Josh Rappaport - Stern, IR Bassil Dahiyat - President & CEO John Kuch - VP, Finance.

Edward Tenthoff - Piper Jaffray Arlinda Lee - Canaccord Genuity Jonathan Chang - Leerink Partners David Nierengarten - Wedbush Allen Cha - Nomura Instinet.

Good afternoon and welcome to the Xencor Fourth Quarter and Full-Year 2017 Financial Results Conference Call. At this time, all participants are in a listen-only-mode. Following the formal remarks, we will open up the call up for your questions. Please be advised that this call is being recorded at the company's request.

At this time, I would like to turn the call over to Josh Rappaport of Stern Investor Relations. Please proceed..

Thank you, Kevin. Good afternoon. This is Josh Rappaport with Stern Investor Relations. Welcome to Xencor's fourth quarter and full-year 2017 financial results conference call. Earlier this afternoon, we issued a press release which outlines the topics we plan to discuss today. The release is available at www.xencor.com.

Today, on our call, Bassil Dahiyat, Ph.D. President and Chief Executive Officer, will discuss the company's business highlights and provide an update on Xencor's clinical programs and pipeline progress. And John Kuch, Vice President of Finance, will review the financial results from the fourth quarter and full-year 2017.

Then, we will 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 the statements regarding the company's future financial and operating results, future market conditions, the plans and objectives of management for future operations, the company's partnering efforts, the company's capital requirements, the company's future product offerings, and the company's research and development programs.

These forward-looking statements are not historical facts, but rather are Xencor's current expectations and beliefs and are based on information currently available to us.

The outcome of the events described in these forward-looking statements is 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 sections of Xencor's 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..

IgG4-RD and SLE both of which have a strong rationale for B-cell inhibition and represent areas of high unmet need. Now at the American College of Rheumatology or ACR Annual Meeting in November we presented positive data from our Phase 2 study in IgG4-RD.

This trial was designed to evaluate the safety and efficacy of 5871 in safety in patients with IgG4-RD. 12 of the patients completed the 24-week study and all 12 achieved the primary end point of at least 2 point reduction in their IgG4-RD responder index on Day 169. Notably none of the 12 required corticosteroids after month two.

Now eight patients of these or 53% achieved disease remission as designed by an IgG4-RD of zero and no corticosteroids use after two months. Now the other four achieved IgG4-RD responder index scores of less than or equal to 4 on day 169.

Across all 15 patients, 14 or 93% achieved a decrease of greater than or equal to a two in their IgG4-RD responder index, most within two weeks. Now additionally 5871 continues to be safe and well tolerated -- oh I'm sorry; I made an error there, a decrease of at least 5 in their IgG4-RD responder index, most within two weeks.

Now additionally 5871 continue to be safe and well tolerated, with all drug related adverse events created is mild or moderate. Based on these results, we believe there is a path forward to the continued development of 5871 in patients with IgG4-RD.

Now because IgG4 RD is a newly defined disease with no therapeutic options and no regulatory precedence for approval pathway, we've been engaging with regulatory authorities to design most appropriate Phase 3 development program. Following an End of Phase 2 meeting last year with the U.S.

FDA we've designed a randomized placebo-controlled double-blinded Phase 3 study to evaluate the addition of 5871 to standard of care in approximately 200 to 250 patients with IgG4-RD. We expect to initiate this study in the second half of this year.

We also intend to see scientific advice regarding this drop in European Medicines Agency early in this year. Now in January, we received from the EMA what can be additional product designation in IgG4-RD for 5871 to go along with the orphan drug designation we received last year from the FDA.

So separately from IgG4 related disease, we continue to progress our randomized double-blind placebo-controlled multi-dose trial of 5871 in SLE.

This trial uses a novel design to evaluate the ability of 5871 to maintain the improvement in SLE disease activity after short core symmetric muscular steroids and in the absence of immunosuppressive medication.

