Exelixis, Inc. (EXEL) Earnings Call Transcript & Summary

Hello, this webcast presentation is for Bank of America clients only. If you are a member or representative of the press or media, please disconnect now. And now I would like to turn the call over to the moderator. Thank you, and have a good day.

Great. Thank you, and thank you, everybody, for joining us for our next company presentation at Bank of America's Annual Healthcare Conference. My name is Jason Gerberry, and I cover Specialty Pharma and Smid-Cap Biotech at BofA, and I'm pleased to be introducing Exelixis and CEO, Mike Morrissey. Exelixis is focused on oral small molecules for cancer and known for its development of CABOMETYX for both renal and liver cancer. And Mike, thank you so much for joining us today.

It's great to be here. Wish we were back in Vegas, like the old format, but this is working out great today. So thanks again for inviting us to participate.

Yes, yes, of course. So I guess first question is more of an obligatory question on my part, but it seemed as though from the 1Q results that your company, your story is somewhat removed from the COVID-19 headwinds that a lot of companies, even Merck flagged, even Keytruda, physician-administered drug, whereas, obviously, patients can self-administer CABOMETYX. And so can you just give us a little bit of a flavor for the ways that you're feeling the impact to COVID-19 on your business, specifically, any long-term implications that you think there may be from COVID-19?

For sure. So before I begin, let me remind everybody that I'll be making forward-looking statements today, so please see our SEC filings for a description of the risks that we face in our business. Look, COVID has been a big global impact on statement of the obvious, everything, right? Feels like we got out of the box or blocks back in January at the JPMorgan meeting. And that seems like it's 10 years ago now. There's been so much happening over the last 4.5 months, not only with us, not only within biotech and pharma, but just globally, that the impact has been dramatic. We've been -- we're really fortunate in a lot of ways. We have a super-strong team of people who are highly, highly committed to making sure that we do the -- our utmost to make sure that patients can access cabozantinib, either through clinical trials or through commercial channels. And I think we have been able to navigate through the efforts of the team and technology that we have in place and the culture that we've built pretty well so far, right? Now it's a fluid situation, both commercially and clinically. Our discovery operation, at least the internal efforts have been paused for the last couple of months as we've had the shelter-in-place order from the State of California. But we're still making progress there because we have this global network of collaborators across the board that have been impacted both regionally and temporarily different than we are here in California. So we're still getting a lot of work done. But I think the upshot from the earnings call last week was that we're still more or less on track even with all the -- with the dynamics as they are in the clinical world, in the commercial world, in the -- how we have to navigate. I think we've kept on track for most things, and that could change in the future if things get worse or second wave is worse than anticipated. But I am optimistic that with the team we have in place, and literally, the hour by hour, minute-by-minute oversight that we bring to all parts of our business, we'll be able to navigate that as we go forward. So we'll see. Stay tuned.

Okay. Well, some of my early questions have to do around CABOMETYX, no surprise. And clearly, an important consideration for investors is how you generate incremental data and expand the utilization of CABOMETYX. And so let's start with renal cancer. And the CheckMate 9ER top line was obviously received very well by the Street. And so now the discussion shifted to, well, how does the late mover come into the frontline renal cancer space and get market share? Oncology is known to be a first-mover marketplace. Cabo is the second-line standard of care. So will doctors want to lose their second-line option if CheckMate 9ER looks similar to KEYNOTE-426? Or do you have to have clear wins over KEYNOTE-426? So I was wondering if you can sort of address, at least at a high level, as you think about how late movers have come into different cancer markets? And what are some of the important factors to changing the current paradigm?

Yes. It's a great question, and I really like the way you framed it because I would just refer back to the initial launch of CABOMETYX in RCC back in 2016. We were, what, #11, #12 into the marketplace. I think the narrative on the Street was pretty negative then in terms of how we compete with other TKIs, how we compete with nivo, which just got approved a few months before with survival data. It was a pretty clear sky-is-falling moment for us. But I think we actually, through our performance, addressed your question, right? So a second-mover can gain market share rapidly as we did with cabo for METEOR and then with CABOSUN, the first-line trial against -- head-to-head against sunitinib, by generating arguably better data, right? And that's what happened, right? So with METEOR, we were the first TKI to show a survival benefit in the second-line setting, we had a strong doubling of PFS, trifecta of activity with the response rate, the durability of response. And then within a very relatively short time frame that was the first molecule, single agent to beat SUTENT head-to-head in a trial in frontline RCC. So how does the late mover gain traction? You generate better data and you use that data then to offer a kind of upside to conventional therapies that don't exist with those therapies going forward. So I think the analogy fits in quite well with 9ER on top of the fact that, again, cabo and nivo as individual agents have been standard of care within RCC for years. So it's not like we're coming in with a brand-new entry where nobody can say the name, nobody knows the data and nobody has any experience here. Clearly, that's the opposite. There's a tremendous interest in following and utilization of these agents, the single agents. And now arguably, we're going to be able to generate, and we have generated and present shortly some really interesting data, which we and others think could be best-in-class in terms of IO-TKI combination. So we've got the data, we got the team. Obviously, having great alignment with BMS on the importance of getting this information out and have an impact on practices and patients and our companies is of critical importance to us. So that alignment is great as well. So yes, we're chopping at the bit to get the file in, hopefully, get it approved quickly and get out there and capturing a bigger piece of the pie for sure.

