Xencor Inc

10. Collaboration and Licensing Agreements

Following is a summary description of the material revenue arrangements, including arrangements that generated revenue in the period ended December 31, 2023, 2022, and 2021. The revenue reported for each agreement has been adjusted to reflect the adoption of ASC 606 for each period presented.

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. Alexion exercised its rights to include our technology in ALXN1210, which is now marketed as Ultomiris.

The Company is eligible to receive royalties based on a percentage of net sales of such products 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 2022 and 2021, the Company recorded royalty revenue of $29.4 million and $22.2 million, respectively in connection with reported net sales of Ultomiris by Alexion.

In 2023, Alexion completed certain sales milestones for Ultomiris, and the Company received a milestone payment of $20.0 million and recorded royalty revenue of$38.6 million on net sales.

On November 3, 2023, the Company entered into the Ultomiris Royalty Sale Agreement with OMERS, in which OMERS acquired the rights to certain royalties associated with the existing license relating to Ultomiris in exchange for an upfront payment of $192.5 million. Included in the proceeds is $29.5 million of accounts receivable the Company sold for royalties and milestone receivable recorded at September 30, 2023. For the year ended December 31, 2023, the Company earned and recognized $38.6 million in royalty revenue, $6.2 million of which was non-cash royalty revenue under the Ultomiris Royalty Sale Agreement

The total revenue recognized under this arrangement was $58.6 million, $29.4 million, and $22.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there isno receivable andno deferred revenue related to this agreement.

Astellas Pharma Inc.

Effective March 2019, the Company entered into a Research and License Agreement (Astellas Agreement) with Astellas Pharma Inc. (Astellas) pursuant to which the Company and Astellas conducted 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.

The Company received an upfront payment and is eligible to receive development, regulatory and 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.

Astellas has advanced an antibody that was delivered into development, and we received a milestone related to the candidate in 2020. Astellas advanced the candidate into Phase 1 studies in 2022 and we received a $5.0 million milestone. No revenue was recognized for the year ended December 31, 2023 or 2021.The Company recognized $5.0 million of revenue for the year ended December 31, 2022 under the agreement. There isno deferred revenue as of December 31, 2023.

Astria Therapeutics, Inc.

In May 2018, the Company entered into an agreement with Quellis, pursuant to which the Company provided Quellis a non-exclusive license to its Xtend Fc technology. The Company received an equity interest in Quellis and is eligible to receive development, regulatory and sales milestones. The Company is also eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

In January 2021, Quellis merged into Astria (formerly Catabasis), and the Company received common stock and preferred stock of Aastria in exchange for its equity in Quellis. The Company recognized an increase in the fair value of its equity interest for the exchange of shares, which was recorded as unrealized gain for the three months ended March 31, 2021. In June 2021, a portion of the Company’s preferred stock in Astria was converted to common stock. The remaining Astria preferred stock was converted to common stock in 2023. The Company recorded an impairment charge of $0.1 million and $0.8 million for its investment in Astria preferred stock for the year ended December 31, 2022 and 2021, respectively.

The Company recognized unrealized (loss) gain of $(4.3) million, $6.1 million, and $4.5 million related to its equity interest in Astria for the years ended December 31, 2023, 2022, and 2021 respectively. There isno deferred revenue as of December 31, 2023 related to this agreement.

Genentech, Inc., and F. Hoffmann-La Roche Ltd.

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 XmAb306, the Company’s IL-15/IL15Rα-Fc candidate.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306 and we share in 45% of development and commercialization costs of Collaboration Products, and we are eligible to share in 45% of net profits and losses from the sale of approved products. However, in the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement. Pursuant to the terms of the amended agreement with Genentech, effective June 1, 2024, Genentech will assume sole responsibility over all clinical, regulatory and commercial activities. We are eligible to receive up to $600.0 million in milestones, including $115.0 million in development milestones, $185.0 million in regulatory milestones and $300.0 million in sales-based milestones and tiered royalties ranging from low double-digit to mid-teens percentages.

