Novartis goes bispecific with Xencor in up to $2.6B immuno-oncology deal

Xencor has lined up its third recent major partnership, this time for its bispecific antibodies with Novartis ($NVS). The small cap biotech will get $150 million upfront in addition to up to $2.41 billion in clinical, regulatory and sales milestones. It already partnered with Amgen ($AMGN) last year and Novo Nordisk ($NVO) the year before, among others.

The deal is expected to give Xencor ($XNCR) enough cash to take its lead drugs through clinical development and, potentially, onto the market in the U.S. The bispecific antibody player has 9 candidates created with its XmAb technology; its most advanced internal candidate is the Phase II treatment for IgG4-related disease and systemic lupus erythematosus (SLE), XmAb5871.

"We look to advance our two lead bispecifics more comprehensively and quickly by adopting, pending a look at our soon to start Phase 1 trial results, a clinical plan that is potentially larger and broader by benefiting from Novartis’ 50/50 cost sharing worldwide, their expertise/scale and the cash from the upfront and clinical milestones," Xencor President and CEO Bassil Dahiyat told FierceBiotech

He continue: "The added capital will also help the 2 additional bispecific oncology molecules we hope to add to our clinical portfolio in 2017. Those target SSTR2xCD3 for T-cell engagement against neuroendocrine tumors, and PD1xCTLA4, to get combination checkpoint blockade for multiple tumors."

Xencor is slated to have initial Phase II data in IgG4-related disease during the first half of next year, with the SLE data to follow in 2018 for its lead candidate.

Under the Novartis deal, the partners will develop a pair of candidates: XmAb14045 for acute myeloid leukemia and XmAb13676 for B-cell malignancies. Both are expected to get into the clinic this year. The pair will share development costs for these candidates with Xencor keeping U.S. commercialization rights and Novartis gaining them in the rest of the world.

In addition, Novartis gains worldwide rights to four additional targets that will be engineered by Xencor. And the pharma gets a worldwide, nonexclusive license to use Xencor’s XmAb Fc technologies in up to 10 molecules.

As part of the deal, Xencor could receive tiered, low-double-digit royalties for sales of XmAb14045 and XmAb13676 outside of the U.S. It also stands to get mid- to high-single-digit tiered royalties for worldwide sales of the four proprietary Novartis bispecific molecules.

"As Novartis understood how our lead candidates, and platform, performed, we expanded the deal from just the two  lead programs to include research programs to create more leads against additional targets," said Dahiyat. "Critical for us was to maintain the full US commercial rights to the two lead programs, so we can mature as a company and have commercial aspirations. Novartis made clear they could be flexible in dealing with us, as long as they could continue to build up their IO pipeline." 

Xencor had $178.7 million in cash at the end of last quarter, with an operating loss of only $6.4 million for that period. The company went public in late 2013 and has managed to hold on to a market cap just above $500 million.

At least 7 of Xencor’s partnered programs are currently in clinical testing. Most recently, the National Institutes of Health put an HIV treatment, VRC01LS, into the clinic that uses Xencor's Xtend antibody half-life extension technology. Its partners also include Merck ($MRK), Janssen, Alexion ($ALXN) and Boehringer Ingelheim.

Xencor’s technology is aimed at creating precise alteration of an antibody’s Fc domain; it can be used with virtually any antibody. Its XmAb bispecific technology requires binding with two different antigen targets, rather than one as in traditional monoclonal antibodies. It’s intended to be able to improve half-life and enable simpler manufacturing processes.

Its shares were up 18% in premarket trading on June 28 on the Novartis partnership news.

- here is the release
- and here is the SEC filing

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