Good afternoon, and welcome to the Xencor Fourth Quarter and Year End 2013 Conference Call. At this time all participants are in a listen-only mode. Following the formal remarks we will open the call up for your questions. Please be advised that the call is being recorded at the company’s request. At this time I would like to turn the call over to Deanne Tockey of Stern Investor Relations, please proceed.

Thank you, operator, good afternoon this is Deanne Tockey with Stern Investor Relations and welcome to Xencor’s fourth quarter and year end 2013 conference call. This afternoon we issued a press release which outlines the topics that we plan to discuss today. The release is available at www.xencor.com. Today on our call Bassil Dahiyat, Ph.D. President and CEO will discuss the company’s business and clinical highlights from the last year, John Kuch Vice President of Finance, will review the financial results. And 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 statements regarding the company’s future financial and operating results future market conditions, the plans and objectives of management for future operations and the company’s future product offerings. These forward-looking statements are not historical facts, but rather are based on Xencor’s current expectations and believes and are based on information currently available to us. The outcome of the events described in these forward-looking statement 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 section of Xencor’s Registration Statement in connection with its initial public offerings filed on December 2, 2013 with the SEC. All information provided in this conference call is as of March 19, 2014. Except as required by law, we undertake no obligation to update publicly any forward-looking statements made on this call or to confirm the statement to actual results or changes in our expectations. Also in light of Regulation FD we advise you that it is Xencor’s policy not to comment on our financial guidance other than in public communications. With that let me pass the call over to Bassil.

Thanks Deanne. Good afternoon to everyone and welcome to Xencor’s inaugural earnings call. We’re delighted to report the successful completion of our IPO in December of 2013 where we netted approximately $72.5 million. As a result we’re entering 2014 a new public company. We’re very well capitalized and we're focused on advancing our programs in the clinic as rapidly as possible. Now it’s very exciting time for us. This is a big transition for the company and we think we can advance our both internally developed program as well as our partnering strategy. We now have five clinical programs ongoing internally and with partners, employing our XmAb platform which is our Fc engineering platform for antibody optimization and we have a sixth program starting soon. First I’ll touch on the antibody engineering technology that’s the foundation for Xencor’s product development. For those who are not familiar with the tools that we use that make us unique. We focus on the portion of the antibody that interacts with the multiple segments of the immune system. This portion of the antibody is called the Fc domain, which is part of the constant region of the antibody, so it’s constant and it’s interchangeable amongst antibodies that might bind to different antigen. Our XmAb technology creates or it consists of really subtle changes in the natural structure of the Fc domain to selectively augment their functions. For example, to augment their regulation of immune responses, to augment their ability to control antigen levels, to increase their cytotoxicity that’s driven by Fc domain functions or to extend antibody half-life. So these engineered Fc domains that make up our XmAb technology can readily be substituted for natural Fc domain and typically maintain over 99.5% identity in structure and amino acid sequence to natural antibodies, which helps…

Thank you, Bassil. In this afternoon's press release, we reported cash and cash equivalents totaling $78 million as of December 31, 2013 compared to $2.3 million on December 31, 2012. The cash includes a $72.5 million in net proceeds from the initial public offering of the 14.6 million shares of the company's common stock, which closed in December 2013. Revenues for the fourth quarter ended December 31, 2013 were $1.7 million, compared to $2.4 million in the same period of 2012. Revenues for the full year of 2013 were $10.2 million compared to $9.5 million in the same period of 2012. Revenues are earned from technology licensing fees and milestone payments from Xencor's partners for the license of its drug candidates and the use of its proprietary XmAb antibody engineering technologies. Research and development expenditures for the fourth quarter ended December 31, 2013 were $4.1 million compared to $3.9 million for the same period in 2012. Research and development expenditures were $17 million for the full year ended December 31, 2013 compared to $12.7 million for the same period in 2012. Increases in R&D spending were primary due to increased spending on the company’s two lead clinical programs; XmAb7195 and XmAb5871. General and administrative expenses in the fourth quarter ended December 31, 2013 were $1.3 million compared to $1 million for the same period in 2012. General and administrative expenses were $3.7 million in the full year ended December 31, 2013 compared to $3.1 million for the same period in 2012. The increase primarily reflects increased compensation expenses and professional fees. Net loss for the fourth quarter ended December 31, 2013 was $3.7 million compared to a net loss of $3.1 million for the same period in 2012. The increase in loss reflects lower licensing and milestone fees of $0.6 million earned in the fourth quarter of 2013. Net loss for the full year ended December 31, 2013 was $60.3 million or $3.85 per share on a fully diluted basis compared to a net loss of $8.6 million or $118.86 per share on a fully diluted basis for the same period in 2012. The 2013 net loss includes a loss on the settlement of convertible notes of $48.6 million and related accrued interest expense of $1.2 million. These non-cash charges are reported as other expenses in our 2013 earnings. The weighted average shares outstanding used to compute earnings per share was 15,645,789 shares for the year ended December 31, 2013 compared to 72,302 shares for the year ended December 31, 2012. Based on current operating plans, we expect to have sufficient cash to fund research and development programs and operations through 2016. We expect to end 2014 with approximately $54.5 million in cash and cash equivalent. We’ll now open up the call for your questions. Operator?