The Company determined that the transaction price of the Genentech Agreement at inception was $120.0 million consisting of the upfront payment, and allocated the transaction price to each of the separate performance obligations using the relative standalone selling price with $111.7 million allocated to the license to XmAb306, $4.1 million allocated to the additional program and $4.2 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, and the $8.3 million allocated to the research activities was recognized over a period of time through the end of the research term or the time that a program is delivered to Genentech. The research term expired in the first half of 2021, and the balance in deferred revenue related to the Genentech Agreement was recognized as the Company is no longer required to render services.

No revenue was recognized for the years ended December 31, 2023, and 2022. For the year ended December 31, 2021, we recognized $2.5 million of income from the Genentech Agreement. As of December 31, 2023, there was a$3.3 million payable related to cost-sharing development activities during the fourth quarter of 2023. There isno deferred revenue as of December 31, 2023.

Gilead Sciences, Inc.

In January 2020, the Company entered into a Technology License Agreement (the Gilead Agreement) with Gilead Sciences, Inc. (Gilead), in which the Company provided Gilead an exclusive license to its Cytotoxic Fc and Xtend Fc technologies for an initial identified antibody and options for up tothree additional antibodies directed to the same molecular target. Gilead is responsible for all development and commercialization activities for all target candidates. The Company received an upfront payment and is eligible to receive development, regulatory and, sales milestones for each product incorporating the antibodies selected. In addition, the Company is eligible to receive royalties in the low-single digit percentage range on net sales of approved products.

The Company recognized $6.0 million in milestone revenue for the year ended December 31, 2023. No revenue was recognized for the years ended December 31, 2022 and 2021. There isno deferred revenue as of December 31, 2023 related to this agreement.

INmune Bio, Inc.

In October 2017, the Company entered into a License Agreement (the INmune Agreement) with INmune. Under the terms of the INmune Agreement, the Company provided INmune with an exclusive license to certain rights to a proprietary protein, XPro1595. In connection with the agreement the Company received shares of INmune common stock and an option to acquire additional shares of INmune. The Company also received a second option to acquire additional shares of INmune common stock with a designee appointed by us serving on the board of directors of INmune.

The Company initially recorded its equity interest in INmune, including its option to acquire additional INmune shares, at cost pursuant to ASC 323.

In June 2021, the Company entered into the First Amendment to License Agreement (the Amended INmune Agreement) and an Option Cancellation Agreement (the Option Agreement) with INmune.The Option Agreement provided for the sale of the initial option to INmune for the total consideration of $18.3 million which includes $15.0 million in cash and additional shares of INmune common stock. The Company recorded a realized gain of $18.3 million according to ASC 860, Transfer and Servicing, and recorded the additional shares of INmune common stock according to ASC 321, Investments – Equity Securities.

During 2021, the Company determined that it should no longer record its investment in INmune under the equity method and recorded its investment in INmune pursuant to ASC 321. The Company adjusted the carrying value of this investment by recognizing an unrealized gain of $27.8 million as other income during 2021.

During 2021, the Company exercised its second to purchase additional shares of INmune common stock for $0.8 million, and the Company recognized an unrealized gain of $2.0 million, which consists of $1.1 million of fair value of the option and $0.9 million gain on the purchase.

For the year ended December 31, 2023, the Company recorded $9.3 million of unrealized gain related to its investment in INmune. For the year ended December 31, 2022, the Company recorded $7.3 million of unrealized loss related to its investment in INmune. For the year ended December 31, 2021, the Company recorded $15.1 million of unrealized gain and $18.3 million of realized gain related to its investment in INmune. No revenue was recognized for the years ended December 31, 2023, 2022, or 2021.

