Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2019	Oct. 31, 2019
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2019
Entity File Number	001-36182
Entity Registrant Name	Xencor Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-1622502
Entity Address, Address Line One	111 West Lemon Avenue
Entity Address, City or Town	Monrovia
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91016
City Area Code	626
Local Phone Number	305-5900
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	XNCR
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		56,721,172
Entity Central Index Key	0001326732
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3

Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 51,189	$ 26,246
Marketable securities	495,292	268,115
Accounts receivable	4,349	10,187
Income tax receivable	402	804
Contract asset	15,000
Prepaid expenses and other current assets	7,533	10,375
Total current assets	573,765	315,727
Property and equipment, net	13,868	11,813
Patents, licenses, and other intangible assets, net	14,027	11,969
Marketable securities - long term	73,995	236,108
Income tax receivable	402	804
Other assets	10,187	311
Total assets	686,244	576,732
Current liabilities
Accounts payable	8,304	3,797
Accrued expenses	7,832	9,662
Deferred rent		315
Lease liabilities	2,197
Deferred revenue	45,579	40,079
Income tax payable	400
Total current liabilities	64,312	53,853
Deferred rent, net of current portion		1,198
Lease liabilities, net of current portion	9,082
Deferred revenue, net of current portion	2,613
Total liabilities	76,007	55,051
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at September 30, 2019 and December 31, 2018
Common stock, $0.01 par value: 200,000,000 authorized shares at September 30, 2019 and December 31, 2018; 56,714,788 issued and outstanding at September 30, 2019 and 56,279,542 issued and outstanding at December 31, 2018	567	563
Additional paid-in capital	877,724	845,366
Accumulated other comprehensive income (loss)	1,436	(971)
Accumulated deficit	(269,490)	(323,277)
Total stockholders' equity	610,237	521,681
Total liabilities and stockholders' equity	$ 686,244	$ 576,732

Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Condensed Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	56,714,788	56,279,542
Common stock, shares outstanding	56,714,788	56,279,542

Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue
Collaborations, licenses, milestones, and royalties	$ 21,760	$ 29,039	$ 153,184	$ 29,039
Operating expenses
Research and development	29,770	20,953	91,250	70,371
General and administrative	6,266	7,435	17,537	16,955
Total operating expenses	36,036	28,388	108,787	87,326
Income (loss) from operations	(14,276)	651	44,397	(58,287)
Other income (expenses)
Interest income, net	3,699	2,642	10,201	6,279
Other income (expense), net	3	(143)	(211)	(202)
Total other income, net	3,702	2,499	9,990	6,077
Net income (loss) before income tax expense (benefit)	(10,574)	3,150	54,387	(52,210)
Income tax expense (benefit)	(350)		600
Net income (loss)	(10,224)	3,150	53,787	(52,210)
Other comprehensive income (loss)
Net unrealized gain (loss) on marketable securities	(193)	(330)	2,407	(530)
Comprehensive income (loss)	$ (10,417)	$ 2,820	$ 56,194	$ (52,740)
Basic net income (loss) per common share	$ (0.18)	$ 0.06	$ 0.95	$ (0.98)
Diluted net income (loss) per common share	$ (0.18)	$ 0.05	$ 0.92	$ (0.98)
Basic weighted average common shares outstanding	56,643,075	55,974,080	56,449,678	53,165,774
Diluted weighted average common shares outstanding	56,643,075	58,313,002	58,365,158	53,165,774

Statement of Stockholders' Equity - USD ($) $ in Thousands	Scenario, Previously Reported Common Stock	Scenario, Previously Reported Additional Paid-in Capital	Scenario, Previously Reported Accumulated Other Comprehensive Loss	Scenario, Previously Reported Accumulated Deficit	Scenario, Previously Reported	Restatement Adjustment Accumulated Deficit	Restatement Adjustment	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Increase (Decrease) in Stockholders' Equity
Adoption of ASC 606						$ 34,418	$ 34,418
Balance, revised								$ 470	$ 570,670	$ (1,808)	$ (252,868)	$ 316,464
Balance at Dec. 31, 2017	$ 470	$ 570,670	$ (1,808)	$ (287,286)	$ 282,046
Balance (in shares) at Dec. 31, 2017	47,002,488							47,002,488
Increase (Decrease) in Stockholders' Equity
Sale of common stock, net of issuance cost								$ 84	245,421			245,505
Sale of common stock, net of issuance cost (in shares)								8,395,000
Issuance of common stock upon exercise of stock awards								$ 2	1,108			1,110
Issuance of common stock upon exercise of stock awards (in shares)								219,387
Comprehensive income (loss)										(393)	(29,493)	(29,886)
Stock-based compensation expense									4,471			4,471
Balance at Mar. 31, 2018								$ 556	821,670	(2,201)	(282,361)	537,664
Balance (in shares) at Mar. 31, 2018								55,616,875
Balance at Dec. 31, 2017	$ 470	$ 570,670	$ (1,808)	$ (287,286)	$ 282,046
Balance (in shares) at Dec. 31, 2017	47,002,488							47,002,488
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)												(52,740)
Balance at Sep. 30, 2018								$ 562	839,128	(2,338)	(305,080)	532,272
Balance (in shares) at Sep. 30, 2018								56,212,449
Balance at Mar. 31, 2018								$ 556	821,670	(2,201)	(282,361)	537,664
Balance (in shares) at Mar. 31, 2018								55,616,875
Increase (Decrease) in Stockholders' Equity
Sale of common stock, net of issuance cost									(1)			(1)
Issuance of common stock upon exercise of stock awards								$ 2	1,803			1,805
Issuance of common stock upon exercise of stock awards (in shares)								177,883
Issuance of common stock under the Employee Stock Purchase Plan									504			504
Issuance of common stock under the Employee Stock Purchase Plan (in shares)								26,552
Comprehensive income (loss)										193	(25,869)	(25,676)
Stock-based compensation expense									4,882			4,882
Balance at Jun. 30, 2018								$ 558	828,858	(2,008)	(308,230)	519,178
Balance (in shares) at Jun. 30, 2018								55,821,310
Increase (Decrease) in Stockholders' Equity
Issuance of common stock upon exercise of stock awards								$ 4	4,150			4,154
Issuance of common stock upon exercise of stock awards (in shares)								391,139
Comprehensive income (loss)										(330)	3,150	2,820
Stock-based compensation expense									6,120			6,120
Balance at Sep. 30, 2018								$ 562	839,128	(2,338)	(305,080)	532,272
Balance (in shares) at Sep. 30, 2018								56,212,449
Balance at Dec. 31, 2018								$ 563	845,366	(971)	(323,277)	521,681
Balance (in shares) at Dec. 31, 2018								56,279,542
Increase (Decrease) in Stockholders' Equity
Issuance of common stock upon exercise of stock awards								$ 1	666			667
Issuance of common stock upon exercise of stock awards (in shares)								58,536
Issuance of restricted stock units (in shares)								11,311
Comprehensive income (loss)										1,316	80,045	81,361
Stock-based compensation expense									5,856			5,856
Balance at Mar. 31, 2019								$ 564	851,888	345	(243,232)	609,565
Balance (in shares) at Mar. 31, 2019								56,349,389
Balance at Dec. 31, 2018								$ 563	845,366	(971)	(323,277)	521,681
Balance (in shares) at Dec. 31, 2018								56,279,542
Increase (Decrease) in Stockholders' Equity
Comprehensive income (loss)												56,194
Balance at Sep. 30, 2019								$ 567	877,724	1,436	(269,490)	610,237
Balance (in shares) at Sep. 30, 2019								56,714,788
Balance at Mar. 31, 2019								$ 564	851,888	345	(243,232)	609,565
Balance (in shares) at Mar. 31, 2019								56,349,389
Increase (Decrease) in Stockholders' Equity
Issuance of common stock upon exercise of stock awards								$ 1	3,238			3,239
Issuance of common stock upon exercise of stock awards (in shares)								143,504
Issuance of common stock under the Employee Stock Purchase Plan									734			734
Issuance of common stock under the Employee Stock Purchase Plan (in shares)								36,505
Comprehensive income (loss)										1,284	(16,034)	(14,750)
Stock-based compensation expense									9,303			9,303
Balance at Jun. 30, 2019								$ 565	865,163	1,629	(259,266)	608,091
Balance (in shares) at Jun. 30, 2019								56,529,398
Increase (Decrease) in Stockholders' Equity
Issuance of common stock upon exercise of stock awards								$ 2	3,047			3,049
Issuance of common stock upon exercise of stock awards (in shares)								185,390
Comprehensive income (loss)										(193)	(10,224)	(10,417)
Stock-based compensation expense									9,514			9,514
Balance at Sep. 30, 2019								$ 567	$ 877,724	$ 1,436	$ (269,490)	$ 610,237
Balance (in shares) at Sep. 30, 2019								56,714,788

Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
Statements of Cash Flows - USD ($) $ in Thousands	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities
Net income (loss)	$ 53,787	$ (52,210)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	3,073	2,368
Amortization of premium and accretion of discount on marketable securities	(3,333)	68
Stock-based compensation	24,673	15,473
Abandonment of capitalized intangible assets	115	118
Loss on disposal of assets	8	110
Changes in operating assets and liabilities:
Accounts receivable	5,903	(1,320)
Interest receivable	(3)	(624)
Contract asset	(15,000)
Prepaid expenses and other assets	2,843	(6,535)
Accounts payable	4,508	(886)
Accrued expenses	(1,830)	192
Income taxes	1,204	(156)
Deferred rent	(1,513)	466
Lease liabilities and ROU assets	1,403
Deferred revenue	8,113	(20,039)
Net cash provided by (used in) operating activities	83,951	(62,975)
Cash flows from investing activities
Purchase of marketable securities	(352,174)	(331,126)
Purchase of intangible assets	(2,932)	(1,302)
Purchase of property and equipment	(4,443)	(4,425)
Proceeds from maturities of marketable securities	292,852	165,134
Repayment of loan		86
Net cash used in investing activities	(66,697)	(171,633)
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of stock awards	6,955	7,068
Proceeds from issuance of common stock under the Employee Stock Purchase Plan	734	504
Proceeds from issuance of common stock		260,245
Common stock issuance costs		(14,741)
Net cash provided by financing activities	7,689	253,076
Net increase in cash and cash equivalents	24,943	18,468
Cash and cash equivalents, beginning of period	26,246	16,528
Cash and cash equivalents, end of period	51,189	34,996
Cash paid during the period for:
Interest	11	9
Income taxes	200	170
Supplemental disclosures of non-cash investing activities
Unrealized gain (loss) on marketable securities, net of tax	$ 2,407	$ (530)

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim financial statements for Xencor, Inc. (the Company, Xencor, we or us) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Certain amounts in the prior period financial statements have been revised to conform to the presentation of the current period financial statements. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of the Company believes are necessary for a fair presentation of the periods presented. The preparation of interim financial statements requires the use of management’s estimates and assumptions that affect reported amounts of assets and liabilities at the date of the interim financial statements and the reported revenues and expenditures during the reported periods. These interim financial results are not necessarily indicative of the results expected for the full fiscal year or for any subsequent interim period.