Thank you. (Operator Instructions) Our first question comes from the line of Jason Kantor of Credit Suisse. Your line is now open.

Great. Glad to be participating in your first inaugural call here, couple of questions, first on the financials. What goes into that year-end cash guidance in terms of milestones or new partnership revenue; what’s included, what’s not included?

Well, generally we have some annual licensing fees that are a part of the transaction where a partner has to pay us a recurring fees to keep the agreement, we have those, those are fairly committed. And then we have some near-term milestones that we feel fairly confident of. There is a pool of milestones that we are eligible for and we take a very small percentage based on informal information we may get from partners on status of a program. But it’s a very low level relative to the total amount of money in there.

And I mean is it also - are there other milestones that could potentially be achieved in that timeframe, but are not included in that because you just don’t know?

Yes, absolutely. There is additional milestones that we are eligible for, but we may not get or we may get in converse - in addition we do not have any new transaction that we may get during the year. So the way we view it, it’s fairly conservative estimate of revenue on a cash basis. Now remember this is just cash revenue not necessarily revenue reflected for financial reporting purposes.

Yes. One point to note is many of our partnerships are these technology licenses where we literally hand off the technology in a controlled license and it’s up to the partners to do what they will and he have no impact or influence on the further activities. We think it’s appropriate to take a conservative approach in projecting revenue out of this.

And then when somebody licenses those products to somebody else like in the case with Janssen that your royalty just follows the product, there is no change in that relationship?

Yes. Typically what happens is there is an obligation that our licensee has to us and so long as they maintain those financial obligations like royalties and milestones to us, how they structure it with any flow-through or not with their partner, we’re agnostic.

Okay. And then finally on the IgE program, you’re committed to having some data by year-end and I am just wondering will that just be in the normal volunteers or will that also be in the high IgE volunteers? I guess the crux of the question is should we anticipate an IgE reduction result if that’s something that we will see with this drug?

Well, we are committing to having the healthy volunteers data by the end of this year. But note that healthy volunteers have quite measurable IgE that is – it’s measurable; its reduction is measurable as well. So we’ll certainly have IgE reduction data. The question is whether we will have such data from patients at start up at very high level, but a normal volunteer, the range of normal IgE levels in healthy so to speak non-allergic patients overlaps with a number of allergic patients, right. So there is a range of healthy IgE levels that some of them go somewhat high, even the lower ones are readily - the changes from our [agent] [ph] we expect to be readily measurable. So there will be reduction data, we are -- is what we're committing to. How high that IgE might start from is up to how the clinical trial progresses.

Got it. Okay, thanks.

Thank you, Jason.

Thank you. Our next question comes from the line of Michael Schmidt of Leerink Partners. Your line is now open.

Hey thanks for taking my questions. You mentioned to start IND-enabling studies for a CD123 bispecific antibody this year. I was just wondering if you could comment some more on how you envision the pipeline to expand over the next couple of years, when are you -- when do you think you can get into the clinic with that agent? And then what is the status of the CD38 bispecific product that’s listed on your pipeline chart as well?

Right. Well, we're not -- we haven’t committed to either the CD38 or the CD123, which are two research leads for our bispecific platform. We are certainly going to initiate one of those two into IND-enabling studies by mid this year and we would expect them to be able to file an IND for one that we select to go forward entering 2015. Now both agents share the approach of recruiting cytotoxic t-cells through binding CD3 on one arm of this Fc containing molecule and then the tumor targeting antigen on the other arm in the case of the CD123 that would be for AML for the case of the CD38 that would be for multiple myeloma. So what we're doing is, we're sort of progressing these and keeping in mind our organizational capacity for driving programs forward pursuing an IND that we can get going next year to follow on from the IND for 7195 that we are fast approaching the filing of this year. And as we go forward, we're going to continue to work to advance agents into the clinic, we think our research pipeline is rich, there is other things of course we're working on in discovery that are behind these two bispecifics we mentioned. We think bispecifics are going to be a big part of what we do. But we don't have any commitment yet on what the next agent might be after one of these two or whether we might advance both of them at different with one of them coming on at a different timeframe. We're still sorting out our plans with the commitment for the one to kick off the IND-enabling work this year.