J&J Agreement

In November 2020, the Company entered into a Collaboration and License Agreement (the J&J Agreement) with Janssen Biotech, Inc., a Johnson & Johnson company, pursuant to which Xencor and J&J conducted research and development activities to discover novel CD28 bispecific antibodies for the treatment of prostate cancer. Xencor together with J&J conducted joint research activities to discover XmAb bispecific antibodies against CD28 and against an undisclosed prostate tumor-target with J&J maintaining exclusive worldwide rights to develop and commercialize Licensed Products identified from the research activities.

Under the J&J Agreement, the Company conducted research activities and apply its bispecific Fc technology to antibodies targeting prostate cancer provided by J&J. Upon completion of the research activities Janssen will have a candidate selection option to advance an identified candidate for development and commercialization. The activities will be conducted under a research plan agreed to by both parties. J&J will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate. Pursuant to the J&J Agreement, the Company received an upfront payment and is eligible to receive development, regulatory and, 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.

Pursuant to the J&J Agreement, upon development of a bispecific candidate by J&J through proof of concept, we have the right to opt-in to fund 20% of development costs and to perform 30% of detailing efforts in the U.S. If we exercise this right, we will be eligible to receive tiered royalties in the low-double digit to mid-teen percentage range.

The Company allocated the transaction price to the single performance obligation, delivery of CD28 bispecific antibodies to J&J.

The Company recognized the $50.0 million transaction price as it satisfied its performance obligation to deliver CD28 bispecific antibodies to J&J. The Company recognized revenue related to the performance obligation over the expected period of time to complete and deliver the CD28 bispecific antibodies to J&J using the expected input method which considers an estimate of the Company’s efforts to complete the research activities outlined in the J&J Agreement.

In November 2021, the Company completed its performance obligations under the research activities and delivered CD28 bispecific antibodies to J&J. In December 2021, J&J selected a bispecific CD28 candidate for further development, and we received a milestone of $5.0 million. For the year ended December 31, 2021 the Company recognized as revenue the $50.0 million transaction price in connection with the completion of the research activities and the $5.0 million milestone for selection of an antibody candidate by J&J. No revenue was recognized under this agreement for the year ended December 31, 2022. In 2023, J&J completed filing of regulatory submission for a CD28 candidate and initiated Phase 1 clinical trial, and the Company received $17.5 million in milestone payments. For the year ended December 31, 2023, the Company recognized $17.5 million in milestones under the J&J Agreement. There isno deferred revenue related to the Agreement at December 31, 2023.

Second J&J Agreement

On October 1, 2021, the Company entered into a second Collaboration and License Agreement (the Second J&J Agreement) with J&J pursuant to which the Company granted J&J an exclusive worldwide license to develop, manufacture, and commercialize plamotamab, the Company’s CD20 x CD3 development candidate, and pursuant to which Xencor and J&J will conduct research and development activities to discover novel CD28 bispecific antibodies. The parties will conduct joint research activities for up to atwo-year period to discover XmAb bispecific antibodies against CD28 and undisclosed B cell tumor-targets with J&J receiving exclusive worldwide rights, subject to certain Xencor opt-in rights, to develop, manufacture and commercialize pharmaceutical products that contain one or more of such discovered antibodies (CD28 Licensed Antibodies). The Agreement became effective on November 5, 2021.

Pursuant to the Second J&J Agreement, the Company received an upfront payment of $100.0 million and is eligible to receive up to $1,187.5 million in milestones which include $289.4 million in development milestones, $378.1 million in regulatory milestones and $520.0 million in sales milestones. Under the terms of the Stock Purchase Agreement, Johnson & Johnson Innovation, JJDC, Inc. (JJDC), agreed to purchase $25.0 million of newly issued unregistered shares of the Company’s common stock, priced at a 30-day volume-weighted average price of $33.4197 per share as of October 1, 2021. The Company issued JJDC 748,062 shares of its common stock which had a fair market value of $28.9 million when the shares were transferred.