The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 26, 2019.

Use of Estimates

The preparation of interim financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, other comprehensive gain (loss) and the related disclosures. On an ongoing basis, management evaluates its estimates, including estimates related to its accrued clinical trial and manufacturing development expenses, stock-based compensation expense, intangible assets and related amortization. Significant estimates in these interim financial statements include estimates made for royalties and accrued research and development expenses, stock-based compensation expenses, intangible assets and related amortization, estimated standalone selling price of performance obligations, the likelihood of recognizing variable consideration, and recoverability of deferred tax assets.

Intangible Assets

The Company maintains definite-lived intangible assets related to certain capitalized costs of acquired licenses and third-party costs incurred in establishing and maintaining its intellectual property rights to its platform technologies and development candidates. These assets are amortized over their useful lives, which are estimated to be the remaining patent life or the contractual term of the license. The straight-line method is used to record amortization expense. The Company assesses its intangible assets for impairment if indicators are present or changes in circumstances suggest that impairment may exist. There were no impairment charges recorded for the nine months ended September 30, 2019 and 2018.

The Company capitalizes certain in-process intangible assets that are abandoned when they are no longer pursued or used in current research activities. There was no material abandonment of in-process intangible assets during the nine months ended September 30, 2019 or 2018.

Marketable Securities

The Company has an investment policy that includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The Company invests its excess cash primarily in marketable debt securities issued by investment grade institutions.

The Company considers its marketable debt securities to be available-for-sale. These assets are carried at fair value and the unrealized gains and losses are included in accumulated other comprehensive income (loss). Accrued interest on marketable debt securities is included in marketable securities. If a decline in the value of a marketable debt security in the Company’s investment portfolio is deemed to be other-than-temporary, the Company writes down the security to its current fair value and recognizes a loss as a charge against income. The Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost are other-than-temporary.

Recent Accounting Pronouncements

Pronouncements Adopted in 2019

Effective January 1, 2019, the Company adopted Accounting Standards Codification Topic 842 (ASC 842), Leases, which requires lessees to recognize a right-of-use (ROU) asset and a lease liability for leases with terms greater than 12 months and also requires disclosures about the amount, timing and uncertainty of cash flows arising from such leases. The Company adopted ASC 842 using the optional transition method provided under ASU 2018-11, which did not require adjustments to comparative periods nor require modified disclosures in those comparative periods. Under this method, the Company adjusted its financial statements for the cumulative effect of the adoption of ASC 842 at the beginning of January 1, 2019.

At inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances. For leases with a term of one year or longer where the Company is the lessee, ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The interest rate implicit with such leases is typically not readily determined. The Company has determined the appropriate incremental borrowing rate by reference to an estimate of the current market borrowing rate for a collateralized asset over a similar term as the lease term.

The new standard impacts our reporting on the leases on our facilities in Monrovia and San Diego. Under ASC 842, tenant allowances under such operating leases are no longer tracked separately as a deferred rent liability; instead, it is integrated as part of the ROU asset. As a result, we recorded an adjustment to the beginning balance for deferred rent liability and adopted the use of ROU asset and lease liability. We recorded lease liabilities of $12.7 million and ROU assets of $11.4 million for lease agreements in effect as of January 1, 2019. The ROU asset is included in Other assets on the balance sheet as of September 30, 2019. This resulted in an increase to the beginning balance on both assets and liabilities after the adjustment of $11.2 million, with no impact on our retained earnings.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payments issued to nonemployees for goods and services. The standard requires a modified retrospective transition approach, with a cumulative adjustment to retained earnings as of adoption date, for all liability-classified awards that have not been settled as of the adoption date and equity-classified nonemployee awards for which a measurement date has not been established. The adoption of this standard did not have any impact on the Company’s financial statements.

There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2018 Annual Report on Form 10-K.

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value of Financial Instruments

Fair Value of Financial Instruments

2. Fair Value of Financial Instruments

Financial instruments included in the financial statements include cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. Marketable securities and cash equivalents are carried at fair value. The fair value of the other financial instruments closely approximates their fair value due to their short-term maturities.

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification ASC 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosure about fair value measurements. The ASC 820 hierarchy ranks the quality of reliable inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1—Fair Value is determined by using unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2—Fair Value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active. Related inputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated by observable market data.

Level 3—Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgments to be made by the reporting entity –e.g. determining an appropriate discount factor for illiquidity associated with a given security.

The Company measures the fair value of financial assets using the highest level of inputs that are reasonably available as of the measurement date. The assets recorded at fair value are classified within the hierarchy as follows for the periods reported (in thousands):


	September 30, 2019						December 31, 2018
	Total						Total
	Fair Value		Level 1		Level 2		Fair Value		Level 1		Level 2

Money Market Funds	$	30,603	$	30,603	$	—	$	18,270	$	18,270	$	—
Corporate Securities		217,702		—		217,702		104,967		—		104,967
Government Securities		351,585		—		351,585		399,256		—		399,256
	$	599,890	$	30,603	$	569,287	$	522,493	$	18,270	$	504,223

Our policy is to record transfers of assets between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. During the three and nine months ended September 30, 2019 and 2018, there were no transfers between Level 1 and Level 2. The Company does not have any Level 3 assets or liabilities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Net Income (Loss) Per Share

9 Months Ended

Sep. 30, 2019

Net Income (Loss) Per Share

Net Income (Loss) Per Share

3. Net Income (Loss) Per Share

We compute basic net income (loss) per common share by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock option grants, employee stock purchase plan (ESPP) and restricted stock units (RSUs). Potentially dilutive securities consisting of stock issuable under options, ESPP and RSUs are not included in the per common share calculation in periods where there is a net loss where the inclusion of such shares would have had an antidilutive effect.

Basic and diluted net income (loss) per common share is computed as follows (in thousands except share and per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(in thousands, except share and per share data)
Numerator:
Net income (loss) attributable to common stockholders	$	(10,224)	$	3,150	$	53,787	$	(52,210)
Denominator:
Weighted-average common shares outstanding used in computing basic net income (loss)		56,643,075		55,974,080		56,449,678		53,165,774
Weighted-average common shares outstanding used in computing diluted net income (loss)		56,643,075		58,313,002		58,365,158		53,165,774
Basic net income (loss) per common share	$	(0.18)	$	0.06	$	0.95	$	(0.98)
Diluted net income (loss) per common share	$	(0.18)	$	0.05	$	0.92	$	(0.98)

For the three months ended September 30, 2019 and the nine months ended September 30, 2018, all outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per common share as the effect of including such securities would have been antidilutive. For the three months ended September 30, 2018 and the nine months ended September 30, 2019, potentially dilutive securities were included in the diluted net income per common share calculation.

The numbers of common stock equivalents that were included in the calculation of the weighted-average common shares outstanding used in computing diluted net income per common share are as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
	(in thousands)		(in thousands)
Employee stock purchase plan shares	—	—	20	—
Options to purchase common stock and RSU grants	—	2,339	1,895	—
	—	2,339	1,915	—

The table below summarizes the number of common stock equivalents that were excluded in the calculation of the weighted-average common shares outstanding used in computing diluted net income (loss) because the inclusion of such shares would have had an antidilutive effect as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
	(in thousands)		(in thousands)
Employee stock purchase plan shares	6	—	—	—
Options to purchase common stock and RSU grants	2,261	—	—	1,884
	2,267	—	—	1,884

Marketable Securities

9 Months Ended

Sep. 30, 2019

Marketable Securities

Marketable Securities

5. Marketable Securities

The Company’s marketable debt securities held as of September 30, 2019 and December 31, 2018 are summarized below:


			Gross		Gross
	Amortized		Unrealized		Unrealized
September 30, 2019	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	30,603	$	—	$	—	$	30,603
Corporate Securities		217,484		228		(10)		217,702
Government Securities		350,358		1,227		—		351,585
	$	598,445	$	1,455	$	(10)	$	599,890

Reported as
Cash and cash equivalents							$	30,603
Marketable securities								569,287
Total investments							$	599,890



			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2018	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	18,270	$	—	$	—	$	18,270
Corporate Securities		105,311		1		(345)		104,967
Government Securities		399,873		187		(804)		399,256
	$	523,454	$	188	$	(1,149)	$	522,493

Reported as
Cash and cash equivalents							$	18,270
Marketable securities								504,223
Total investments							$	522,493

The maturities of the Company’s marketable debt securities are as follows:


	Amortized		Estimated
September 30, 2019	Cost		Fair Value
(in thousands)
Mature in one year or less	$	494,248	$	495,292
Mature within two years		73,594		73,995
	$	567,842	$	569,287

The unrealized losses on available-for-sale investments and their related fair values as of September 30, 2019 and December 31, 2018 are as follows:


	Less than 12 months				12 months or greater
			Unrealized				Unrealized
September 30, 2019	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	3,037	$	(1)	$	21,409	$	(9)
Government Securities		15,606		(1)		—		—
	$	18,643	$	(2)	$	21,409	$	(9)



	Less than 12 months				12 months or greater
			Unrealized				Unrealized
December 31, 2018	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	84,666	$	(310)	$	17,805	$	(35)
Government Securities		176,225		(672)		116,830		(132)
	$	260,891	$	(982)	$	134,635	$	(167)

The unrealized losses from the listed securities are due to a change in the interest rate environment and not a change in the credit quality of the securities.