So it sounds like you are not committed on 123, it could be either of the two?

Correct, it could be any, now we're continuing to see which we think is going to have the best profile for differentiation et cetera. But we're excited by the activity we're seeing for both already in our preclinical studies.

Sure, okay. And then on the rheumatoid arthritis Phase 2a data that you expect to report in the second half of this year. So what data exactly are you planning to report? And so how would a result or a potential [result] [ph] influence your next steps in that program?

Right. So, the data we're expecting to report is, this is a Phase 1b 2a study, where there was basically that multiple ascending dose study was a Phase 1b, where we added an additional cohort of patients at all the same dose to be at Phase 2a portion. And so the primary, one of the primary outcome, results outcome is going to be of course the safety pharmacokinetics of the agent. In addition, we are examining the disease response criteria that are standard in this field; the primary one we are focusing on is the DAS28 score which is a measure of rheumatoid arthritis disease activity, a version of the DAS28 score that incorporates also quantitatively the levels of serum marker CRP. We are examining other metrics of disease response such as ACR 20, 50, 70 scores. And we are looking at reporting the primary -- exploratory outcome measure of the DAS28 plus CRP.

And then….

Sorry, I was going to follow-up. Go ahead.

Yes, go ahead, sorry.

So in terms of how these colors are taking on development this was really as in conjunction with our collaborative work with Amgen, a way for us to examine how we impact a particular disease phenomenon, in this case RA with this utterly new mechanism of action. And we know we can inhibit B-cells from our prior clinical study in Phase 1a in a way -- in a completely novel pathway, nobody that we are aware of has targeted FcγRIIb which is a real driver of the activity of the drug, nobody has been able to access that pathway to see what happens when you do so in the clinical setting. And so we are excited by the activity we have seen. Now this is -- let’s just take a step further and examine disease modifying activity in a particular disease. I think certainly, the results we will see will color our thinking on how to drive forward subsequently in RA, where RA considering based on what we know of the activity of the agent at suppressing B-cell responses in humans considering how we can potentially expand the clinical development program into additional indications, again subsequent to finishing this trial. So I would say it gives us a partial picture focusing on the profile that might have in RA, again it’s a small phase that is not going to be definitive in any sense but it does give us an education on that disease which will cover I think in another diseases but it’s not the full picture. We are also examining based on our Phase 1 data other areas we can start pursuing, it’s like the true autoantibody mediated diseases.

Sure, okay. And then I guess so, what is your overall thinking on the asthma market longer term? We have recently seen some positive data from Glaxo’s mepolizumab in eosinophil high patients. How do you think the market is evolving and what role will IgE inhibition play in that market?

Yes. So that’s a great question. We think that the asthma marketplace, in particular now we are talking about the more severe types of asthma, the more severe manifestations that are generally fully controlled with existing inhale therapies and it require long-term steroid use which is where all of these agents are initially targeting at least. So we think that IgE is still the only truly validated target in this disease and it’s been validated by Xolair’s use. After a lot of attempts and a lot of years, some of these interleukin targeting therapies, IL-5 like you mentioned, the mepolizumab or the IL-4 receptor targeting therapies that are coming on, that have reported Phase 2s recently are starting to show initial validation for those target axes. And it’s going to be really interesting to see the breadth of population that these agents address as they continue development as they are going to be able to expand away from sort of the eosinophil disease from mepolizumab or they not. But in general, I think this is going to fit into a renascence for severe asthma patients where there have really been very few options, Xolair really being one of the only ones. And I think it’s going to be fantastic for patients and I think there is a lot of opportunity for all, in particular targeting IgE which is established or validated is an utterly distinct pathway that impacts disease relative to say IL-4, IL-5, which are involved in more upstream immune disregulation, we’re way downstream at the allergic response space. So I think this huge need and better treatment, there is going to be places for all. And we think that the leading paradigm is still and we believe will remain IgE blockhead and how these pieces all fit together around that, it will be interesting to see evolve over the next few years.

Got it, alright. Great. Thank you.

Thank you. (Operator Instructions). Our next question comes from the line of Chris Marai of Wedbush Securities. Your line is now open.

Hi, good afternoon. Thanks for taking my question and congratulations on your IPO in the quarter. With respect to 7195 and IgE lowering therapies, obviously Xolair [has muted] in asthma, but I am wondering several studies have been looking at it in different indications. And I am wondering how you guys are looking at 7195 beyond asthma and specifically maybe what indications? And then at what time point will you expect to hear decision on a path forward in a clinical setting after your data here at the end of the year? Thanks.