The Company will collaborate with J&J on further clinical development of plamotamab with J&J and share development costs with J&J paying 80% and the Company paying 20% of certain development costs.

The Company is generally responsible for conducting research activities under the Second J&J Agreement, and J&J is generally responsible for all development, manufacturing, and commercialization activities for CD28 Licensed Antibodies that are advanced.

Under the Second J&J Agreement, the Company granted J&J an exclusive worldwide right to its plamotamab program and the Company will conduct research activities and apply its CD28 bispecific Fc technology to antibodies targeting B-cells. Upon completion of the research activities J&J will have options to advance up tofour identified candidates for development and commercialization. The activities will be conducted under a research plan agreed to by both parties. J&J will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate. If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages.

The Company evaluated the Second J&J Agreement under the provisions of ASC 606. We have determined that J&J is a customer for purposes of the delivery of specific performance obligations under the Second Janssen Agreement and applied the provisions of ASC 606 to the transaction.

The Company identified the following performance obligations under the Second Janssen Agreement:

(i)the license to the plamotamab program, and

(ii)research services during atwo-year period to create up tofour CD28 bispecific candidates targeting B-cell antigens.

The Company determined that the license and the research services are separate performance obligations because they are capable of being distinct and are distinct in the context of the Second J&J Agreement.

The Company determined the standalone selling price of the license to be $58.5 million using the adjusted market assessment approach considering similar collaboration and license agreements and transactions. The standalone selling price for the research services to be performed during the research term was determined to be $37.6 million using the market approach which was derived from the Company’s experience and information from providing similar research services.

The Company determined that the transaction price of the Second J&J Agreement at inception was $96.1 million consisting of the $100.0 million upfront payment reduced by the $3.9 million discount on the proceeds received from the sale of Company common stock to J&J. 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 $58.5 million allocated to the license to the plamotamab program and $37.6 million allocated to the research services.

The Company recognized the $58.5 million allocated to the license when it satisfied its performance obligation and transferred the license to J&J in November 2021. The $37.6 million allocated to the research services 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. The Company completed its performance obligations under the research agreement in December 2023.

During 2023, J&J exercised its options on three CD28 candidates developed under the collaboration, and it completed regulatory submissions for a selected candidate and initiated a Phase 1 study for it. During the year ended December 31, 2023, we received $30.0 million in milestone revenue and recognized $30.3 million in revenue related to completion of the research services. A total of $30.3 million, $7.0 million, and $0.3 million of revenue related to the research services was recognized in each of the years ended December 31, 2023, 2022, and 2021, respectively.

The Company recognized $77.8 million, $7.0 million, and $113.8 million of revenue related to thetwo J&J agreements for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there was a $2.9 million receivable related to cost-sharing development activities during the fourth quarter of 2023. There isno in deferred revenue as of December 31, 2023 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Second J&J Agreement.

MorphoSys AG/Incyte Corporation

In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys), which was subsequently amended in March 2012 and in 2020. The agreement provides MorphoSys with an exclusive worldwide license to the Company’s patents and know-how to research, develop, and commercialize the Company’s XmAb5574 product candidate (subsequently renamed MOR208 and tafasitamab) with the right to sublicense under certain conditions. If certain developmental, regulatory, and sales milestones are achieved, the Company is eligible to receive future milestone payments and royalties.

On November 3, 2023, the Company entered into the Monjuvi Royalty Sale Agreement with OMERS, pursuant to which OMERS acquired the rights to certain royalties earned after July 1, 2023 associated with the existing license relating to Monjuvi in exchange for an upfront payment of $22.5 million. The upfront payment included $2.2 million of accounts receivable we recorded as a royalty receivable at September 30, 2023. The payment for the receivable was received by OMERS.

In February 2024, Incyte Corporation acquired exclusive global development and commercialization rights to tafasitamab.