And we believe this trial design will allow us to assess the effective 5871 in SLE with a shorter time to endpoint and with fewer patients compared to standard SLE trial. To that end, we completed enrollment of approximately 100 patients in December and expect to report top-line data in the fourth quarter of this year.

Now I will pivot to our bispecific oncology pipeline. Our bispecifics are built on our novel Fc domain which we created to provide a robust scalpels for two or more different antigen binding demands. The results of a single molecule that can simultaneously bind multiple targets while preserving important properties of native antibodies.

Our lead bispecific programs are tumor-targeted antibodies that contain a tumor antigen binding domain and a cytotoxic T-cell binding domain, the T-cell domain being CD3. They work by activating T-cells at the site of the tumor for highly potent killing the malignant cells.

Now importantly the format of our bispecifics allow us to tune their potency to balance the anti-tumor activity with a reduction of immune toxicity that can result from T-Cell activation.

Now pending alignment on time with our partner Novartis, we plan to announce initial data from our Phase 1 studies of XmAb14045 for the treatment of AML and other CD123 expressing malignancies and the XmAb13676 for the treatment of B-cell tumors late this year.

As a reminder, both trials are designed to evaluate the safety and tolerability of treatment to determine the maximum tolerated dose after the first and subsequent infusions and to provide a preliminary assessment of anti-tumor activity.

Now as I mentioned at the start of today's call, we recently dosed the first patient in our Phase 1 dose escalation study of XmAb18087. 18087 is an SSTR2 or somatostat receptor 2 by CD3 bispecific antibody that we're developing for the treatment of advanced neuroendocrine tumors and GIST.

Our Phase 1 trial is designed to evaluate safety and tolerability, pharmacokinetics and immunogenicity and to assist preliminary signs of anti-tumor activity.

After the termination of a maximum tolerated dose or recommended Phase 2 dose, this trial will enroll patients in separate neuroendocrine tumor in just expansion cohorts to collect additional safe data on safety and potential efficacy. We expect to report initial data in 2019.

Now beyond the three CD3 bispecifics 14045, 13676, and 18087, we are expecting our bispecific oncology pipeline to build a suite -- we are expanding it I should say to build a suite of tumor macro environment or TME activators that simultaneously engage multiple targets such as T-Cell checkpoints at our four agonist.

To us these TME activators represent the next wave of bispecific drug development. They have the potential to improve the selectivity of combination therapies for T-Cell activation and to eliminate the need for multiple antibodies each against a specific target.

Now each of this next wave of bispecific molecules will test a distinct approach for TME activation which will enable us to select the best of these combinations of targets for T-Cell activation in cancer.

Now at the Citi Annual Meeting this past November we presented posters with preclinical data from two of our bispecific antibodies targeting the tumor microenvironment, XmAb20717 or PD-1 by CTLA-4 bispecific, and XmAb23104 or PD-1 by IcO bispecific. Both are in development for multiple oncology indications.

Now both of these antibodies are selective for their target pairs that is cells the mind both antigens and superior T-Cell activation compared to anti-PD-1 antibodies alone. Further the well tolerated with antibody like pharmacokinetics in cynomolgus monkeys.

Our third TME activator XmAb22841 is also active in Vivo and is designed to combine with anti-PD-1 therapy to achieve highly active triple checkpoint blockade. We have planned to initiate a Phase 1 trial evaluating XmAb2717 in 2018 and trials for 23104 and 22841 in 2019. Now the latest addition to our TME pipeline is our candidate XmAb24306.

24306 is an IL-15, IL-15 receptor alpha complex fused to our plug-and-play XmAb header or dimmer Fc domain. Now IL, IL-15 receptor alpha complexes naturally target CD122 also called IL-2 receptor beta, without targeting CD125 or receptor that favors regulatory T-Cells.

We use our highly stable XmAb Fc scaffle to create a stable ligand receptor complex.

Now 24306 is designed to create sustained T-Cell activation or expansion I should say, the modulated CD122 activation which we achieved by engineering the IL-15 receptor alpha complex and our XmAb bispecific Fc domain that contains our extent technology for longer half-life.

