10-Q: Q3 2025: Revenue Soars, Net Loss Narrows for Biopharma

Biopharmaceutical company Xencor reports significantly increased revenue and a narrowed net loss for Q3 and the first nine months of 2025, driven by milestone payments and royalties, despite ongoing R&D investments.

Summary

• Total revenue for the nine months ended September 30, 2025, increased by $39.6 million to $97.3 million, compared to $57.7 million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, significantly narrowed to $85.5 million, a substantial improvement from a net loss of $190.3 million in the prior year period.
• Operating loss improved by $41.4 million for the nine months ended September 30, 2025, reaching $(123.9) million compared to $(165.2) million in 2024.
• Other income (expense), net, saw a positive swing of $63.6 million, moving from a net expense of $(25.1) million in 2024 to a net income of $38.5 million in 2025, primarily due to gains on marketable equity securities.
• Research and development (R&D) expenses decreased slightly by $2.0 million to $174.6 million for the nine months ended September 30, 2025, mainly due to lower stock-based compensation and reduced wind-down costs for terminated programs.
• Cash, cash equivalents, and marketable debt securities totaled $633.9 million as of September 30, 2025, down from $706.7 million at December 31, 2024.
• The company initiated a Phase 2b study for XmAb942 (Xtend TL1A) in ulcerative colitis and a Phase 1b proof-of-concept study for plamotamab (CD20 x CD3) in rheumatoid arthritis during Q3 2025.
• Positive early efficacy data was presented for XmAb819 (ENPP3 x CD3) in advanced ccRCC and XmAb541 (CLDN6 x CD3) in advanced gynecologic and germ cell tumors in October 2025.
• A material weakness in internal control over financial reporting was identified, leading to the restatement of 2023 financial statements and Q1-Q3 2024 unaudited statements, with remediation actions underway.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial improvement with significantly narrowed net losses and increased revenue driven by milestone payments and royalties. Positive early clinical data for several pipeline programs and partner advancements indicate good progress. However, the identified material weakness in internal controls and the ongoing patent litigation introduce some caution, though the company has strong defenses in the latter. The overall outlook is positive due to pipeline progress and improved financials.

Positives

• Total revenue for the nine months ended September 30, 2025, increased by $39.6 million to $97.3 million, compared to $57.7 million for the same period in 2024.
• Net loss significantly narrowed to $85.5 million for the nine months ended September 30, 2025, a substantial improvement from $190.3 million in the prior year.
• Operating loss improved by $41.4 million for the nine months ended September 30, 2025, reaching $(123.9) million.
• Other income (expense), net, saw a positive swing of $63.6 million, primarily driven by $50.1 million in gains on marketable equity securities for the nine months ended September 30, 2025.
• Received $37.5 million in milestone payments from Incyte in 2025 ($12.5 million for FDA sBLA acceptance in February 2025 and $25.0 million for FDA application approval in June 2025).
• Received a $2.0 million milestone payment from Vir Bio in Q2 2025 for initiating a Phase 3 study of tobevibart.
• XmAb819 (ENPP3 x CD3) Phase 1 study in advanced ccRCC showed evidence of anti-tumor activity with 25% partial response and 70% disease control rate in efficacy-evaluable patients at target dose levels, with an acceptable safety profile.
• XmAb541 (CLDN6 x CD3) Phase 1 study showed confirmed partial responses in three patients (one ovarian cancer, two germ cell tumors) in an early dose-escalation cohort.
• XmAb942 (Xtend TL1A) Phase 1 study in healthy volunteers demonstrated a human half-life greater than 71 days, supporting a potential 12-week dosing interval for maintenance treatment.
• Zenas BioPharma, Inc. announced positive results from the Phase 2 MoonStone trial of obexelimab in relapsing multiple sclerosis in October 2025, meeting the primary endpoint.
• Amgen initiated the Phase 3 Xalience study of xaluritamig in combination with abiraterone for mCRPC in Q3 2025.
• The company's motion to dismiss the Merus N.V. patent infringement complaint was granted on October 1, 2025, and the PTAB instituted IPR on September 26, 2025, for two of Merus's patents, indicating strong defenses.

Negatives

• Cash, cash equivalents, and marketable debt securities decreased by $72.8 million from $706.7 million at December 31, 2024, to $633.9 million at September 30, 2025.
• The company continues to incur significant research and development expenses and has no internally developed products approved for commercial sale.
• Further development of Vudalimab (PD-1 x CTLA-4) has been paused.
• A material weakness in internal control over financial reporting was identified, leading to the restatement of financial statements for 2023 and the first three quarters of 2024.
• The company recorded asset impairment charges of $8.3 million during the nine months ended September 30, 2025, related to pausing further development of certain programs.