The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the securities before recovery of the amortized cost basis. Therefore, the Company did not consider these securities to be other-than-temporarily impaired as of September 30, 2019 or December 31, 2018.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Stock-Based Compensation

Stock-Based Compensation

7. Stock Based Compensation

Our Board of Directors (the Board) and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan). In October 2013, the Board approved the 2013 Equity Incentive Plan (the 2013 Plan) and in November 2013 our stockholders approved the 2013 Plan which became effective as of December 3, 2013. As of December 2, 2013, we suspended the 2010 Plan and no additional awards may be granted under the 2010 Plan. Any shares of common stock covered by awards granted under the 2010 Plan that terminate after December 2, 2013 by expiration, forfeiture, cancellation or other means without the issuance of such shares will be added to the 2013 Plan reserve.

As of September 30, 2019, the total number of shares of common stock available for issuance under the 2013 Plan is 11,434,273, which includes 2,684,456 shares of common stock that were available for issuance under the 2010 Plan as of the effective date of the 2013 Plan. Unless otherwise determined by the Board, beginning January 1, 2014, and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Plan will automatically increase annually on January 1 of each year by 4% of the total number of issued and outstanding shares of common stock as of December 31 of the immediate preceding year. Pursuant to approval by the Board on January 1, 2019, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,251,181 shares. As of September 30, 2019, a total of 8,669,662 options have been granted under the 2013 Plan.

In November 2013, the Board and our stockholders approved the 2013 Employee Stock Purchase Plan (ESPP), which became effective as of December 5, 2013. We have reserved a total of 581,286 shares of common stock for issuance under the ESPP. Unless otherwise determined by the Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number of shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock. Pursuant to approval by our Board of Directors, there was no increase in the number of authorized shares in the ESPP in 2019. As of September 30, 2019, we have issued a total of 386,221 shares of common stock under the ESPP.

During the nine months ended September 30, 2019, the Company awarded 39,666 Restricted Stock Units (RSUs) to certain employees. Vesting of these awards is in three equal annual installments and is contingent on continued service to the Company. The fair value of these awards is determined based on the intrinsic value of the stock on the date of grant and will be recognized as stock-based compensation expense over the requisite service period. As of September 30, 2019, we have granted a total of 73,599 shares of common stock subject to RSUs.

Total employee, director and non-employee stock-based compensation expense recognized for the three and nine months ended September 30, 2019 and 2018 are as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
General and administrative	$	2,474	$	2,732	$	6,337	$	6,037
Research and development		7,040		3,388		18,336		9,436
	$	9,514	$	6,120	$	24,673	$	15,473

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	9,117	$	5,832	$	23,588	$	14,723
ESPP		217		209		630		562
Restricted stock units		180		79		455		188
	$	9,514	$	6,120	$	24,673	$	15,473

The following table summarizes option activity under our stock plans and related information:


		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining		Aggregate
	Shares subject	Price		Contractual		Intrinsic
	to outstanding	(Per		Term		Value
	options	Share)		(in years)		(in thousands)
Balances at December 31, 2018	5,966,928	$	19.71		7.51
Options granted	1,918,375	$	35.76
Options forfeited	(266,780)	$	31.36
Options exercised	(387,430)	$	17.95
Balances at September 30, 2019	7,231,093	$	23.63		7.47	$	78,789
Exercisable	3,831,677	$	17.25		6.28	$	63,736

We calculate the intrinsic value as the difference between the exercise price of the options and the closing price of common stock of $33.73 per share as of September 30, 2019.

Weighted average fair value of options granted during the nine-month periods ended September 30, 2019 and 2018 were $20.71 and $17.57 per share, respectively. There were 1,679,400 options granted during the nine-month period ended September 30, 2018. We estimated the fair value of each stock option using the Black-Scholes option-pricing model based on the date of grant of such stock option with the following weighted average assumptions for the three and nine months ended September 30, 2019 and 2018:


	Options				Options
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Expected term (years)	6.0		6.1		6.0		6.1
Expected volatility	60.8	%	72.8	%	61.2	%	73.1	%
Risk-free interest rate	1.52	%	2.87	%	2.33	%	2.56	%
Expected dividend yield	—	%	—	%	—	%	—	%


	ESPP				ESPP
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Expected term (years)	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Expected volatility	55.0 - 71.4	%	61.2 - 71.4	%	55.0 - 71.4	%	61.2 - 71.4	%
Risk-free interest rate	1.47 - 2.70	%	1.47 - 2.41	%	1.47 - 2.70	%	1.47 - 2.41	%
Expected dividend yield	—	%	—	%	—	%	—	%

As of September 30, 2019, the unamortized compensation expense related to unvested stock options was $56.6 million. The remaining unamortized compensation expense will be recognized over the next 2.45 years. As of September 30, 2019, the unamortized compensation expense under our ESPP was $0.1 million. The remaining unamortized expense will be recognized over the next 0.2 years.

The following table summarizes the RSU activity for the nine-month period ended September 30, 2019:


		Weighted
	Restricted	Average Grant
	Stock	Date Fair Value
	Units	(Per unit)

Unvested at December 31, 2018	33,933	$	27.64
Granted	39,666		35.94
Vested	(11,311)		27.64
Forfeited	(4,182)		31.12
Unvested at September 30, 2019	58,106	$	33.05

As of September 30, 2019, the unamortized compensation expense related to unvested restricted stock units was $1.5 million. The remaining unamortized expense will be recognized over the next 2.2 years.

Leases

9 Months Ended

Sep. 30, 2019

Leases

Leases

8. Leases

The Company leases office and laboratory space in Monrovia, CA under a lease that continues through June 2020, with an option to renew for an additional five years. In July 2017, the Company entered into an amended lease agreement for additional space in the same building with a lease that continues through September 2022, also with an option to renew for an additional five years. The Company assesses that it is likely to exercise both options of the lease term extensions.

The Company also leases office space in San Diego, CA through July 2020 which includes an option to renew for an additional five years. The Company assesses that it is unlikely to exercise the option to extend this lease.

The Company leases additional office space in San Diego, CA through August 2022, with an option to extend for an additional five years. The Company assesses that it is unlikely to exercise the option to extend the lease term.

The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. As of September 30, 2019, the Company did not have additional operating leases that have not yet commenced.

The following table reconciles the undiscounted cash flows for the operating leases at September 30, 2019 to the operating lease liabilities recorded on the balance sheet (in thousands):


Years ending December 31,
For the remainder of 2019	$	698
2020		2,703
2021		2,587
2022		2,208
2023		1,352
2024		1,371
Thereafter		2,282
Total undiscounted lease payments		13,201
Less: Imputed interest		(1,922)
Present value of lease payments	$	11,279

Lease liabilities - short-term	$	2,197
Lease liabilities - long-term		9,082
Total lease liabilities	$	11,279

Our operating lease cost and the cash payments for operating leases for the nine months ended September 30, 2019 were $2.0 million and $1.9 million, respectively. Rent expense for the nine months ended September 30, 2018 was $1.9 million.

At September 30, 2019, the weighted-average remaining lease term for operating leases was 5.7 years, and the weighted average discount rate for operating leases is 5.5%.

Collaboration and Licensing Agreements

9 Months Ended

Sep. 30, 2019

Collaboration and Licensing Agreements

Collaboration and Licensing Agreements

10. Collaboration and Licensing Agreements

The following is a summary description of the material revenue arrangements, including arrangements that generated revenue in the nine months ended September 30, 2019 and 2018.

Genentech

In February 2019, the Company entered into a collaboration and license agreement (the Genentech Agreement) with Genentech, Inc. and F. Hoffman-La Roche Ltd (collectively, Genentech) for the development and commercialization of novel IL-15 collaboration products (Collaboration Products), including XmAb24306, the Company’s IL-15/IL-15Ra candidate. The Genentech Agreement became effective March 8, 2019.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb24306 and other Collaboration Products, including any new IL-15 programs identified during the joint research collaboration. Genentech and Xencor will jointly collaborate on worldwide development of XmAb24306 and other Collaboration Products with Genentech maintaining all worldwide commercialization rights, subject to Xencor having an option to co-promote in the United States. Xencor has the right to perform clinical studies of Collaboration Products in combination with other therapeutic agents at its own cost, subject to certain requirements.

The term of the Genentech Agreement will continue on a program-by-program and country-by-country basis until there are no remaining payment obligations from Genentech to Xencor with respect to Collaboration Products. Genentech may terminate the Genentech Agreement in its entirety or on a Collaboration Product-by-Collaboration Product basis by providing prior written notice. Xencor may terminate the Agreement on a Collaboration Product-by-Collaboration Product basis if Genentech fails to spend a defined minimum amount on research, development, or commercialization activities for that Collaboration Product. In the event of a termination of any individual Collaboration Product or the Genentech Agreement in its entirety, the relevant rights revert to Xencor.

The Company received a $120.0 million upfront payment and is eligible to receive up to an aggregate of $160.0 million in clinical milestone payments for each Collaboration Product that advances to Phase 3 clinical trials. The Company is also eligible to receive 45% share of net profits for sales of XmAb24306 and other Collaboration Products, while also sharing in net losses at the same percentage rate. The parties will jointly share in development and commercialization costs for all programs designated as a development program under the Genentech Agreement at the same percentage rate, while Genentech will bear launch costs entirely. The initial 45% profit-cost share percent is subject to ratchet down at the Company’s discretion and convertible to a royalty under certain circumstances.

Pursuant to the Genentech Agreement, XmAb24306 is designated as a development program and all costs incurred for developing XmAb24306 from the effective date of the Genentech Agreement are being shared with Genentech under the initial cost-sharing percentage.

Under the Genentech Agreement, the Company and Genentech will conduct joint research activities for a two-year period to identify and discover additional IL-15 candidates developed from the Company’s cytokine and bispecific technologies. The two-year research term may be extended an additional year if both parties agree. The Company and Genentech are each responsible for their own costs in conducting the research activities. The Company will receive a $20.0 million development milestone for each new Collaboration Product that is identified from the research efforts and advances into a Phase 1 clinical trial.

The Company evaluated the Genentech Agreement under the provisions of ASU No. 2014-09, Revenue from Contracts with Customers and all related amendments (collectively, ASC 606) and also ASC 808, Collaborative Arrangements. Certain provisions of the Genentech Agreement including the cost-sharing of development programs are governed by ASC 808. We have determined that Genentech is a customer for purposes of the delivery of specific performance obligations under the Genentech Agreement and applied the provisions of ASC 606 to the transaction.