We plan to present detailed preclinical data for 24306 at the American Association for Cancer Research Annual Meeting in April. Now I will touch briefly on XmAb7195 our first-in-class monoclonal that targets IgE with its variable domain.

7195 uses our XmAb immune inhibitor Fc domain that targets B-Cells by targeting Fc Gamma R2B and works through three distinct mechanisms of action to reduce IgE levels. That's what differentiates from approved IgE targeting therapies.

First, it's sequesters free IgE to block IgE signaling, next it suppresses B-cell differentiation into IgE-producing plasma cells, and last, it enables the rapid clearance of IgE from circulation.

Now based on the Phase 1 subcutaneous administration data we reported in November, we believe subcutaneous 7195 could offer improvement of our standard of care for patients with asthma or allergic disease and are currently seeking a development partner.

Next I'll do a quick update on our partnerships, that's partnering is really a core part of our strategy particularly as we look to continue expanding our pipeline.

Using licensing of the XmAb technology, we can take additional shots on go for our programs -- for programs that we aren't pursuing ourselves or attaining the commercial rights for most promising assets. Critically we tried little or no R&D work in our partnerships allowing us to focus our resources on our own pipeline.

Now, currently eight pharmaceutical companies and NIH are advancing drug candidate either discovered at Xencor or that rely on our proprietary XmAb Fc domains. There are currently six such programs in clinical development including two in Phase 3 studies.

The first of these two is Alexion 1210 a next-generation C5 inhibitor Alexion is advancing that uses our extent technology for long and half-life. Data from two Phase 3 trials of 1210 are expected in Q2 of this year with regulatory filings expected later this year. The second of these is XmAb5574 MOR208 which is being developed by Morphosys.

In November 2017 they received breakthrough therapy designation in relapsing refractory diffused large B-Cell lymphoma in combination with Lenalidomide and they are also in a Phase 3 trial in relapsed refractory DLBCL in combination with Bendamustine. We eagerly await the data readouts from both of these programs.

Now for our bispecific partnerships which are much more recent we announced in December then Amgen submitted an IND application for AMG 424 novel T-Cell returning bispecific antibody targeting CD38 and CD3 for multiple myeloma. 424 uses our bispecific XmAb technology and CD38 and CD3 binding domains produced at Xencor.

Now this IND filing triggered a $10 million milestone payment which is reflected in our financials. Finally a quick comment on the team here. In December, we welcomed Richard Ranieri to our board of directors.

Rich is currently EVP of Human Resources of BioMarin and brings substantial experience building biotech companies from research and development into commercial organizations and we very much look forward to his insights as we progress into later stages of development.

Now with that, I will turn the call over to John to review our fourth quarter and full-year 2017 financial results.

John?.

Thank you, Bassil. In this afternoon's press release, we reported cash, cash equivalents and marketable securities totaling $363.3 million as of December 31, 2017, compared to $403.5 million as of December 31, 2016. The 2017 year-end cash balance reflects operating spending net of $31 million in milestone payments received during the year.

The 2016 year-end cash balance reflects the upfront proceeds of $150 million received from Xencor's Novartis collaboration and that proceeds of $119 million received from a financing in excess of spending and operations in 2016. Total revenue for the fourth quarter of 2017 was $10.9 million compared to $6.4 million for the same period in 2016.

Revenues for the full-year 2017 were $35.7 million compared to $87.5 million in 2016. Revenue earned in the three-month period ended December 31, 2017, were primarily from a milestone payment received from Amgen compared to revenue for the same period in 2016 which were primarily from a milestone payment received from Alexion.

Total revenues earned in 2017 were lower than 2016 primarily due to revenue earned from our Novartis collaboration in 2016 compared to revenue earned from our Amgen collaboration in 2017. Research and development expenditures for the fourth quarter 2017 were $20.4 million compared to $13.4 million for the same period in 2016.