Risks

• Unfavorable global economic or political conditions, including potential trade wars or tariffs, could adversely affect business, financial condition, or results of operations.
• Disruptions at the FDA, SEC, and other government agencies due to changing priorities, funding shortages, or government shutdowns (e.g., the U.S. government shutdown beginning October 1, 2025) could hinder regulatory approvals or delay SEC filings.
• Present and future legislation, such as the ACA, IRA, and the One Big Beautiful Bill Act, may increase the difficulty and cost of obtaining marketing approval and commercializing product candidates, and could affect drug pricing and reimbursement.
• The company's ability to obtain and maintain regulatory approvals for product candidates is uncertain.
• The success of ongoing and planned clinical trials is not guaranteed, and product candidates may not achieve market acceptance or clinical utility.
• The company relies on partners' abilities to advance drug candidates into and successfully complete clinical trials.
• The company may fail to maintain effective internal controls, potentially leading to additional material weaknesses and misstatements in financial statements.
• The company operates in a very competitive and rapidly changing environment, facing significant competition in the industry.
• The company's ability to protect its intellectual property position is crucial, and there is no guarantee of prevailing in legal disputes like the Merus patent infringement case.
• The company's estimates for future revenues, capital requirements, and needs for additional financing may prove to be wrong, leading to capital resources being used sooner than expected.

Future Outlook

The company anticipates its current financial resources, including cash, cash equivalents, marketable securities, and potential milestone payments, will be sufficient to fund operations and capital expenditure requirements into 2028. They expect to continue increasing operating expenses for ongoing and additional clinical and preclinical development. The company plans to initiate a first-in-human study for XmAb657 by year-end 2025 and for XmAb412 during 2026. Future milestone and contingent payments are dependent on the achievement of certain research and development milestones by the company or its partners and remain uncertain.

Management Comments

• We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered antibody therapeutics to treat patients with cancer and other serious diseases, who have unmet medical needs.
• Our approach to protein design includes engineering Fc domains, the parts of antibodies that interact with multiple segments of the immune system and control antibody structure.
• We believe our current financial resources are sufficient to fund our operations through at least the next twelve months from the date of the issuance of these unaudited consolidated financial statements.
• Management is committed to maintaining a strong internal control environment and intends to implement comprehensive remediation actions in a timely manner for the identified material weaknesses.

Industry Context

The biopharmaceutical industry continues to see significant activity in oncology and autoimmune disease, with a focus on novel antibody therapeutics and bispecific platforms. The company's strategy of leveraging its XmAb protein engineering capabilities through internal development and partnerships aligns with industry trends seeking to optimize drug candidate development and commercialization. The positive clinical updates for several programs, including bispecific T-cell engagers and anti-TL1A antibodies, demonstrate progress in competitive therapeutic areas. However, the industry faces increasing regulatory scrutiny, particularly regarding drug pricing and market access, as highlighted by the Inflation Reduction Act and other legislative initiatives, which could impact future commercialization and profitability.

Comparison to Industry Standards

• The company's XmAb 2+1 bispecific antibody format for XmAb819 (ENPP3 x CD3) and XmAb541 (CLDN6 x CD3) is designed to enable greater selectivity and potency, potentially offering clinical benefits over other treatment options, similar to how other bispecific T-cell engagers like Amgen's Blincyto (blinatumomab) or Roche's Lunsumio (mosunetuzumab) operate, though direct comparative data is not provided in the filing.
• The reported 25% partial response rate and 70% disease control rate for XmAb819 in heavily pre-treated advanced ccRCC patients are promising early-stage results, but direct comparison to approved therapies like nivolumab (Opdivo) or pembrolizumab (Keytruda) in similar patient populations would require more mature data and specific trial designs.
• The observed deep peripheral B-cell depletion with plamotamab in lymphoma patients, and its evaluation in rheumatoid arthritis, suggests a competitive profile within the B-cell depleting T-cell engager class, potentially comparable to other CD20-targeting agents, but specific competitor data is not detailed.
• The positive Phase 2 MoonStone trial results for obexelimab (partnered with Zenas BioPharma) in relapsing multiple sclerosis, meeting its primary endpoint, positions it favorably against existing MS treatments, though specific comparative efficacy data is not provided in this filing.
• The extended half-life of XmAb942 (Xtend TL1A) of greater than 71 days, supporting a 12-week dosing interval, is a competitive advantage in inflammatory bowel disease, potentially offering improved patient convenience compared to therapies requiring more frequent administration.