The Company identified the following performance obligations under the Genentech Agreement: (i) the license of XmAb24306 and (ii) research services during a two-year period to identify up to potentially nine additional IL-15 candidates, each a separate research program and a separate performance obligation. The Company determined that the license and each of the potential research programs are separate performance obligations because they are capable of being distinct and are distinct in the context of the Genentech Agreement. The license to XmAb24306 has standalone functionality as Genentech has exclusive worldwide rights to the program, including the right to sublicense to third parties. Genentech has significant experience and capabilities in developing and commercializing drug candidates similar to XmAb24306, and Genentech is capable of performing these activities without the Company’s involvement. Upon the transfer of the license of XmAb24306, Genentech could develop and commercialize XmAb24306 without further assistance from the Company. The Company determined that the research services for each potential additional IL-15 candidate and research program were separate standalone performance obligations. The Genentech Agreement provides an outline of an integrated research plan for the programs to be conducted by the two companies, and the research activities are separate and distinct from the license to XmAb24306.

The Company determined the standalone selling price of the license to be $114.4 million using the adjusted market assessment approach considering similar collaboration and license agreements and transactions. The standalone selling price for the research activities for all nine of the potential IL-15 programs to be performed during the research term was determined to be $8.5 million using the expected cost approach which was derived from the Company’s experience and information from providing similar research activities to other parties.

The Company determined that the transaction price of the Genentech Agreement at inception was $120.0 million consisting of the upfront payment. The potential milestones are not included in the transaction price as these are contingent on future events and the Company would not recognize these in revenue until it is not probable that these would not result in significant reversal of revenue amounts in future periods. The Company will re-assess the transaction price at each reporting period and when event outcomes are resolved or changes in circumstances occur.

The Company allocated the transaction price to each of the separate performance obligation using the relative standalone selling price with $111.7 million allocated to the license to XmAb24306 and $8.3 million allocated to the research services.

The Company recognized the $111.7 million allocated to the license when it satisfied its performance obligation and transferred the license to Genentech in March 2019. The license was transferred upon the effective date of the Genentech Agreement and when the Company subsequently transferred certain data related to the program to Genentech. The $8.3 million allocated to the research activities is being recognized over a period of time through the end of the research term that services are rendered as we determine that the input method is the appropriate approach to recognize income for such services. A total of $1.6 million of revenue related to the research activities was recognized in the nine-month period ended September 30, 2019.

For the three and nine months ended September 30, 2019, we recognized $0.7 million and $113.2 million of income, respectively, from the Genentech Agreement. As of September 30, 2019, there is a $0.5 million payable related to cost-sharing development activities during the third quarter of 2019 for the XmAb24306 program. There is $6.8 million in deferred revenue as of September 30, 2019 which reflects our obligation to perform research services during the research term.

Astellas

Effective March 29, 2019, the Company entered into a Research and License Agreement (Astellas Agreement) with Astellas Pharma Inc. (Astellas) pursuant to which the Company and Astellas will conduct a discovery program to characterize compounds and products for development and commercialization. Under the Astellas Agreement, Astellas was granted a worldwide exclusive license, with the right to sublicense products in the field created by the research activities.

Pursuant to the Astellas Agreement, the Company will apply its bispecific Fc technology to research antibodies provided by Astellas to generate bispecific antibody candidates and will conduct limited testing and characterization of the bispecific candidates and return the candidates to Astellas for development and commercialization. The activities will be conducted under a research plan agreed to by both parties to the Astellas Agreement. Astellas will assume full responsibility for development and commercialization of the antibody candidate. Pursuant to the Astellas Agreement, the Company received an upfront payment of $15.0 million and is eligible to receive up to $240.0 million in milestones which include $32.5 million in development milestones, $57.5 million in regulatory milestones and $150.0 million in sales milestones. If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages.

We evaluated the Astellas Agreement under ASC 606 and identified the performance obligations under the Agreement to be (i) delivery of bispecific antibodies to Astellas from the antigen provided by Astellas and (ii) research activities against the bispecific antibodies as outlined in the research plan. The Company determined that the license to the bispecific antibodies is not a separate performance obligation because it is not capable of being distinct, the license to the antibodies cannot be separated from the underlying antibodies.

Astellas will control and benefit from the antibodies that are delivered. The Astellas Agreement provides Astellas the right to sublicense the antibody to third parties and Astellas has significant experience and capabilities in developing and commercializing clinical candidates and is capable of performing these activities from the delivered antibodies without the Company’s involvement.

The Company determined the standalone selling price of the bispecific deliverable to be $17.1 million using the income approach by calculating a risk adjusted net present value of the potential revenue that could be earned from the arrangement. The standalone selling price for the research activities to be performed was determined to be $1.4 million using the expected cost approach which was derived from the Company’s experience and information from providing similar research activities to other customers.

The Company determined that the transaction price of the Astellas Agreement at inception was $15.0 million consisting of the upfront payment. The potential milestones are not included in the transaction price as these are contingent on future events and the Company would not recognize these in revenue until it is not probable that these would not result in significant reversal of revenue amounts in future periods. The Company will re-assess the transaction price at each reporting period and when event outcomes are resolved or changes in circumstances occur.

The Company allocated the transaction price to each of the separate performance obligations using the relative standalone selling price with $13.6 million allocated to delivery of the bispecific antibodies and $1.4 million allocated to the research activities.

The Company recognized the $13.6 million allocated to the bispecific antibodies when it satisfied its performance obligation and transferred the bispecific antibodies to Astellas in June 2019. Astellas transferred the research antibodies to the Company and the Company applied its bispecific technologies to and transferred the completed antibodies to Astellas. The $1.4 million allocated to the research activities is being recognized as the research services are being completed over the period of time the Company expects to complete the activities under the research plan.

No revenue was recognized under this arrangement for the three months ended September 30, 2019. For the nine months ended September 30, 2019, we recognized $13.8 million related to the arrangement and there is $1.2 million in deferred revenue as of September 30, 2019 related to our obligation to complete research activities under the Astellas Agreement.

Novartis

In June 2016, the Company entered into a Collaboration and License Agreement (Novartis Agreement) with Novartis Institutes for BioMedical Research, Inc. (Novartis), to develop and commercialize bispecific and other Fc engineered antibody drug candidates using the Company’s proprietary XmAb technologies and drug candidates. The Company received an upfront payment of $150.0 million and is eligible to receive additional development, regulatory and sales milestones.

Pursuant to the Novartis Agreement:

●

The Company granted Novartis certain exclusive rights to research, develop and commercialize XmAb14045 and XmAb13676, two development stage products that incorporate the Company’s bispecific Fc technology;

●

The Company will apply its bispecific technology in up to four target pair antibodies identified by Novartis (each a Global Discovery Program); and

●

The Company will provide Novartis with a non-exclusive license to certain of its Fc technologies to apply against up to ten targets identified by Novartis.

The Company determined that the transaction price of the Novartis Agreement at inception was the $150.0 million upfront payment. The potential milestones were not included in the transaction price as these are contingent on future events, and the Company will not recognize these potential milestones in revenue until it is not probable that these would not result in significant reversal of revenue amounts in future periods. The Company will re-assess the transaction price at each reporting period and when event outcomes are resolved or changes in circumstances occur.

Under the Novartis Agreement, the Company and Novartis are co-developing XmAb14045 worldwide and sharing development costs.

In December 2018, Novartis notified us that they were returning their rights to the XmAb13676 program. Pursuant to the terms of the Novartis Agreement, the rights to the XmAb13676 program reverted to us in June 2019 and Novartis’ obligation to fund its share of XmAb13676 development costs will continue through June 2020.

We completed delivery of a Global Discovery Program in 2017 and delivery of a second Global Discovery Program in 2018. Under the Novartis Agreement, Novartis will assume full responsibility for development and commercialization of each Global Discovery product candidate that is delivered. Assuming successful development and commercialization of a Global Discovery Program, we are eligible to receive $50.0 million in development milestones, $100.0 million in regulatory milestones and $100.0 million in sales milestones for each program. Pursuant to ASC 606, the potential milestone payments are considered variable consideration and were not included in determining the transaction price at inception of the Novartis Agreement. The Company has elected the most-likely-amount method for recognizing variable consideration.

Under ASC 606, revenue is recognized at the time that the Company’s performance obligation for each Global Discovery is completed upon delivery of each discovery program to Novartis.

In the third quarter ended September 30, 2019, Novartis notified the Company that the United States Food and Drug Administration (FDA) had allowed its Investigational New Drug application (IND) that was submitted for a Global Discovery bispecific antibody candidate, and Novartis intends to initiate a Phase 1 clinical trial for the candidate. Based on the expectation of a patient being dosed in the study, the Company recognized $10.0 million of revenue related to the expected Phase 1 milestone in the three-month period ended September 30, 2019. This amount was also recorded as a contract asset on the balance sheet at September 30, 2019.

The Company recognized $10.0 million of revenue during the three and nine months ended September 30, 2019 in connection with the Novartis arrangement. The Company recognized $20.0 million of revenue in the three and nine months ended September 30, 2018. As of September 30, 2019 there is a receivable of $1.7 million related to cost-sharing of development activities for the third quarter of 2019 for the XmAb14045 and XmAb13676 programs, and $40.1 million in deferred revenue related to our obligation to deliver two additional Global Discovery Programs to Novartis under the arrangement.

Amgen Inc.

In September 2015, the Company entered into a research and license agreement (the Amgen Agreement) with Amgen Inc. (Amgen) to develop and commercialize bispecific antibody product candidates using the Company’s bispecific technology. Under the Amgen Agreement, the Company licensed the rights to its internally developed, preclinical CD38 x CD3 bispecific antibody candidate to Amgen and also agreed to apply our bispecific technology to five previously identified Amgen targets (each a Discovery Program). The Company has received a total of $55.0 million in upfront payments and milestone payments and is eligible to receive up to an additional $600.0 million in milestone payments and royalties on approved products. Pursuant to ASC 606, the milestone payments are considered variable consideration and were not included in determining the transaction price at inception of the Amgen Agreement.

Pursuant to the Amgen Agreement, the Company applied its bispecific technology to five Discovery Programs antibody molecules provided by Amgen that bind Discovery Program targets and returned the bispecific product candidates to Amgen for further testing, development and commercialization. The initial research term was three years from the date of the Amgen Agreement, but Amgen, at its option, could request an extension of one year. In May 2018, Amgen elected to extend the term of the research term for one year. During the extended research term, the Company provided additional research activities to Amgen and received research funding for such activities. The extended research term expired in May 2019.