Total R&D expenses for full-year 2017 were $71.8 million compared to $51.9 million in 2016. R&D spending for the fourth quarter and for the full-year ended December 31, 2017, was greater than R&D spending over comparable periods of 2016, primarily due to increased spending on our bispecific oncology pipeline.

General and administrative expenses for the fourth quarter 2017 were $4.4 million compared to $3.1 million for the same period in 2016. Total G&A expenses were $17.5 million for the full-year of 2017 compared to $13.1 million for the same period in 2016.

Additional spending on G&A for the three and 12-months ended December 31, 2017, over the same periods in 2016 reflects increased stock-based compensation charges. Non-cash share-based compensation expenses for the year-ended December 31, 2017, was $13.7 million compared to $7.8 million for the year-ended December 31, 2016.

The net loss for the fourth quarter of 2017 was $11.8 million or $0.25 on a fully diluted per share basis compared to net loss of $9.1 million or $0.21 on a fully diluted per share basis for the same period in 2016.

For the full-year ended December 31, 2017, the net loss was $48.9 million or $1.05 on a fully diluted per share basis compared to net income of $23.6 million or $0.56 on a fully diluted per share basis for the full-year ended December 31, 2016.

The higher loss for the three-months ended December 31, 2017, over the loss reported for the same period in 2016, is primarily due to increased research and development spending.

While the loss reported for the full-year ended December 31, 2017, compared to net income reported for the full-year ended December 31, 2016, is primarily due to Novartis collaboration revenue reported in 2016 and increased expenses in 2017.

Total shares outstanding was 47,002,488 as of December 31, 2017 compared to 46,567,978 shares outstanding as of December 31, 2016.

Based on our current operating plans, we expect to have cash to fund research and development programs and operations beyond the end of 2020, and to end 2018 was approximately $240 million in cash, cash equivalents, and marketable securities. With that, we would like to now open up the call for your questions.

Operator?.

[Operator Instructions]. Our first question comes from Edward Tenthoff with Piper Jaffray..

Hey thank you very much guys for taking the question. I appreciate it.

So we're heading for progress this year, you mentioned partnering as kind of an important part of the business and is the way we should be thinking about that as you'll partner products in the future that maybe aren't core, how should we be thinking about future partnering opportunities for Xencor?.

Sure. So I think the primary role of partnering for us is to really expand our pipeline which means we can't license purely license out assets that are core to our future growth to other parties without maybe a deal structure like we achieved with our Novartis collaboration where we maintained U.S. commercial rights for ourselves.

I think in general I would expect to sort of see some technology partnerships not really an emphasis for really non-core molecules or for molecules where it's something we wouldn't want to pursue around, we would allow a third-party to use one or more of our Fc domains in the right context.

And then, I think it would be as we advance in the clinic assets that either it's just difficult for us to based on as clinical data emerge to see investing what it takes to really get it across the finish line in late development, we would want to bring extra resources to bear whether that's a deal we share commercial rights, we license outright would be based on the mix of other programs we have.

We certainly want to make sure that we maintain our own core assets fully owned by Xencor. So it's really going to be about how the data emerges and how we need to leverage resources from others to maybe push something all the way across the finish line while we focus our internal resources on the programs that we choose to keep 100% for ourselves..

Makes a lot of sense. I appreciate that looking forward to data and just saw INDs this year..

Thanks, Ed..

Our next question comes from Arlinda Lee with Canaccord Genuity..

Hi guys, thanks for taking my questions.

I was curious about what kind of data might we see for 14045 this year and maybe you can walk us through how low of a dose you think you started at? And then maybe on the CD3 you talked about tuning the potency, can you talk about if all the CD3s that you have in the clinic right now have the same potency or did you kind of individually tune those for the partner device? Thanks..

Right, right, right. So I guess first on the -- the first question on 14045 obviously there would be the Phase 1 study safety data would be front center which is an important consideration in how you give such highly active agencies, these T-Cell engaging antibodies.