So if I can kind of read between the lines in a marketplace where oncologists will often say OS is king, your view is really the totality of data really is the key here, because it looks like, at least from the OS data that we've seen so far, arguably, it's a very comparable signal perhaps seeing with CheckMate 9ER and KEYNOTE-426.

I mean, again, for those who want to compare across trials, which everybody says you shouldn't do, and everybody does anyway, the hazard ratios were in the same ballpark with similar follow-up. I like having a hazard ratio for PFS in the 0.5 range, which is arguably different than others. The other IO combination trials that have been published so far, we have great response rates, great duration of response. I'm most excited about the tolerability and the low discon, the discontinuation rates that we're seeing in the study. In my mind, that is important broadly in terms of the read-through to other cabo/IO trials starting with cabo at 40 on top of IO, 9ER global -- large global randomized pivotal trial showed really good efficacy and really good tolerability and safety with a low discon rate, which has to correlate with -- in terms of -- if you're going to have a long PFS duration, which can't be salvaged by other therapies since the way it's measured in terms of tumor progression, you need to keep drug on -- patients on drug, basically, right? So we're excited about all that. And now the question is just how we package it up and get it out there. So -- but yes, it's exciting times for sure.

Do you view it as an impediment in any way that you are the second-line standard of care such that doctors may not want to, if they went to an Opdivo/cabo combination, they may still -- they may view that as taking away their second-line option? Or would you envision cabo retreatment after a nivo/cabo combination?

Yes. We're not -- we've done a lot of market research there asking that specific question. And the feedback we consistently get is that you want to use the big guns upfront, you want to use your best combination early when the patients have the best performance status, have disease that has not been kind of evolved to be resistant to generic mechanisms, et cetera. So, a, I'm not worried about that; b, our goal, our vision from literally day 1 has been to capture as much of the first- and second-line share is possible, right? So patients that we don't get frontline, either IO-IO or IO-TKI or other agents won't hopefully get second line. So as long as we can maximize our impact, the first-line and second-line setting with the idea that we want to get as much first line as possible because we think that's probably best for patients certainly gives us the longest duration of treatment, so much the better. So -- but I'm not worried about one salvaging the other and vice versa. It's -- I'm looking at this as a totality opportunity, right, so...

Okay. Well, I know that there's some topics that we have to cover in the next 15 minutes that are more imminent, like ahead of ASCO, there's a lot of interest in your lung cancer data set that you guys have been generating. So maybe can you help frame for investors to the extent that you can they're going to be getting second-line data at ASCO in a post-IO setting. How do you see that opportunity? What do you think are some of the important considerations going into that data update?

Yes. Look, this is a large underserved population. Certainly, IO dominates the first-line setting now with pembro, whether it be single-agent pembro or pembro/chemo combinations. Some patients get chemo first and pembro second. And what this all means in totality is that you've got a population of patients who see IO early and are either become resistant to that, meaning that they have some level of clinical benefit and then they progress or they are refractory to IO. They just go through that first treatment with progressive disease as their best response and need other options. So this is an area of great interest because you have arguably a large bolus of patients who are seeking additional therapies after they've been exposed to IO, at least the primary IO regimen and have progressed, right? So it's critically important to have better therapies there. We think we've got some pretty interesting data that you'll see in abstract form in literally 26.5 hours. So I don't want to preempt that. I don't want to frame that. I don't want to give benchmarks that would bias people thinking about what success looks like. I'll just say, give it a day and you'll see the data. As -- and maybe, Susan, if you're on the comps line, maybe you can just reiterate kind of the ASCO embargo stuff as well. So people understand kind of what's going to happen or what could happen tomorrow relative to kind of the ASCO abstract release.