In the third quarter ended September 30, 2019, Amgen notified the Company that the FDA had allowed the IND that was submitted for AMG 509, a STEAP1 x CD3 bispecific antibody developed under the Amgen Agreement. Amgen indicated that it intends to initiate a Phase 1 clinical trial for AMG 509. Based on the expectation of a patient being dosed in the study, we recognized $5.0 million of revenue related to the expected Phase 1 milestone for the three months ended September 30, 2019. This amount was also recorded as a contract asset on the balance sheet at September 30, 2019.

We recognized $5.0 million of revenue under this arrangement during the three and nine months ended September 30 2019. No revenue was recognized under the arrangement during the same periods in 2018. As of September 30, 2019, there was no deferred revenue related to the arrangement.

MorphoSys AG

In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys) for a worldwide license to the Company’s patents and know-how to research, develop and commercialize our drug candidate XmAb5574 (subsequently renamed MOR208 and tafasitamab) with the right to sublicense under certain conditions. Under the agreement, the Company agreed to collaborate with MorphoSys to develop and commercialize tafasitamab. If certain developmental, regulatory and sales milestones are achieved, the Company is eligible to receive future milestone payments and royalties.

In June 2017, MorphoSys initiated a Phase 3 clinical trial under the arrangement for which the Company received a milestone payment of $12.5 million. The Company recognized the payment as revenue in the period that the milestone event occurred.

There were no revenues recognized under this arrangement for the three and nine months ended September 30, 2019 and 2018. As of September 30, 2019, the Company has no deferred revenue related to this agreement.

Alexion Pharmaceuticals, Inc.

In January 2013, the Company entered into an option and license agreement with Alexion Pharmaceuticals, Inc. (Alexion). Under the terms of the agreement, the Company granted to Alexion an exclusive research license, with limited sublicensing rights, to make and use our Xtend technology to evaluate and advance compounds against six different target programs during a five-year research term under the agreement. Alexion exercised its option to take a commercial license for our technology against a target that was developed as ALXN1210 and is currently marketed as Ultomiris®.

The Company is eligible to receive contractual milestones for certain regulatory and commercial achievements and is also entitled to receive royalties based on a percentage of net sales of Ultomiris sold by Alexion, its affiliates or its sub licensees, which percentage is in the low single digits. Alexion’s royalty obligations continue on a product-by-product and country-by-country basis until the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country.

In the third quarter of 2018, Alexion completed certain regulatory submission filings for ALXN1210, and the Company received $9.0 million in milestone payments. In the fourth quarter of 2018, Alexion completed certain regulatory submission filings and also received FDA marketing approval, and the Company received $11.0 million in milestone payments.

In the second quarter of 2019, Alexion received marketing authorization from Japan’s Ministry of Health, Labour and Welfare, and the Company received a $4.0 million milestone.

In the third quarter of 2019, Alexion received marketing authorization from the European Commission, and the Company received a $4.0 million milestone.

Under ASC 606, we recognize revenue for sales-based royalties upon the subsequent sale of the product. We began earning royalty revenue from the sale of Ultomiris in 2019. For the three and nine months ended September 30, 2019, we have estimated royalty revenue of $1.4 million and $2.5 million, respectively, related to sales of Ultomiris.

We recognized $4.0 million and $8.0 million of milestone revenue under the arrangement for the three and nine months ended September 30, 2019. We also recognized $1.4 million and $2.5 million of royalty revenue under this arrangement for the three and nine months ended September 30, 2019. There was $9.0 million of revenue recognized under this arrangement for the three and nine months ended September 30, 2018. As of September 30, 2019, there is no deferred revenue related to this agreement.

Boehringer Ingelheim International GmbH

In 2007, the Company entered into a Research License and Collaboration Agreement with Boehringer Ingelheim International GmbH (BI). Under the agreement, the Company provided BI with a three-year research license to one of the Company’s technologies and commercial options. BI elected to exercise two commercial licenses from the compounds identified during the research term and one compound was in clinical development. In the third quarter of 2019, BI discontinued development of the compound and terminated the agreement. No revenue related to this arrangement was recognized for the three and nine months ended September 30, 2019 and 2018 and there is no deferred revenue related to this agreement at September 30, 2019.

INmune Bio, Inc.

In October 2017, the Company entered into a License Agreement with INmune Bio, Inc. (INmune). Under the terms of the agreement, the Company provided INmune with an exclusive license to certain rights to a proprietary protein, XPRO1595. Under the agreement the Company received an upfront payment of $100,000, an equity interest in INmune and an option to acquire additional shares of INmune. The Company is eligible to receive a percentage of sublicensing revenue received for XPRO1595 and also royalties in the mid-single digit percentages on the sale of approved products.

The equity interest in INmune constituted of 1,585,000 shares of common stock and the option is to purchase up to an additional 10% of the fully diluted outstanding share of INmune for $10.0 million. We have recorded our equity interest in INmune at cost pursuant to ASC 323. We did not record our share of the net loss from INmune during the nine months ended September 30, 2019 or 2018, respectively, as the carrying value of this investment has been reduced to zero.

In 2018, INmune filed a registration statement on Form S-1 with the Securities and Exchange Commission (SEC) which was declared effective by the SEC as of December 19, 2018.

The Company did not recognize any revenue related to the agreement for the three and nine months ended September 30, 2019 and 2018. There is no deferred revenue as of September 30, 2019 related to this agreement.

VIR Biotechnology, Inc.

In the third quarter of 2019, the Company entered into a Patent License Agreement (the VirBio Agreement) with VIR Biotechnology (VirBio) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up to two targets. Under the terms of the VirBio Agreement, the Company received an upfront payment and is eligible to receive total milestones of $155.5 million which include $5.5 million of development milestones, $30.0 million of regulatory milestones and $120.0 million of sales milestones. In addition, the Company is eligible to receive royalties on the net sales of approved products in the low single digits.

The Company evaluated the VirBio Agreement and determined that the single performance obligation was access to a non-exclusive license to certain patents of the Company which were transferred to VirBio upon execution of the VioBio Agreement in July 2019.

The Company recognized $0.7 million of license and milestone revenue related to the agreement for the three and nine months ended September 30, 2019. There is no deferred revenue as of September 30, 2019 related to this agreement.

Revenue earned

The revenues recorded for the three and nine months ended September 30, 2019 were earned principally from the following licensees (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

Alexion	$	5.4	$	9.0	$	10.5	$	9.0
Amgen		5.0		—		5.0		—
Astellas		—		—		13.8		—
Genentech		0.7		—		113.2		—
Novartis		10.0		20.0		10.0		20.0
Vir Biotechnology		0.7		—		0.7		—
Total	$	21.8	$	29.0	$	153.2	$	29.0

The table below summarizes the disaggregation of revenue recorded for the three and nine months ended September 30, 2019 (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

Research collaboration	$	0.6	$	20.0	$	15.2	$	20.0
Milestone		19.3		9.0		23.3		9.0
Licensing		0.5		—		112.2		—
Royalties		1.4		—		2.5		—
Total	$	21.8	$	29.0	$	153.2	$	29.0

Remaining Performance Obligations and Deferred Revenue

Our remaining performance obligations are delivery of two Global Discovery Programs under the Novartis Agreement and the conduct of research activities pursuant to research plans under the Genentech and Astellas Agreements. As of September 30, 2019 and 2018, we have deferred revenue of $48.2 million and $40.1 million, respectively. As of September 30, 2019, $45.6 million was classified as current liabilities as our obligations to perform services are due on demand when requested by Novartis and Astellas under the Novartis Agreement and Astellas Agreement, respectively; $2.6 million of the deferred revenue liability is classified as long-term for the obligation to perform research services to Genentech after one year.

Summary of Significant Accounting Policies (Polices)	9 Months Ended
Summary of Significant Accounting Policies (Polices)	Sep. 30, 2019
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The accompanying unaudited interim financial statements for Xencor, Inc. (the Company, Xencor, we or us) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Certain amounts in the prior period financial statements have been revised to conform to the presentation of the current period financial statements. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of the Company believes are necessary for a fair presentation of the periods presented. The preparation of interim financial statements requires the use of management’s estimates and assumptions that affect reported amounts of assets and liabilities at the date of the interim financial statements and the reported revenues and expenditures during the reported periods. These interim financial results are not necessarily indicative of the results expected for the full fiscal year or for any subsequent interim period. The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 26, 2019.
Use of Estimates	Use of Estimates The preparation of interim financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, other comprehensive gain (loss) and the related disclosures. On an ongoing basis, management evaluates its estimates, including estimates related to its accrued clinical trial and manufacturing development expenses, stock-based compensation expense, intangible assets and related amortization. Significant estimates in these interim financial statements include estimates made for royalties and accrued research and development expenses, stock-based compensation expenses, intangible assets and related amortization, estimated standalone selling price of performance obligations, the likelihood of recognizing variable consideration, and recoverability of deferred tax assets.
Intangible Assets	Intangible Assets The Company maintains definite-lived intangible assets related to certain capitalized costs of acquired licenses and third-party costs incurred in establishing and maintaining its intellectual property rights to its platform technologies and development candidates. These assets are amortized over their useful lives, which are estimated to be the remaining patent life or the contractual term of the license. The straight-line method is used to record amortization expense. The Company assesses its intangible assets for impairment if indicators are present or changes in circumstances suggest that impairment may exist. There were no impairment charges recorded for the nine months ended September 30, 2019 and 2018. The Company capitalizes certain in-process intangible assets that are abandoned when they are no longer pursued or used in current research activities. There was no material abandonment of in-process intangible assets during the nine months ended September 30, 2019 or 2018.
Marketable Securities	Marketable Securities The Company has an investment policy that includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The Company invests its excess cash primarily in marketable debt securities issued by investment grade institutions. The Company considers its marketable debt securities to be available-for-sale. These assets are carried at fair value and the unrealized gains and losses are included in accumulated other comprehensive income (loss). Accrued interest on marketable debt securities is included in marketable securities. If a decline in the value of a marketable debt security in the Company’s investment portfolio is deemed to be other-than-temporary, the Company writes down the security to its current fair value and recognizes a loss as a charge against income. The Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost are other-than-temporary.
Recent Accounting Pronouncements	Recent Accounting Pronouncements Pronouncements Adopted in 2019 Effective January 1, 2019, the Company adopted Accounting Standards Codification Topic 842 (ASC 842), Leases, which requires lessees to recognize a right-of-use (ROU) asset and a lease liability for leases with terms greater than 12 months and also requires disclosures about the amount, timing and uncertainty of cash flows arising from such leases. The Company adopted ASC 842 using the optional transition method provided under ASU 2018-11, which did not require adjustments to comparative periods nor require modified disclosures in those comparative periods. Under this method, the Company adjusted its financial statements for the cumulative effect of the adoption of ASC 842 at the beginning of January 1, 2019. At inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances. For leases with a term of one year or longer where the Company is the lessee, ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The interest rate implicit with such leases is typically not readily determined. The Company has determined the appropriate incremental borrowing rate by reference to an estimate of the current market borrowing rate for a collateralized asset over a similar term as the lease term. The new standard impacts our reporting on the leases on our facilities in Monrovia and San Diego. Under ASC 842, tenant allowances under such operating leases are no longer tracked separately as a deferred rent liability; instead, it is integrated as part of the ROU asset. As a result, we recorded an adjustment to the beginning balance for deferred rent liability and adopted the use of ROU asset and lease liability. We recorded lease liabilities of $12.7 million and ROU assets of $11.4 million for lease agreements in effect as of January 1, 2019. The ROU asset is included in Other assets on the balance sheet as of September 30, 2019. This resulted in an increase to the beginning balance on both assets and liabilities after the adjustment of $11.2 million, with no impact on our retained earnings. Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payments issued to nonemployees for goods and services. The standard requires a modified retrospective transition approach, with a cumulative adjustment to retained earnings as of adoption date, for all liability-classified awards that have not been settled as of the adoption date and equity-classified nonemployee awards for which a measurement date has not been established. The adoption of this standard did not have any impact on the Company’s financial statements. There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2018 Annual Report on Form 10-K.

Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value of Financial Instruments

Schedule of assets recorded at fair value


	September 30, 2019						December 31, 2018
	Total						Total
	Fair Value		Level 1		Level 2		Fair Value		Level 1		Level 2

Money Market Funds	$	30,603	$	30,603	$	—	$	18,270	$	18,270	$	—
Corporate Securities		217,702		—		217,702		104,967		—		104,967
Government Securities		351,585		—		351,585		399,256		—		399,256
	$	599,890	$	30,603	$	569,287	$	522,493	$	18,270	$	504,223

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

Net Income (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Net Income (Loss) Per Share

Schedule of basic and diluted net income (loss) per common share

Basic and diluted net income (loss) per common share is computed as follows (in thousands except share and per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(in thousands, except share and per share data)
Numerator:
Net income (loss) attributable to common stockholders	$	(10,224)	$	3,150	$	53,787	$	(52,210)
Denominator:
Weighted-average common shares outstanding used in computing basic net income (loss)		56,643,075		55,974,080		56,449,678		53,165,774
Weighted-average common shares outstanding used in computing diluted net income (loss)		56,643,075		58,313,002		58,365,158		53,165,774
Basic net income (loss) per common share	$	(0.18)	$	0.06	$	0.95	$	(0.98)
Diluted net income (loss) per common share	$	(0.18)	$	0.05	$	0.92	$	(0.98)

Schedule of securities included in the calculation of earnings per share


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
	(in thousands)		(in thousands)
Employee stock purchase plan shares	—	—	20	—
Options to purchase common stock and RSU grants	—	2,339	1,895	—
	—	2,339	1,915	—

Schedule of potentially dilutive securities


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
	(in thousands)		(in thousands)
Employee stock purchase plan shares	6	—	—	—
Options to purchase common stock and RSU grants	2,261	—	—	1,884
	2,267	—	—	1,884

Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2019

Marketable Securities

Schedule of marketable securities


			Gross		Gross
	Amortized		Unrealized		Unrealized
September 30, 2019	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	30,603	$	—	$	—	$	30,603
Corporate Securities		217,484		228		(10)		217,702
Government Securities		350,358		1,227		—		351,585
	$	598,445	$	1,455	$	(10)	$	599,890

Reported as
Cash and cash equivalents							$	30,603
Marketable securities								569,287
Total investments							$	599,890



			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2018	Cost		Gains		Losses		Fair Value
(in thousands)
Money Market Funds	$	18,270	$	—	$	—	$	18,270
Corporate Securities		105,311		1		(345)		104,967
Government Securities		399,873		187		(804)		399,256
	$	523,454	$	188	$	(1,149)	$	522,493

Reported as
Cash and cash equivalents							$	18,270
Marketable securities								504,223
Total investments							$	522,493

Schedule of maturities of marketable securities


	Amortized		Estimated
September 30, 2019	Cost		Fair Value
(in thousands)
Mature in one year or less	$	494,248	$	495,292
Mature within two years		73,594		73,995
	$	567,842	$	569,287

Schedule of unrealized losses on available-for-sale investments

The unrealized losses on available-for-sale investments and their related fair values as of September 30, 2019 and December 31, 2018 are as follows:


	Less than 12 months				12 months or greater
			Unrealized				Unrealized
September 30, 2019	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	3,037	$	(1)	$	21,409	$	(9)
Government Securities		15,606		(1)		—		—
	$	18,643	$	(2)	$	21,409	$	(9)



	Less than 12 months				12 months or greater
			Unrealized				Unrealized
December 31, 2018	Fair value		losses		Fair value		losses
(in thousands)
Corporate Securities	$	84,666	$	(310)	$	17,805	$	(35)
Government Securities		176,225		(672)		116,830		(132)
	$	260,891	$	(982)	$	134,635	$	(167)

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Stock-Based Compensation

Schedule of total employee, director and non-employee stock-based compensation expense recognized


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
General and administrative	$	2,474	$	2,732	$	6,337	$	6,037
Research and development		7,040		3,388		18,336		9,436
	$	9,514	$	6,120	$	24,673	$	15,473

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	9,117	$	5,832	$	23,588	$	14,723
ESPP		217		209		630		562
Restricted stock units		180		79		455		188
	$	9,514	$	6,120	$	24,673	$	15,473

Summary of stock option activity


		Weighted		Weighted
		Average		Average
	Number of	Exercise		Remaining		Aggregate
	Shares subject	Price		Contractual		Intrinsic
	to outstanding	(Per		Term		Value
	options	Share)		(in years)		(in thousands)
Balances at December 31, 2018	5,966,928	$	19.71		7.51
Options granted	1,918,375	$	35.76
Options forfeited	(266,780)	$	31.36
Options exercised	(387,430)	$	17.95
Balances at September 30, 2019	7,231,093	$	23.63		7.47	$	78,789
Exercisable	3,831,677	$	17.25		6.28	$	63,736

Schedule of weighted average assumptions used for estimation of fair value of stock options


	Options				Options
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Expected term (years)	6.0		6.1		6.0		6.1
Expected volatility	60.8	%	72.8	%	61.2	%	73.1	%
Risk-free interest rate	1.52	%	2.87	%	2.33	%	2.56	%
Expected dividend yield	—	%	—	%	—	%	—	%

Schedule of weighted average assumptions used for estimation of fair value of ESPP


	ESPP				ESPP
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Expected term (years)	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Expected volatility	55.0 - 71.4	%	61.2 - 71.4	%	55.0 - 71.4	%	61.2 - 71.4	%
Risk-free interest rate	1.47 - 2.70	%	1.47 - 2.41	%	1.47 - 2.70	%	1.47 - 2.41	%
Expected dividend yield	—	%	—	%	—	%	—	%

Summary of restricted stock unity activity


		Weighted
	Restricted	Average Grant
	Stock	Date Fair Value
	Units	(Per unit)

Unvested at December 31, 2018	33,933	$	27.64
Granted	39,666		35.94
Vested	(11,311)		27.64
Forfeited	(4,182)		31.12
Unvested at September 30, 2019	58,106	$	33.05

Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases

Schedule of operating lease liabilities maturities

The following table reconciles the undiscounted cash flows for the operating leases at September 30, 2019 to the operating lease liabilities recorded on the balance sheet (in thousands):


Years ending December 31,
For the remainder of 2019	$	698
2020		2,703
2021		2,587
2022		2,208
2023		1,352
2024		1,371
Thereafter		2,282
Total undiscounted lease payments		13,201
Less: Imputed interest		(1,922)
Present value of lease payments	$	11,279

Lease liabilities - short-term	$	2,197
Lease liabilities - long-term		9,082
Total lease liabilities	$	11,279

Collaboration and Licensing Agreements (Tables)

9 Months Ended

Sep. 30, 2019

Collaboration and Licensing Agreements

Schedule of revenue by licensees

The revenues recorded for the three and nine months ended September 30, 2019 were earned principally from the following licensees (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

Alexion	$	5.4	$	9.0	$	10.5	$	9.0
Amgen		5.0		—		5.0		—
Astellas		—		—		13.8		—
Genentech		0.7		—		113.2		—
Novartis		10.0		20.0		10.0		20.0
Vir Biotechnology		0.7		—		0.7		—
Total	$	21.8	$	29.0	$	153.2	$	29.0

Schedule of disaggregation of revenue

The table below summarizes the disaggregation of revenue recorded for the three and nine months ended September 30, 2019 (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

Research collaboration	$	0.6	$	20.0	$	15.2	$	20.0
Milestone		19.3		9.0		23.3		9.0
Licensing		0.5		—		112.2		—
Royalties		1.4		—		2.5		—
Total	$	21.8	$	29.0	$	153.2	$	29.0

Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($)	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Lease liability	$ 11,279,000
Increase in assets	686,244,000		$ 576,732,000
Increase in liabilities	76,007,000		55,051,000
Impact on retained earnings (accumulated deficit)	$ (269,490,000)		$ (323,277,000)
ASU 2016-02 \| Restatement Adjustment
Right-of-Use Asset		$ 11,400,000
Lease liability		12,700,000
Increase in assets		11,200,000
Increase in liabilities		11,200,000
Impact on retained earnings (accumulated deficit)		$ 0