And of course initial activity, we would hope to able to demonstrate against tumor cells, against blast and AML really.

We certainly have to be cautious when we start these studies and start at a low dose, we don’t disclose the quantitative doses until we do a data release, but I think in particular for antibodies, we have to be -- because of the regulatory environment for how antibody molecules are governed, it's opposed to say cell therapies like CAR-T therapies, we do start-up low doses and have to progress upwards till we get activity and then go from there to where you need to be.

That’s a general statement. I’m not really commenting specifically any one program that really holds true for I think all antibodies.

Again in distinction from CAR-T therapies where there are kind of not really sure where to start because of the lack of animal models that really read on their drug specific drug candidates and they kind of sometimes come in really high and that can be both good and dangerous. Now going to your second question on potency.

There is multiple pieces to the potency picture. There is AFFINITY to your T-Cell targeting side, the CD3 side, AFFINITY to your antigen, and then there is how you balance those.

And we typically primate models to tune that and for our first three CD3 bispecifics they do have the same CD3 AFFINITY on the CD3 binding side which is a high-single-digit nano model, which is not a super-low AFFINITY but again it’s balanced by what's happening on the antigen binding side where depending on the target it's either well they are all differently, the numbers don’t make sense to compare.

It’s based on what we see in our primate pharmacology and toxicology models. We always try to get long-term activity without having an unmanageable toxicity from the T-Cell the cytokine release response. So it’s hard to say same potency across different candidates but the same design principles are used.

Are really great cases, our partner Amgen, Amgen, the AMG 424 program where they took the various building blocks, different CD3 and CD38 AFFINITIES and they had a beautiful presentation at ASH this past December showing the different combinations they tried, there’re quite a large number of them in both in-vitro studies with human cells and in vivo studies in primates to tune it properly and ended up with lower CD3 AFFINITY and a moderate CD38 AFFINITY.

It's so case specific, you have to have the tools to rapidly prototype and test what you’re going to do..

Our next question comes from Michael Schmidt with Leerink Partners..

Hi, this is Jonathan Chang stepping in for Michael. Thanks for taking my questions.

First question can you remind us what the economics are for programs partnered with Alexion and MorphoSys, and can you talk about the potential near-term milestone payments from these programs and other partner programs as well?.

Well, we don’t really disclose specifics on milestone payments. The economics on the Alexion partnership are low-single-digit royalties and we have on the order of tens of millions of milestones remaining for regulatory filing and approval in our milestones. And then the sales milestones are in aggregate also tens of millions..

Yes..

Right. For the MorphoSys -- and that was the case where we literally just gave them an intellectual property premium operate license under our patents for the EXTENT technology. We never touched the molecule or did any work or invested anything. The MOR208 program is a whole different piece. We created that molecule from scratch.

We called it XmAb5574 filed the IND and it started the Phase 1 study when we partnered with MorphoSys.

For that the economics are different scale, they are high single to low-double-digit royalties and we have in excess of $100 million of milestones remaining for this set of indications in regulatory and developing milestones and then further milestones for sales..

And just a follow-up on that, for the cash guidance that you provided for the end of 2018, does that -- can you talk about what that incorporates for in terms of milestone assumptions?.

It's very modest milestones based on what public information that partners have disclosed. We're generally very conservative as far as projecting out milestones. So it does include a nominal amount, but not a lot and generally we are more conservative..

Yes, nominal relative to the total spend in each of those years. So the modeled milestones are significantly smaller in magnitude then and is a fraction of spend than our spend. It doesn’t have a huge impact on the runway. Now in reality they could end-up being more or less but we're very conservative in how we approach the model..

Okay, great. And then maybe just one last one, can you talk about the reasons for confidence for the SLE opportunity for XmAb5871 and can you talk about what you would need to see from that study to move forward in SLE? Thanks..

Yes, yes. So well the SLE is a really, really hard disease. So you always have to go in with the right level of humility.