Corporate Governance

Legal Proceedings

• The company is a party to a patent infringement action initiated by Merus N.V. in the District of Delaware, alleging infringement of three Merus patents related to common light chain and heterodimeric antibodies.
• The company's motion to dismiss the Merus complaint was granted on October 1, 2025, based on the argument that accused activities are covered by the 35 U.S.C. 271(e)(1) safe harbor.
• Merus has until November 11, 2025, to file an amended complaint.
• The U.S. Patent and Trademark Office's Patent and Trial Appeal Board (PTAB) instituted inter partes review (IPR) on September 26, 2025, for two of the asserted Merus patents (U.S. Patent Nos. 9,358,286 and 11,926,859), seeking a finding that certain claims are unpatentable.
• The company believes it has strong defenses, including invalidity and non-infringement, some of which have been accepted by the district court and preliminarily by the PTAB, but there is no guarantee of ultimate prevail.

Stakeholder Impact

• **Shareholders**: Potential positive impact from improved financial performance (narrowed net loss, increased revenue), positive clinical pipeline updates, and partner advancements. However, dilution risk exists from the increased share reserve for equity plans and potential future capital raises. The identified material weakness in internal controls could negatively impact investor confidence until fully remediated.
• **Employees**: Continued stock-based compensation and an increased share reserve under the 2023 Equity Incentive Plan could positively impact employee retention and motivation. The company's ongoing R&D efforts suggest stable employment in research and development.
• **Customers/Patients**: Progress in clinical trials for oncology and autoimmune diseases (XmAb819, XmAb541, XmAb942, plamotamab) offers hope for new treatment options for unmet medical needs. Partner advancements (Ultomiris, Monjuvi, obexelimab, xaluritamig, ASP2138) also contribute to potential new therapies.
• **Partners/Collaborators**: Continued milestone payments and royalties from existing collaborations (Alexion, Incyte, Vir Bio) demonstrate successful partnerships. Positive clinical data from partnered programs (Zenas, Amgen, Astellas) reinforce the value of the company's technology platforms.
• **Creditors**: The company's liquidity position of $633.9 million in cash, cash equivalents, and marketable debt securities, and its projection to fund operations into 2028, suggests a stable financial position to meet its obligations.

Next Steps

• Continue dose-escalation and enroll patients in the first dose-expansion cohort for XmAb819 Phase 1 study in advanced ccRCC.
• Continue Phase 1 dose-escalation study for XmAb541 in patients with advanced gynecologic and germ cell tumors.
• Evaluate data from the final cohort of the Phase 1 dose-escalation study of XmAb808 in combination with pembrolizumab to inform future development decisions.
• Conduct the Phase 2b XENITH-UC Study of XmAb942 in patients with moderate-to-severe ulcerative colitis.
• Continue the Phase 1b proof-of-concept study for plamotamab in rheumatoid arthritis.
• Initiate a first-in-human study for XmAb657 (CD19 x CD3) by year-end 2025.
• Anticipate initiating first-in-human studies for XmAb412 (TL1A x IL-23) during 2026.
• Implement comprehensive remediation actions to address the material weaknesses in internal control over financial reporting.
• Monitor developments in the Merus N.V. patent infringement lawsuit, including Merus's deadline to file an amended complaint by November 11, 2025.
• Continue to assess the impact of the U.S. government shutdown and new healthcare legislation on operations and regulatory processes.

Key Dates

Recommendation

The company demonstrated significant financial improvement with a narrowed net loss and increased revenue, driven by milestone payments and royalties from successful partnerships. Positive early clinical data for several pipeline programs and advancements by partners (Zenas, Amgen, Astellas) are encouraging. The granting of the motion to dismiss in the Merus patent lawsuit is a favorable legal development. However, the identified material weakness in internal controls, while being addressed, introduces a degree of uncertainty regarding financial reporting integrity. The company's cash position is strong, projected to fund operations into 2028, but the biopharmaceutical sector inherently carries high risk due to clinical trial uncertainties, regulatory hurdles, and intense competition. Given the mix of strong progress and ongoing risks, a 'hold' recommendation is appropriate for investors to monitor the remediation of internal controls and further clinical trial outcomes before making more aggressive investment decisions.

Keywords

Biopharmaceutical, Antibody therapeutics, Oncology, Autoimmune diseases, Clinical-stage, XmAb technology, Bispecific antibodies, T-cell engagers, Fc domains, Clinical trials, SEC filing, 10-Q, Revenue, Net loss, R&D expenses, Milestone payments, Royalties, Ultomiris, Monjuvi, Tafasitamab, Obexelimab, XmAb819, XmAb541, XmAb808, XmAb942, Plamotamab, XmAb657, XmAb412, Patent litigation, Internal controls, Regulatory risk