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Fair Value of Financial Instruments
Money Market Funds	$ 51,189	$ 26,246
Securities	569,287
Total Fair Value	599,890	522,493
Transfers from level 1 to level 2	0		$ 0
Transfers from level 2 to level 1	0		$ 0
Money Market Funds
Fair Value of Financial Instruments
Money Market Funds	30,603	18,270
Corporate Securities
Fair Value of Financial Instruments
Securities	217,702	104,967
Government Securities
Fair Value of Financial Instruments
Securities	351,585	399,256
Level 1
Fair Value of Financial Instruments
Total Fair Value	30,603	18,270
Level 1 \| Money Market Funds
Fair Value of Financial Instruments
Money Market Funds	30,603	18,270
Level 2
Fair Value of Financial Instruments
Total Fair Value	569,287	504,223
Level 2 \| Corporate Securities
Fair Value of Financial Instruments
Securities	217,702	104,967
Level 2 \| Government Securities
Fair Value of Financial Instruments
Securities	$ 351,585	$ 399,256

Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Numerator:
Net income (loss) attributable to common stockholders	$ (10,224)	$ 3,150	$ 53,787	$ (52,210)
Denominator:
Weighted average common shares outstanding, basic	56,643,075	55,974,080	56,449,678	53,165,774
Weighted average common shares outstanding, diluted	56,643,075	58,313,002	58,365,158	53,165,774
Basic net income (loss) per common share	$ (0.18)	$ 0.06	$ 0.95	$ (0.98)
Diluted net income (loss) per common share	$ (0.18)	$ 0.05	$ 0.92	$ (0.98)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=117326831&loc=d3e1337-109256

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(21))
-URI http://asc.fasb.org/extlink&oid=116634182&loc=SL114868664-224227

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 60B
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=117326831&loc=SL5780133-109256

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(19))
-URI http://asc.fasb.org/extlink&oid=116637232&loc=SL114874131-224263

+ Details

Marketable Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities
Cash and cash equivalents	$ 51,189	$ 26,246
Investments, amortized cost	598,445	523,454
Investments	599,890	522,493
Total amortized cost	567,842
Gross unrealized gains	1,455	188
Gross unrealized losses	(10)	(1,149)
Securities	569,287
Marketable securities
Schedule of Available-for-sale Securities
Securities	569,287	504,223
Money Market Funds
Schedule of Available-for-sale Securities
Cash and cash equivalents	30,603	18,270
Corporate Securities
Schedule of Available-for-sale Securities
Total amortized cost	217,484	105,311
Gross unrealized gains	228	1
Gross unrealized losses	(10)	(345)
Securities	217,702	104,967
Government Securities
Schedule of Available-for-sale Securities
Total amortized cost	350,358	399,873
Gross unrealized gains	1,227	187
Gross unrealized losses		(804)
Securities	351,585	399,256
Cash and Cash Equivalents
Schedule of Available-for-sale Securities
Cash and cash equivalents	$ 30,603	$ 18,270

Marketable Securities - Maturities (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Amortized Cost
Maturing in one year or less	$ 494,248
Maturing within two years	73,594
Total amortized cost	567,842
Estimate Fair Value
Maturing in one year or less	495,292
Maturing within two years	73,995
Total estimated fair value	$ 569,287

Marketable Securities - Unrealized losses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair value
Fair value, less than 12 months	$ 18,643	$ 260,891
Fair value, 12 months or greater	21,409	134,635
Unrealized losses
Unrealized losses, Less than 12 months	(2)	(982)
Unrealized losses, 12 months or greater	(9)	(167)
Corporate Securities
Fair value
Fair value, less than 12 months	3,037	84,666
Fair value, 12 months or greater	21,409	17,805
Unrealized losses
Unrealized losses, Less than 12 months	(1)	(310)
Unrealized losses, 12 months or greater	(9)	(35)
Government Securities
Fair value
Fair value, less than 12 months	15,606	176,225
Fair value, 12 months or greater		116,830
Unrealized losses
Unrealized losses, Less than 12 months	$ (1)	(672)
Unrealized losses, 12 months or greater		$ (132)

Stock Based Compensation (Details)		9 Months Ended
Stock Based Compensation (Details)	Dec. 02, 2013 shares	Sep. 30, 2019 item shares	Sep. 30, 2018 shares	Dec. 31, 2018 shares
Stock-based compensation
Common stock, shares issued		56,714,788		56,279,542
Employee stock options
Stock-based compensation
Options granted (in shares)		1,918,375	1,679,400
ESPP
Stock-based compensation
Total number of shares of common stock available for issuance		581,286
Awards issued under the plan (in shares)		386,221
Increase in shares of common stock available for issuance (in shares)		0
ESPP \| Maximum
Stock-based compensation
Annual percentage increase in shares of common stock available for issuance		1.00%
Annual increase in shares of common stock available for issuance (in shares)		621,814
Restricted stock units
Stock-based compensation
Awards issued under the plan (in shares)		73,599
Annual installment vesting periods \| item		3
The 2013 Plan
Stock-based compensation
Total number of shares of common stock available for issuance		11,434,273
Annual percentage increase in shares of common stock available for issuance		4.00%
Awards issued under the plan (in shares)		8,669,662
Increase in shares of common stock available for issuance (in shares)		2,251,181
The 2010 Plan
Stock-based compensation
Total number of shares of common stock available for issuance		2,684,456
Options granted (in shares)	0

Stock-Based Compensation - Employee expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	$ 9,514	$ 6,120	$ 24,673	$ 15,473
Employee stock options
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	9,117	5,832	23,588	14,723
ESPP
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	217	209	630	562
Restricted stock units
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	180	79	455	188
General and administrative
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	2,474	2,732	6,337	6,037
Research and development
Stock-based compensation
Total employee, director and non-employee stock-based compensation expense	$ 7,040	$ 3,388	$ 18,336	$ 9,436

Stock-Based Compensation - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended		12 Months Ended
	Dec. 02, 2013	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Employee stock options
Number of Shares subject to outstanding options
Balance at the beginning of the period (in shares)		5,966,928
Options granted (in shares)		1,918,375	1,679,400
Options forfeited (in shares)		(266,780)
Options exercised (in shares)		(387,430)
Balance at the end of the period (in shares)		7,231,093		5,966,928
Exercisable options (in shares)		3,831,677
Weighted Average Exercise Price (Per Share)
Balance at the beginning of the period (in dollars per share)		$ 19.71
Options granted (in dollars per share)		35.76
Options forfeited (in dollars per share)		31.36
Options exercised (in dollars per share)		17.95
Balance at the end of the period (in dollars per share)		23.63		$ 19.71
Exercisable (in dollars per share)		$ 17.25
Weighted-average remaining contractual life		7 years 5 months 19 days		7 years 6 months 3 days
Weighted-average remaining contractual life of awards exercisable		6 years 3 months 10 days
Aggregate intrinsic value of options outstanding		$ 78,789
Aggregate intrinsic value of options exercisable		$ 63,736
Closing price of common stock (in dollars per share)		$ 33.73
Weighted average fair value of options granted (in dollars per share)		$ 20.71	$ 17.57
The 2010 Plan
Number of Shares subject to outstanding options
Options granted (in shares)	0

Stock-Based Compensation - FV of employee stock options (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Employee stock options
Weighted average assumptions for estimated fair value of employee stock options
Expected volatility (as a percent)	60.80%	72.80%	61.20%	73.10%
Risk-free interest rate (as a percent)	1.52%	2.87%	2.33%	2.56%
Expected term (years)	6 years	6 years 1 month 6 days	6 years	6 years 1 month 6 days
Compensation expense
Unamortized compensation expense related to unvested options	$ 56.6		$ 56.6
Period to recognize unamortized compensation expense			2 years 5 months 12 days
ESPP
Weighted average assumptions for estimated fair value of employee stock options
Expected volatility, low end of range (as a percent)	55.00%	61.20%	55.00%	61.20%
Expected volatility, high end of range (as a percent)	71.40%	71.40%	71.40%	71.40%
Risk-free interest rate, low end of range (as a percent)	1.47%	1.47%	1.47%	1.47%
Risk-free interest rate, high end of range (as a percent)	2.70%	2.41%	2.70%	2.41%
Compensation expense
Unamortized compensation expense related to unvested options	$ 0.1		$ 0.1
Period to recognize unamortized compensation expense			2 months 12 days
ESPP \| Minimum
Weighted average assumptions for estimated fair value of employee stock options
Expected term (years)	6 months	6 months	6 months	6 months
ESPP \| Maximum
Weighted average assumptions for estimated fair value of employee stock options
Expected term (years)	2 years	2 years	2 years	2 years

Stock Based Compensation - Restricted stock units (Details) - Restricted stock units $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares
Stock-based compensation
Beginning balance \| shares	33,933
Granted \| shares	39,666
Vested \| shares	(11,311)
Forfeited \| shares	(4,182)
Ending balance \| shares	58,106
Weighted Average Grant Date Fair Value, Beginning Balance \| $ / shares	$ 27.64
Weighted Average Grant Date Fair Value, Granted \| $ / shares	35.94
Weighted Average Grant Date Fair Value, Vested \| $ / shares	27.64
Weighted Average Grant Date Fair Value, Forfeited \| $ / shares	31.12
Weighted Average Grant Date Fair Value, Ending Balance \| $ / shares	$ 33.05
Compensation expense
Unamortized compensation expense related to unvested restricted stock units \| $	$ 1,500
Period to recognize unamortized compensation expense	2 years 2 months 12 days

Leases (Details) - USD ($) $ in Thousands	9 Months Ended
Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jul. 31, 2017
Lessee, Lease, Description [Line Items]
Option to extend	true
For the remainder of 2019	$ 698
2020	2,703
2021	2,587
2022	2,208
2023	1,352
2024	1,371
Thereafter	2,282
Total undiscounted lease payments	13,201
Less: Imputed interest	(1,922)
Present value of lease payments	$ 11,279
Monrovia, CA - office and laboratory space
Lessee, Lease, Description [Line Items]
Renewal term	5 years
Monrovia, CA - office and laboratory space with additional space
Lessee, Lease, Description [Line Items]
Renewal term		5 years
San Diego, CA - office space
Lessee, Lease, Description [Line Items]
Renewal term	5 years
San Diego, CA - second office space
Lessee, Lease, Description [Line Items]
Renewal term	5 years

Leases - Operating lease liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Leases
Lease liability - short-term	$ 2,197
Lease liability - long-term	9,082
Operating lease liabilities	11,279
Operating lease cost	2,000
Cash paid for operating leases	$ 1,900
Net rent expense		$ 1,900
Remaining lease term	5 years 8 months 12 days
Discount rate	5.50%