That said XmAb5871 is a exceptionally potent B-Cell inhibitor, B-Cells are been validated to have an important role in SLE disease and intervening at the B-Cell can certainly treat SLE, the approval of [indiscernible] inhibiting antibody is demonstrating that. Now 5871’s mechanism is a very broad suppressive mechanism of B-cells without killing them.

So it blocks signaling that comes and T-Cell -- B-Cell corporation that comes from baps signaling for example like [indiscernible] does, there were a wholly different mechanisms as well as blocking a numerous other pathways like B-Cell receptor signaling directly that causes activation, a TLR signaling. So it’s very broad shutdown.

I think we would hope from more activity and broader shutdown of different pathways would suggest that B-cell is consistent with that. So the design and mechanism is also consistent with intervening with B-cell that gives us some degree of confidence that this was worth pursuing without speaking to the result directly.

And then I think the next pieces are clinical trial design which is a novel design in collaboration with a leading academic nephrologist we designed the study to look at loss of improvement in disease symptoms that had occurred following an intramuscular store injection which really served to cool down patients.

And that loss of improvement was looked forward in the context of removing their baseline immunosuppressive medication.

So this would be things like Methotrexate and Mirco Fanelli, all of those background medications are known to compound the ability to look at results in LUPO studies and you try to add a new therapy on top of a dense mix of fairly potent and fairly active therapies.

So that study design really sort of trying to clean up the landscape and look for loss of improvement over time that's hopefully avoided with 5871 but in the control arm where there is very little therapy on board now with these patients, none of them are immunosupressions, they are absent the high dose steroids after that initial dunking phase that cleaning up of the landscape we hope gives it much clear signal.

So those are the two pieces and the mechanism and the clinical trial design..

Our next question comes from David Nierengarten with Wedbush..

Hey just a couple of quick questions. Could you remind us as the standard of care for IgG4 in clinical trials includes Rituxan? And then on 087 is there any differences in dose -- in starting dose or thoughts as you think about a CD3 bispecific in the solid tumor setting versus what we’ve seen in the liquid tumor setting? Thanks..

Sure. So for standard of care for IgG4-related disease this does not include Rituxan and that would not be part of our standard of care baseline and clinical trial, standard of care would be corticosteroids.

Now for 18087 the starting dose is really baked, it’s always empirical to all of our programs including 18087 and the good thing is because these CD3 demands and our antigen binding demands are always engineered to cross react and bind to not even primate targets, we use the typical toxicology species cynomolgus monkey to look at where we should do our starting dose based on the usual kind of guidance for where what dose levels you see adverse events, at what does levels you see activity at? Now in general these metalogic malignancies tend to have very high tumor loads right AML in particular, B-cell malignancies like when from a very high tumor loads and so the higher the tumor load the more coupling you get of your target cell with the T-Cell because your antibody and therefore the more T-cell activation and the more potential toxicity from cytokine release syndrome.

Most of the solid tumors have generally the lower tumor low just less tumor accessible to the vascular compartment less tumor in general probably. And so we expect to have a lower amount of that acute cytokine release when there's less tumor load and that's something we're going to going to look for 18087.

It did have our starting dose start out higher than we saw with our metalogic malignancy target is 14045 and 13676. I don't know how relevant that is because you also don't know what dose levels you're going to require for activity. It's unlikely to be the same for these different tumor types.

That said the lower amount of bulky tumor that you have accessible to the drug and T-Cells early on. We would imagine would have an impact on the severity of adverse events but that's a thesis we have to prove by looking at it. It's interesting.

I think to note that, the target mediated toxicity, hitting somatostat receptor two which is certainly expressed on some normal tissues like pancreatic islet cells for example that it's not been an impediment to the approval of an SSTR2 peptide ligand coupled with a radio nuclide, conjugate that is a radioactivity emitter which is a pretty potent and potentially toxic payload.

So we feel we design the molecule to be able to deal with the potential toxicities but it's going to have to wait and see in the trial..

Our next question comes from Christopher Marai with Nomura Instinet..