Thank you, Chris. There are number of other disorders, systemic, allergic disorders that Xolair has demonstrated some kind of activity and most recently in chronic idiopathic urticaria which is severe hives but let’s not minimize it. This is hives that people are so profoundly effective about it taking suppressive drugs or whatnot. And IgE is important and that disease in Xolair has demonstrated activity there. There is activities in other allergic diseases such as nasal rhinitis, such as food allergy et cetera. We’re going to focus on establishing in this initial Phase I program, the dose and schedule that we are, we find optimal for controlling IgE. And we can use that IgE control measure which we can monitor in our Phase I studies very easily, we can use that to help determine as best we can these dose parameters and schedule parameters, so we can then design the right approach for Phase 2. Certainly asthma is going to be at the center of our development, we know that. How we view toward the specifics of that asthma program, how we view maybe incorporating something like a dermatology focus maybe in urticaria or examining some of the other respiratory disorders that are related to asthma such as rhinitis, it’s going to depend on what we learn from this Phase I program. So I don’t think we would give any guidance on that sort of the avenue of approaches we’re going to take until we’re well into 2015 and have a feeling from our multiple ascending dose study, a better idea of these sort of parameters, the dose schedule, the duration of action, the sort of degree of IgE control we’re seeing in humans et cetera. That will be very informative.

Right. And then and with respect to your differentiated mechanism of action in lowering IgE levels, and I was wondering have you looked at other opportunities where maybe Xolair has failed, so maybe, I don’t know, minimal results, is that something that you guys are going to be taking a look at some point in time in 2015 as well? Thanks.

I don’t think we will be looking at any clinical studies outside of our Phase I program during 2015. We do need to establish safety in the multiple ascending dose setting which will take most of 2015 if not all of 2015. I think -- but again to go back to what you sort of said, places where Xolair has lacked in results; the central part of our asthma approach is that Xolair right now because of its potency, its amount of potency is limited to a set of patients where when you measure their IgE, their IgE is within manageable levels, manageable based on the historical data with Xolair can control. This is built and it’s a label on Xolair. So, it’s only indicated for the patients who have IgE within a certain range and body mass within a certain range, so you can be sure you can put enough Xolair into them to control their IgE. Anywhere from 20% to 30% of patients have too much IgE and can’t get Xolair. So right there, even within asthma is an opportunity where you could -- Xolair is there, right. And that’s an opportunity where based on our work in vivo model pre-clinically, we believe 7195 has great potential to reach those patients, because our new mechanism of action seems to control IgE levels much better. So they can control IgE starting at much higher levels and they can drive it down to much lower levels and you can achieve with a simple kind of blockade mechanism that have for first generation monoclonal antibody has like nowhere. So, I think there is built in cellular places where Xolair stealth opportunities there and there is others in various allergic diseases. But we need to establish dose, schedule, of course safety as well, and understand how we get the IgE in detail. And that’s what this Phase 1 study is going to do. It’s going to be a powerful Phase 1 program to really guide our next steps in development. We’re going to have a lot more information I think than most biologics programs will about these issues launching into Phase 2, again because of the ability to measure IgE.

Okay, great. And then that’s I guess too quickly, but with respect to the Phase 2 trial, I mean given that the expense of the results that to see from your Phase 1 and multiple ascending dose Phase 1, do you see potentially a pivotal Phase 2 trial design that you guys will be running or if you’ve seen to…

Well, it certainly would not be a pivotal Phase 2 study in an asthma setting. We believe that the requirements for safety databases are going to be substantial, because while asthma is a debilitating disease, it is not generally being a fatal disease such as severe indications like oncology. So, that would not be the case. How we structure that Phase 2 and how close that first Phase 2 adheres to what would be -- what would look like a registrational study in Phase 3 so that would have matched the population and duration period et cetera versus maybe being shorter pilot study, that’s what we need to sort out. And we are working with the group of KOLs to really kneel that down. But there is really no chance we believe in even with severe asthma setting for any kind of accelerated pathways so to speak.

Okay, great. Thanks for taking my questions.

Thank you very much.

Thank you. I’m showing no further questions in the queue. I’d like to hand the call back over to Bassil Dahiyat for closing remarks.

Thank you very much. As I mentioned, 2014 has some exciting milestones for us to look forward to and we’re working very hard at Xencor to achieve those. And we expect to report first Phase 1a data on IgE levels from our XmAb7195 trial, as well as top-line data for XmAb5871 in our Phase 2a rheumatoid arthritis trial by the end of the year, in addition to launching the real development work, the IND-enabling development work for our first bispecific by middle of this year. So thank you very, very much for joining Xencor’s inaugural earnings call. We are very excited by our newly mentioned public company status and we are very grateful for the support we received. Thank you very much. And I look forward to updating you again soon.

Ladies and gentlemen that does conclude today’s call. You may all disconnect. Have a good day everyone.