The Company recognized a total of $8.7 million and$7.8 million of royalty revenue on net sales of Monjuvi for the years ended December 31, 2023 and 2022. Of the $8.7 million royalty revenue earned in 2023, $2.1 million was non-cash royalty revenue from the Monjuvi Royalty Sale Agreement.The Company recognized a total of$12.5 million of milestone revenue related to clinical studies and royalties of$5.9 million on net sales of Monjuvi for the year ended December 31, 2021. As of December 31, 2023, the Company hasno deferred revenue related to this agreement and has recorded a receivable of$2.1 million for royalties due.

Novartis Institute for Biomedical Research, Inc.

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. Pursuant to the Novartis Agreement:

•The Company granted Novartis certain exclusive rights to research, develop and commercialize XmAb14045 (vibecotamab) and,

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

In August 2021, Novartis notified the Company it was terminating its rights with respect to the vibecotamab program, which became effective in February 2022. Under the Novartis Agreement, Novartis is responsible for its share of vibecotamab development costs through August 2022.

We completed delivery oftwo Global Discovery Programs under the Agreement.

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. The Company deliveredtwo discovery programs to Novartis and recognized $40.1 million of revenue in the period that each program was delivered. The Company’s obligations to provide research services under the Agreement for additional Global Discovery Programs expired in 2021, and we recognized $40.1 million of research revenue from deferred revenue.

In June 2021, Novartis selected an Fc candidate and received a non-exclusive license to the Company’s Fc technology. Novartis will assume full responsibility for development and commercialization of the licensed Fc product candidate. The Company is eligible to receive development, clinical, and sales milestones and royalties on net sales of approved products for the licensed Fc candidate. During the year ended December 31, 2021, Novartis advanced the Fc candidate into development and initiated clinical studies and the Company recognized $3.0 million of revenue related to the milestones.

No revenue was recognized during the years ended December 31, 2023 and 2022. During the year ended December 31, 2021, the Company recognized $43.1 million of revenue. There isno receivable andno deferred revenue as of December 31, 2023 related to the arrangement.

Omeros Corporation

In August 2020, the Company entered into a Technology License Agreement (the Omeros Agreement) with Omeros Corporation (Omeros), in which the Company provided Omeros a non-exclusive license to its Xtend Fc technology, an exclusive license to apply its Xtend technology to an initial identified antibody and options to apply its Xtend technology tothree additional antibodies. Omeros is responsible for all development and commercialization activities for all target candidates. The Company received an upfront payment and is eligible to receive development, regulatory and, sales milestones for each product incorporating the antibodies selected. In addition, the Company is eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

During 2023, Omeros advanced a candidate that incorporates the Company's Xtend Fc technology into a Phase 2 study, and the Company received a$5.0 million milestone. The Company recognized$5.0 million of revenue related to the Omeros Agreement for the year ended December 31, 2023. There wasno revenue recognized for the years ended December 31, 2022 and 2021. There isno deferred revenue as of December 31, 2023 related to this agreement.

Vir Biotechnology, Inc.

In 2019, the Company entered into a Patent License Agreement (the Vir Agreement) with Vir Biotechnology, Inc. (Vir) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up totwo targets.

In March 2020, the Company entered into a second Patent License Agreement (the Second Vir Agreement) with Vir pursuant to which the Company provided a non-exclusive license to its Xtend technology to extend the half-life of novel antibodies Vir developed as potential treatments for patients with COVID-19. Under the terms of the Second Vir Agreement, Vir is responsible for all research, development, regulatory and commercial activities for the antibody, and the Company is eligible to receive royalties on the net sales of approved products in the mid-single digit percentage range.Vir and its marketing partner, GSK, began recording sales for sotrovimab beginning in June 2021. In 2023, 2022, and 2021, we recognized royalty revenue of$2.2 million, $114.9 million, and $52.2 million, respectively related to this agreement.