Hi this is Allen Cha for Christopher Marai. Thanks for taking my questions.

So kind of going off the previous question on 18087 is there any indication that you see progressing more rapidly through dose ranging studies and with the bispecific approaches and are you going to be measuring PDL-1 expression on the tumors? And second will data for AML program on 14045 be sufficient to choose a Phase 2 dose and proceed to Phase 2, 3 registrational studies..

Okay, so first on the 18087 would be faster does ranging we honestly don't know. Again given that you hope to see or you would expect to see with less tumor load, less CRS, one would imagine that. But the reality is until you get clinical experience with a molecule, trying to extrapolate from primate data is difficult right.

So the answer is we don't know. I think this is one of the few solid tumor targeting CD3 bispecific that's been tried it has been data that was presented by Roche last summer at ASCO, there might have been a couple of the trials going but I haven't seen data from.

So we're learning -- we're going to learn pretty rapidly about how bispecific behave in solid tumors based on this kind of data flow, so the answer is I don't know but we hope so and we'll see. Regarding expression of PDL-1 we're looking at a lot of biomarkers. We have a pretty robust biomarker program for this molecule.

Looking at PDL-1 honestly I couldn't tell you the exact list of things but it's a pretty broad biomarker program and certainly looking at PDL-1 is important for looking at what might correlate to activity, certainly PDL-1 can help suppress activity of a CD3 activated T-Cell.

So I think we do but I'd have to double check to be certain because it was a pretty complex biomarker plan I honestly don't remember the details..

Got it..

Yes for the AML data for 14045 would that be sufficient for to determine recommend Phase 2 dose in a go-forward and we’ll have to see as the data continues to mature..

[Operator Instructions]. Our next question comes from Arlinda Lee with Canaccord Genuity..

Hi guys. Sorry, thanks for taking my follow-up question.

On the IgG4-related disease Phase 3, I notice that I thought you guys had talked about maybe having a trial that was a little bit more patients and I was wondering if there was anything that came out of your discussions with FDA or EMA that might have led to that?.

Right, yes we have shifted the patient number down a bit from our initial thinking coming right out of the FDA meeting.

So you don't get specific instructions when you have a meeting with well [indiscernible] you get a lot of discussion and guidance on what are the important factors be it endpoint, be it clinical benefit definition, be it your staff plan whatever and then you kind of work from that to refine your designs.

We’ve refined our thinking on the trial design and we further analyzed it.

We really looked at -- we think we have the ability to run this trial well from that 200 to 250 patients and really some of the drivers of that refinement, we’re really thinking about how the definition of disease signs and symptoms that we’ve seen from patients treated so far that we expect to see plays into the endpoint of how that can -- how that will play into the statistics.

So it was a refinement..

And I’m not showing any -- please go ahead Arlinda?.

Oh, yes, sorry.

So then can you maybe talk about the refinements of the definition of disease or the definition of endpoint, could you please clarify on that?.

With definition of the disease, there is a classification exercise that’s being finished up shortly from a large group of physicians, we have partly helping sponsor but it’s really quite a big independent effort.

But in regard to endpoint we are looking at using clinical signs and symptoms as a critical part of our endpoint as well as using IgG4-related disease responder index which is obviously based on clinical signs and symptoms but it’s a slightly different look at it in our endpoints.

This is again as we’ve been guiding based on prior analogous trials in rheumatology like in joint arthritis or anca vasculitis about how you mix those. We’re not going to give overly specific guidance because we haven’t yet gone through our EMA discussions. We expect that to happen early this year.

But when we do kick-off the trial, we will be able to give more specifics on that..

And I’m not showing any further questions. At this time, I would like to turn the call back over to Bassil..

Thanks very much, operator, and thank you all for your time today and your continued interest in Xencor. We look forward to giving you updates on our progress as we go through 2018. Good afternoon..

Ladies and gentlemen, this concludes today’s presentation. You may now disconnect and have a wonderful day..