Yes. Sure, Mike. I'd be happy to. So the ASCO abstract, as you know, post tomorrow, around 5:00 p.m. Eastern Time, and simultaneously, with the abstracts going live on the website, the embargoes lift on data, not just what's in the abstract itself, but above and beyond that. So it's a pretty wide-open playing field for what you can press release at that time. We haven't disclosed what our exact strategy is for announcing data. But as you saw at ASCO GU, which had a similar policy, we took the opportunity to provide a more robust data sets the most what was in the abstract. So that's what's on the line.

Great. And obviously, you guys were asked in a multitude of ways on your 1Q call how to think about the benchmark. And I realize that you're too close to data to specifically comment on that. And I'm not going to press you on those hits of questions. But what I'm curious is, it seems as though clinicians that we talk to, are of the view that docetaxel probably works and works through a similar magnitude of effect in the second line, even though it's not in the post-IO setting. And so, I guess, do you think that new agents fundamentally need to beat, whatever they think of as the docetaxel rate of efficacy or just establishing similar efficacy in a post-IO setting is sort of sufficient?

Yes. So statement of the obvious, better data is always better, right? I mean, obviously, if you have something that can surpass the standard of care, even if it's standard of care, that's evolving with the earlier line evolving, that would be a great benefit to patients. Again, making these comparisons, though, without randomized data, there's always fraught with challenges, right? So -- and that goes for anybody in this space relative to early data. So I would just say just people should look at the data for what it is. We're excited about it. Obviously, we have a partner or a collaborator in Roche/Genentech, who's also excited about it. We think we have a pretty strong data set that is covering all different components of this population in terms of resistance, refractory, second line, third line kind of cut for the data. So it will be interesting, right? So I'll just leave it to -- I'll leave it there for right now, knowing that this is the first step in many that we'll take going forward.

Got it. We do have multiple IO-TKI combinations now being advanced in lung. I guess what gives you guys the confidence that you guys have the best combination? Is it more the synergism seen with IO/cabo in the prostate setting, the early work that was done to suggest that cabo maybe creates a more favorable environment for immunotherapies in the oncology setting? I'm just sort of curious or maybe it's -- collectively, it's all those data points.

Yes. I would say it's the totality of all that data. What we're seeing so far with the combination of what we've seen previously with single-agent cabo, the tolerability discon rates that we've seen now in 9ER, in the 040 liver, in prostate are all, I think, self-consistent, and that we've got a regimen here that is, patients can actually take and stay on, right, until their disease progresses through any kind of resistance pathway. So that's all self-consistent in terms of what is, I think, really important and potentially exciting around how well this 40-milligram cabo dose performs in combination with IO across different tumor types. So I think this is -- we've seen that with liver. We've seen that with prostate, certainly seen it with renal. So this will be the fourth example now. So I think it's telling a pretty consistent, pretty compelling story. So -- but again, it's -- again, it's Phase Ib data. We've got a lot more stuff going on here in terms of both the cohort 7 expansions as well as the pivotal trial that we're doing with Genentech. It's a space where other people are playing, as you said, and one that we need to continue to be very aggressive in going forward, and we will.

And just to clarify on the question that I asked on the last earnings call. So it would seem as though the focus here is more in an all-comer patient population based on Gisela's answer to the question regarding your primary versus acquired resistance?

Yes. Yes, absolutely. And again, without going into any data, it's -- it was -- cohort 7 has -- as was a lot of the cohorts in 021, it was viewed to be signal searching and viewed to be broadly inclusive. So we could, a, get a view on relevant clinical, commercial and community populations, number one, but also get a sense of what -- how the combination would perform in different subsets with all the caveats and all numbers. So yes, yes.

And one commercial question here. I think you guys estimated that there were roughly 70,000 to 75,000 second-line patients in the U.S. I've seen estimates in the literature that it was more like 50,000 of the -- I think, what was a 100,000 patients with non-small cell lung who don't have an oncogenic driver to their disease. So just sort of curious, has that dynamic changed in terms of the flow of patients into the second line because of new IO therapies? And are more patients making it to second line?

Yes. I think our math would suggest that's the case. And certainly, based on publicly available data with additional filtering, we feel good about that estimate relative to how big that population could be. So the question is just, again, as more time goes on and as we kind of like what we see with renal, the Epi is slowly evolving, picking up as better therapies come online that can improve survival, that give patients more reason to go to the next line of therapy. It has a big impact on actually the pie, if you will, the size of the pie growing as well as market shares can grow, too. So -- but that's kind of what you would expect, I think, from the standpoints of having effective therapies that improve survival, right, so...

