ready to disclose as we get closer to the time to jump off onto the next set of trials. Once we're done with dose escalation. As for timing, we're still guiding to 2024, and we'll fill you in when we get there.

[Operator]

This concludes the question-and-answer session. I would now like to turn it back to Bassil Dahiyat for closing remarks.

[Bassil Dahiyat, executive]

I'd just like to say to everybody, thank you so much for joining us this afternoon, and have a wonderful evening.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.