In June 2021, Vir announced its plan to initiate a Phase 2 study for VIR-3434 and subsequently completed dosing of the first patient in such study in July 2021. The Company recorded a$0.5 million contract asset in connection with this milestone event, and the payment was received in August 2021. In October 2022, Vir completed dosing of the first patient in Phase 2 study for VIR-2482, and the Company recorded$0.5 million revenue in connection with this milestone event.

The Company recognized$2.2 million, $115.4 million, and $52.7 million of revenues related to the agreement for the years ended December 31, 2023, 2022, and 2021, respectively. There isno deferred revenue as of December 31, 2023 related to this agreement. As of December 31, 2023, the Company has recorded a receivable of$0.6 million for royalties due related to this agreement.

Viridian Therapeutics, Inc.

In December 2020, we entered into a Technology License Agreement (Viridian Agreement) with Viridian Therapeutics, Inc. (Viridian), in which we provided Viridian a non-exclusive license to our Xtend Fc technology and an exclusive license to apply our Xtend Fc technology to antibodies targeting IGF-1R. We received an upfront payment of shares of Viridian common stock originally valued at $6.0 million and are eligible to receive development, regulatory and sales milestones. We are also eligible to receive royalties in the mid-single digit percentage range on net sales of approved products.

The Company allocated $6.0 million of the transaction price to the licenses to the Xtend Fc technology and recognized income for the licenses at inception of the arrangement when Viridian began benefiting access to it.

During 2023, Viridian terminated the license agreement.

In December 2021, we entered into a second Technology License Agreement (Second Viridian Agreement) with Viridian for a non-exclusive license to certain antibody libraries developed by us. Under the Second Viridian Agreement,

Viridian received aone-year research license to review the antibodies and the right to select up tothree antibodies for further development. We received an upfront payment shares of Viridian common stock originally valued at $7.5 million and are eligible to receive up to $24.8 million in milestones, which include $1.8 million in development milestones, $3.0 million in regulatory milestones and $20.0 million in sales milestones in addition to royalties on net sales of approved products under the Second Viridian Agreement.

The Company evaluated the Second Viridian Agreement under the revenue recognition standard ASC 606 and identified the following performance obligation that it deemed to be distinct at the inception of the contract:

•non-exclusive license to certain antibody libraries created by the Company

The Company considered the license as functional intellectual property as Viridian has the right to use the materials and license at the time that the Company transfers such rights.

The total transaction price is $7.5 million, which includes the upfront payment of Viridian common stock at their fair value at the date of the Agreement. The milestone payments are variable consideration to which the Company applied the “most likely amount” method and concluded at inception of the Viridian Agreement it is unlikely that the Company will collect such payments. The milestone payments were not included in the transaction price, and the Company will review this conclusion and update at each reporting period.

The Company allocated $7.5 million of the transaction price to the licenses to the antibody libraries and recognized income for the licenses at inception of the arrangement when Viridian received the materials and began accessing them.

In 2023, the research term under the second Viridian license expired.

No revenue related to the Viridian Agreement was recognized for the years ended December 31, 2023 and 2022. The Company recognized $7.5 million of revenue related to the Viridian Agreement for the year ended December 31, 2021. There isno deferred revenue as of December 31, 2023 related to this agreement.

Zenas BioPharma, Inc.

In November 2020, the Company entered into a License Agreement (Zenas Agreement) with Zenas BioPharma (Cayman) Limited, now Zenas BioPharma, Inc., (Zenas) pursuant to which the Company granted Zenas exclusive worldwide rights to develop and commercialize three preclinical-stage Fc-engineered drug candidates: XmAb6755, Xpro9523, and XmAb10171. The Company received an upfront payment in equity in Zenas with a fair value of $16.1 million and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

In November 2021, the Company entered into a second License Agreement (Second Zenas Agreement) with Zenas, in which we licensed the exclusive worldwide rights to develop and commercialize the Company’s obexelimab (XmAb5871) drug candidate. The Company received a warrant to acquire additional equity in Zenas with a fair value of $14.9 million, and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range.