Collaboration and Licensing Agreements (Details)		1 Months Ended								3 Months Ended				9 Months Ended		12 Months Ended
Collaboration and Licensing Agreements (Details)	Mar. 29, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Feb. 28, 2019 USD ($) company item	Oct. 31, 2017 USD ($) shares	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($) item	Sep. 30, 2015 USD ($) item	Jan. 31, 2013 item	Sep. 30, 2019 USD ($) item	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) item	Sep. 30, 2018 USD ($)	Dec. 31, 2007 item
Collaboration research and licensing agreements
Deferred revenue										$ 48,200,000			$ 40,100,000	$ 48,200,000	$ 40,100,000
Current portion of deferred revenue										45,579,000		$ 40,079,000		45,579,000
Deferred revenue, noncurrent portion										2,613,000				$ 2,613,000
Novartis
Collaboration research and licensing agreements
Number of performance obligations														2
Collaboration and License Agreement \| Genentech
Collaboration research and licensing agreements
Nonrefundable upfront payment				$ 120,000,000.0
Percentage of profits on net sales of the product				45.00%
Research license term				2 years
Revenue recognized										700,000				$ 113,200,000
Number of companies that conduct integrated research plan \| company				2
Performance obligation				$ 120,000,000.0
Number of programs \| item				9
Term of revenue recognized														1 year
Collaboration and License Agreement \| Genentech \| XmAb24306
Collaboration research and licensing agreements
Performance obligation				$ 111,700,000
Cost sharing receivable (payable)										(500,000)				$ (500,000)
Collaboration and License Agreement \| Genentech \| Research service
Collaboration research and licensing agreements
Revenue recognized														1,600,000
Performance obligation				8,300,000
Deferred revenue										6,800,000				6,800,000
Collaboration and License Agreement \| Genentech \| Licensing
Collaboration research and licensing agreements
Revenue recognized			$ 111,700,000
Collaboration and License Agreement \| Genentech \| Maximum
Collaboration research and licensing agreements
Potential milestone payment				160,000,000.0
Collaboration and License Agreement \| Genentech \| Market assessment approach \| Licensing
Collaboration research and licensing agreements
Standalone selling price				114,400,000
Collaboration and License Agreement \| Genentech \| Cost approach \| Research service
Collaboration research and licensing agreements
Standalone selling price				8,500,000
Collaboration and License Agreement \| Genentech \| Collaboration Products
Collaboration research and licensing agreements
Performance obligation										0				0
Collaboration and License Agreement \| Novartis
Collaboration research and licensing agreements
Nonrefundable upfront payment							$ 150,000,000.0
Revenue recognized													20,000,000.0	10,000,000.0	20,000,000.0
Performance obligation							$ 150,000,000.0
Deferred revenue										40,100,000				40,100,000
Cost sharing receivable (payable)										1,700,000				$ 1,700,000
Collaboration and License Agreement \| Novartis \| Milestone
Collaboration research and licensing agreements
Revenue recognized										10,000,000.0
Collaboration and License Agreement \| Novartis \| Discovery Program
Collaboration research and licensing agreements
Number of performance obligations \| item														2
Collaboration and License Agreement \| Novartis \| Bispecific FC Technologies
Collaboration research and licensing agreements
Number of development stage products \| item							2
Collaboration and License Agreement \| Novartis \| Bispecific FC Technologies \| Maximum
Collaboration research and licensing agreements
Number of antibody targets for which bispecific technology applied \| item							4
Collaboration and License Agreement \| Novartis \| FC Licenses \| Maximum
Collaboration research and licensing agreements
Number of targets against which non-exclusive license is provided \| item							10
Collaboration and License Agreement \| MorphoSys
Collaboration research and licensing agreements
Revenue recognized										0			0	$ 0	0
Deferred revenue										0				0
Collaboration and License Agreement \| MorphoSys \| Milestone
Collaboration research and licensing agreements
Revenue recognized						$ 12,500,000
Research and License Agreement \| Astellas
Collaboration research and licensing agreements
Nonrefundable upfront payment	$ 15,000,000.0
Potential milestone payment	240,000,000.0
Revenue recognized										0				13,800,000
Performance obligation	15,000,000.0
Deferred revenue										1,200,000				1,200,000
Research and License Agreement \| Astellas \| Bispecific
Collaboration research and licensing agreements
Revenue recognized		$ 13,600,000
Performance obligation	13,600,000
Research and License Agreement \| Astellas \| Research service
Collaboration research and licensing agreements
Performance obligation	1,400,000
Research and License Agreement \| Astellas \| Income approach \| Bispecific
Collaboration research and licensing agreements
Standalone selling price	17,100,000
Research and License Agreement \| Astellas \| Cost approach \| Research service
Collaboration research and licensing agreements
Standalone selling price	1,400,000
Research and License Agreement \| Amgen, Inc.
Collaboration research and licensing agreements
Upfront and milestone payment								$ 55,000,000.0
Potential milestone payment								$ 600,000,000.0
Revenue recognized										5,000,000.0			0	5,000,000.0	0
Deferred revenue										0				0
Number of previously identified products \| item								5
Research and License Agreement \| Amgen, Inc. \| Milestone
Collaboration research and licensing agreements
Revenue recognized										5,000,000.0
Research and License Agreement \| Amgen, Inc. \| Discovery Program
Collaboration research and licensing agreements
Research license term								3 years
Additional research term								1 year
Number of programs \| item								5
Research and License Agreement \| VIR Biotechnology
Collaboration research and licensing agreements
Potential milestone payment										155,500,000				155,500,000
Revenue recognized										700,000				700,000
Deferred revenue										$ 0				0
Number of different target programs \| item										2
Research Licensee and Collaboration Agreement \| Boehringer Ingelheim International GmbH
Collaboration research and licensing agreements
Research license term																3 years
Revenue recognized										$ 0			0	0	0
Deferred revenue										0				$ 0
Number of commercial options \| item																1
Number of compounds \| item														1
Number of commercial licenses \| item														2
Option and license agreement \| Alexion Pharmaceuticals, Inc.
Collaboration research and licensing agreements
Research license term									5 years
Revenue recognized												$ 11,000,000.0	9,000,000.0		9,000,000.0
Deferred revenue										0				$ 0
Number of different target programs \| item									6
Option and license agreement \| Alexion Pharmaceuticals, Inc. \| Royalty
Collaboration research and licensing agreements
Revenue recognized										1,400,000				2,500,000
Option and license agreement \| Alexion Pharmaceuticals, Inc. \| Milestone
Collaboration research and licensing agreements
Revenue recognized										4,000,000.0	$ 4,000,000.0		9,000,000.0	8,000,000.0
License Agreement \| INmune
Collaboration research and licensing agreements
Nonrefundable upfront payment					$ 100,000
Revenue recognized										0			0	0	0
Deferred revenue										0				0
Additional equity interests (as a percentage)					10.00%
Equity issued in shares \| shares					1,585,000
Equity issues, value					$ 10,000,000.0
Carrying value										0			$ 0	0	$ 0
Development-based \| Collaboration and License Agreement \| Genentech
Collaboration research and licensing agreements
Potential milestone payment				$ 20,000,000.0
Development-based \| Collaboration and License Agreement \| Novartis \| Discovery Program
Collaboration research and licensing agreements
Potential milestone payment										50,000,000.0				50,000,000.0
Development-based \| Research and License Agreement \| Astellas
Collaboration research and licensing agreements
Potential milestone payment	32,500,000
Development-based \| Research and License Agreement \| VIR Biotechnology
Collaboration research and licensing agreements
Potential milestone payment										5,500,000				5,500,000
Regulatory-based \| Collaboration and License Agreement \| Novartis \| Discovery Program
Collaboration research and licensing agreements
Potential milestone payment										100,000,000.0				100,000,000.0
Regulatory-based \| Research and License Agreement \| Astellas
Collaboration research and licensing agreements
Potential milestone payment	57,500,000
Regulatory-based \| Research and License Agreement \| VIR Biotechnology
Collaboration research and licensing agreements
Potential milestone payment										30,000,000.0				30,000,000.0
Sales-based \| Collaboration and License Agreement \| Novartis \| Discovery Program
Collaboration research and licensing agreements
Potential milestone payment										100,000,000.0				100,000,000.0
Sales-based \| Research and License Agreement \| Astellas
Collaboration research and licensing agreements
Potential milestone payment	$ 150,000,000.0
Sales-based \| Research and License Agreement \| VIR Biotechnology
Collaboration research and licensing agreements
Potential milestone payment										$ 120,000,000.0				$ 120,000,000.0

Collaborative and Licensing Agreements - Revenue Recognition (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	$ 21,760,000	$ 29,039,000	$ 153,184,000	$ 29,039,000
Deferred revenue	48,200,000	40,100,000	48,200,000	40,100,000
Current portion of deferred revenue	45,579,000		45,579,000		$ 40,079,000
Deferred revenue, noncurrent portion	2,613,000		2,613,000
Research collaboration
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	600,000	20,000,000.0	15,200,000	20,000,000.0
Milestone
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	19,300,000	9,000,000.0	23,300,000	9,000,000.0
Licensing
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	500,000		112,200,000
Royalty
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	1,400,000		2,500,000
Alexion Pharmaceuticals, Inc.
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	5,400,000	9,000,000.0	10,500,000	9,000,000.0
Amgen, Inc.
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	5,000,000.0		5,000,000.0
Astellas
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded			13,800,000
Genentech
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	700,000		$ 113,200,000
Novartis
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of performance obligations			2
Revenue recorded	10,000,000.0	$ 20,000,000.0	$ 10,000,000.0	$ 20,000,000.0
VIR Biotechnology
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Revenue recorded	700,000		$ 700,000
Collaboration and License Agreement \| Genentech
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Term of revenue recognized			1 year
Collaboration and License Agreement \| Novartis
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Deferred revenue	$ 40,100,000		$ 40,100,000

Income Taxes (Details) $ in Thousands	3 Months Ended	9 Months Ended
Income Taxes (Details) $ in Thousands	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Reconciliation of federal statutory income tax to effective income tax
Income tax expense (benefit)	$ (350)	$ 600
Federal
Reconciliation of federal statutory income tax to effective income tax
Income tax receivable	$ 800	$ 800

Sale of Additional Common Stock (Details) - Common Stock - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2018
Sale of common stock	8,395,000	8,395,000
Net proceeds	$ 245.5