Got it. And shifting gears to prostate, I know that there are some debates out there regarding sort of the pre-chemo, post-chemo. We didn't -- I don't think they have PFS data. I think we believe we're going to get some incremental data at ASCO as well. What can you say just to set the table into the ASCO pace as it pertains to CRPC opportunity?

Yes. So ASCO is -- within prostate, it's going to be a reprise of what we had at ASCO GU for the most part along with a lot of biomarker data. So it's really a biomarker-focused poster with a little bit of reprised data that we had at ASCO GU back in January.

Got it. Okay. And as you guys think about the bar for accelerated approval, I believe in the past, it was more or less a function of getting to that 1 to 125 patient threshold with more of a longer duration of follow-up to sort of corroborate what we're seeing at ASCO GU. Am I thinking about sort of the key components to advancing this data set and getting it ready for a dossier?

Yes. If you look at the 40-or-so drugs and/or combinations that have been approved by the accelerated approval pathway over the last 4 years, that's about the ballpark 100-or-so plus patients' response rates vary from low teens up with reasonable follow-up to get some level of duration of response in the case of a combination like we have with cabo/atezo. Clearly, what's important as well is to define the contribution of components. That's been done to a certain degree already with existing data with both single-agent atezo and single-agent cabo. We're doing it here in cohorts 21, 22 and 23 to make it contemporaneous with the cohort 6 enrollments. So it's that totality of data. Yes, it's very consistent with what's been done and what's been seen over the last 4 years in terms of successful Subpart H filings.

Got it. And maybe just shifting gears to liver cancer. It does seem like one of the pushbacks that I commonly get from investors as well, the market still needs to come to materialize, right? So the new IO therapy has to bring more patients into the pharmacotherapy pool and thus create a second-line opportunity that maybe hasn't quite materialized yet for cabo. And so how quickly could you see that start to materialize if the IO therapy regimen becomes standard of care or a temporary standard of care?

Yes. I mean I would think that would happen over a matter of potentially months, right, in terms of patients who progress rapidly through that. Obviously, the people that do well will stay on that for as long as they gain benefit. But with any of these trials, the primary rate of progressive disease is measurable, certainly. And if you look at the Kaplan-Meier, there's patients who unfortunately progress before the median and those that progress afterwards. So again, it will be -- it will -- the connects of that will play out kind of as you would expect, based upon the PFS numbers in the Kaplan-Meiers there. But again, if the -- if you -- if the IO option is exhausted in the frontline sitting in this case, with bev/atezo, then it really comes down to how a second-line TKI, like cabo, can then help salvage patients after they progress. And cabo is the only agent of all those with the exception of regorafenib that has survival in the second-line setting. So we like the offering there. We like the idea of being able to help patients after they progressed on that frontline IO regimen and do all that, have all that potential benefit while we are completing enrollments and then reading out 312, which based upon everything that we've talked about over the last year, last couple of weeks, et cetera, we're obviously very excited about it, right? So it could be a really important study for us.

Mike, was there any surprise either the Avastin combination? We didn't see any severe bleeding in that population presented at ESMO Asia. I don't know if it was a function of short duration of follow-up, but that to me seemed like a potential opening for an atezo/cabo combination to differentiate, at least in the liver setting given Avastin's risk profile in that setting?

Yes. It's -- again, I'm not as familiar with the details there as I was 6 months ago. So forgive me for that. The question is relative to the population that was studied in IMbrave with those patients screened out, potentially, is that the -- again, once we see the label, see the publication when it comes out, will there be more data there? So -- but that's certainly an important component. I would like to just stress, obviously, the most important thing is to generate arguably better efficacy, if we can, right? So -- and you look at the different components of that -- of IMbrave versus 312 and kind of you can do the mental math in terms of how cabo performs relative to Avastin in different settings, we'll see. I mean it's wide open right now. We need to get the data, finish the trial, answer the question, see how it looks. But again, with the tolerability that we saw in 040, the activity we saw with 040, some of the longer term -- again, all the caveats around survival with both the doublet and the triplet there tolerability that we've seen so far, starting at 40 with 040, cohort 6, what you'll see tomorrow with lung, what we got with 9ER, we're pretty confident in the dose. And now it's just dotting the Is and crossing the Ts and getting the trial fully enrolled and get the events we need to start asking some of these key questions, so...

Great. Well, we're up against our time. So thank you so much, Mike and Susan for joining us, and looking forward to the updates tomorrow as well. So thank you so much, guys.

You bet. Thank you. Appreciate it.

Yes. Thanks very much, you guys. Have a great day. Bye.

You, too. Bye.