The total transaction price is $14.9 million, which includes the upfront payment of a warrant to acquire up to 15% of the equity of Zenas in connection with a future financing at its fair value at the date of the Second Zenas Agreement. The Second Zenas Agreement includes variable consideration for potential future royalties that were contingent on future success factors for the licensed programs. The Company used the “most likely amount” method to determine the variable consideration. None of the royalties were included in the transaction price. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur.

The Company determined the transaction price at inception of the Second Zenas Agreement and allocated it to the performance obligation, delivery of the obexelimab license.

The Company completed delivery of its performance obligations in December 2021. The licenses to obexelimab were transferred to Zenas at inception of the Second Zenas Agreement, and the related research data and documentation was transferred to Zenas in December 2021.

In 2021, the Company purchased a convertible promissory note from Zenas which would automatically convert to equity in a financing transaction.

In November 2022, Zenas completed a financing transaction, pursuant to which a warrant to purchase Zenas equity that was held by the Company was automatically exercised, and a convertible note issued to the Company by Zenas was automatically converted with both converting into shares of Zenas’ preferred stock. After the financing transaction, we continued to record our investment in Zenas at fair value adjusted at each reporting period for impairment or other evidence of change in value. The equity shares in Zenas received from exercise of the warrant and conversion of the notes have an estimated fair value of $34.5 million and $7.7 million, respectively. As a result of the Zenas financing transaction, the estimated fair value of our investment in equity securities increased by $17.9 million. In 2022, this amount has been recorded in other income.

In 2023, Zenas initiated a Phase 3 study with obexelimab, and we received additional equity in Zenas as a milestone payment. We recorded milestone revenue of $10.0 million, which is the fair value of the equity shares at the date of issuance.

No revenue was recognized for the year ended December 31, 2022. The Company recognized $10.0 million and $14.9 million of revenue related to thetwo Zenas Agreements for the years ended December 31, 2023 and 2021, respectively. There isno deferred revenue as of December 31, 2023 related to this agreement.

Technology License Agreement and Services Agreement with Gale Therapeutics Inc.

In the fourth quarter of 2023, the Company formed a subsidiary, Gale Therapuetics Inc. (Gale), to develop novel drug candidates with its Fc technologies. On December 19, 2023, the Company entered into the Gale License Agreement and the Gale Services Agreement with Gale. Under the Gale License Agreement, Gale received an exclusive license to certain preclinical candidates and related Xencor technologies. The Company also has an option on future compounds Gale will develop. Under the Gale Services Agreement, the Company will provide research and development services as well as accounting and administrative support. Pursuant to the Gale Agreement, the Company acquired a majority stake in Gale. The Company is deemed to be the primary beneficiary of Gale, a VIE, and they are under common control; therefore, the assets, liabilities and non-controlling interests of Gale are initially recorded at their previous carrying amounts, with no adjustment to current fair values and no gain or loss is recognized. The value of the preclinical assets and technology had no value on Xencor's financial statements, and the license to Gale at inception had no carrying value. The Company would not recognize license revenue related to the transfer for the year ended December 31, 2023. Total charges under the Services Agreement during 2023 of $1.0 million have been eliminated in consolidation.

Revenue Earned

The $168.3 million, $164.6 million, and $275.1 million of revenue recorded for the years ended December 31, 2023, 2022, and 2021, respectively, were earned principally from the following licensees (in millions):

The table below summarizes the disaggregation of revenue recorded for the years ended December 31, 2023, 2022, and 2021 (in millions):

Remaining Performance Obligations and Deferred Revenue

There is no remaining performance obligation under the Company's arrangements as of December 31, 2023. The Company's performance obligation as of December 31, 2022 was completing research activities pursuant to the Second J&J Agreement. As of December 31, 2022, we have deferred revenue of $30.3 million. All of the deferred revenue was classified as short term as of December 31, 2022, as the Company’s obligations to perform research services are due on demand when requested by J&J under the Second J&J Agreement.

11. Sale of Future Royalties

Ultomiris Royalty Sale Agreement

On November 3, 2023, the Company and OMERS entered into the Ultomiris Royalty Sale Agreement. Pursuant to the Ultomiris Royalty Sale Agreement, OMERS acquired the rights to a portion of royalties and milestones earned after July 1, 2023 associated with the existing license relating to Ultomiris® (ravulizumab) in exchange for an upfront payment of $192.5 million.

Pursuant to the Ultomiris Royalty Sale Agreement and subject to the Company’s existing license with Alexion, OMERS has acquired the right to receive: (i)100% of royalties payable on past and potential sales related to Ultomiris® that occur from July 1, 2023 through December 31, 2025; (ii) up to $35.0 million annually in royalties on potential sales related to Ultomiris® that occur from January 1, 2026 through December 31, 2028 with any royalties in excess of $35.0 million reverting to the Company; (iii) up to $12.0 million annually in royalties on potential sales related to Ultomiris® that occur from and after January 1, 2029, with any royalties in excess of $12.0 million reverting to the Company; and (iv) $18.0 million of a certain potential sales based milestone payment pursuant to the existing license with Alexion. OMERS will pay an additional $12.0 million in 2024 to the Company if certain potential sales based milestones have been reached.

The Company determined that $29.5 million of the upfront payment is for a recorded receivable for royalties and a milestone earned in the third quarter of 2023 and $163.0 million is for the sale of future royalties. The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be recorded as deferred income on the balance sheets as none of the criteria for classification as debt had been met in accordance with ASC 470. The Company records the non-cash royalty revenue under the “units-of-revenue” method in the consolidated statements of income (loss). For the year ended December 31, 2023, the Company recognized $6.2 million of non-cash royalty revenue.

Monjuvi Royalty Sale Agreement

On November 3, 2023, the Company and OMERS entered into the Monjuvi Royalty Sale Agreement. Pursuant to the Monjuvi Royalty Sale Agreement, OMERS acquired the rights to a portion of royalties earned after July 1, 2023 associated with the existing license relating to Monjuvi®/Minjuvi® (tafasitamab-cxix) in exchange for an upfront payment of $22.5 million.

Pursuant to the Monjuvi Royalty Sale Agreement and subject to the Company’s existing license with MorphoSys, OMERS has acquired the right to receive up to $29.3 million in royalties earned after July 1, 2023 related to sales of Monjuvi®/Minjuvi®, with any royalties in excess of $29.3 million paid to OMERS reverting to the Company.

The Company determined that $2.2 million of the upfront payment is for a recorded receivable for royalties earned in the third quarter of 2023 and $20.3 million is from the sale of future royalties. The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be classified as debt according to ASC 470. As of December 31, 2023, the estimated effective rate under the agreement was 21.1%. The Company will reassess the estimate of total future royalty payment and prospectively adjust the imputed interest rate and related amortization if the estimate is materially different. For the year ended December 31, 2023, the Company recognized $2.1 million of non-cash royalty revenue and $0.7 million of non-cash interest expense.

The following table shows the activity within debt for the year ended December 31, 2023 (in thousands):

12.401(k) Plan

We have a 401(k) plan covering all full-time employees. Employees may make pre-tax contributions up to the maximum allowable by the Internal Revenue Code. Effective March 31, 2020, the Company contributes 100% of the first 1% of participating employees’ contribution and 50% of the next 6% of participating employees’ contribution, for a maximum of 4.0% of employer contribution. Participants are immediately vested in their employee contributions; employer contributions are vested over athree-year period with one-third for each year of a participating employee’s service.

Employer contributions made for the years ended December 31, 2023, 2022, and 2021 were $1.7 million, $1.4 million, and $1.1 million, respectively.