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

Hello, and welcome to the UBS Global Healthcare Conference. We're having one of the last sessions this afternoon. My next -- my name is Navin Jacob, senior analyst covering large-cap pharmaceuticals and smid cap biotech. Our next presentation fireside chat is with Exelixis and Michael Morrissey, the CEO. I'm so happy to have him with us today. Mike, thank you for joining us today. I hope you're well.

I am. Thanks for the invite and the opportunity to participate in your virtual meeting for sure. It's great so far.

Yes. No, -- well, speaking of virtual meetings, what's caused us to get into the situation, obviously, can't be ignored COVID-19. Maybe we can just start there with just a couple of few comments around that and questions around that. By the way, folks on the line, if you do have questions, please yes, there we have the system online that allows you to post some questions that I can -- I will happily read out to Mike. Also on the line with me are my associate Jon Lim and Prakhar Agrawal, who will also help me out with a couple of questions here.

But Mike, just on COVID-19, oral oncology agents have been very resilient in the face of COVID-19. Can you comment on how cabo utilization has been faring under the situation?

For sure. And before I begin, I'll just remind you and your audience 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. So yes, so certainly, there's been a lot of moving pieces with the pandemic, really got to give my team just huge kudos for across the board in R&D and certainly in development with all the trials that we're either doing or trying to start on the commercial side. It's just been a huge team efforts under less than ideal circumstances, working from home, working remotely, et cetera. We had a strong first quarter. There's certainly -- there have been some anecdotal type of discussions around, feedback around some docs moving their patients from parenteral agents on to oral agents just due to the ease of application basically that don't involve office visits, et cetera. We've seen less of that, to be quite frank. Certainly, we had strong Q1 relative to the first 2 months in the quarter where COVID was less of an issue. March certainly was the beginning of what was a pretty dramatic couple of months. What -- I think what we're seeing is more the kinetics of the first line, second line transition playing out, as we've alluded to on the set last 2 or 3 earnings calls in terms of the longer duration of treatment for IO–IO or I-O/TKI, just kind of pushing kind of right shifting the shift to second line patients. We had some numbers on our call, our market share in the second line is in the 40 plus percent range in the first quarter. Overall, certainly in the post-IO space, cabo is the dominant player as well. So we feel good about that and to juxtapose that now with really very strong 9ER data with cabo/nivo in the first-line setting against sunitinib helps us feel really good and really confident about being able to now gain some of that first-line market share back. And in a way that I think is kind of aligned with the vision that we articulated several years ago that based upon the cabo profile then based on METEOR CABOSUN, et cetera, our view was that every patient with kidney cancer should see cabo in the first couple of lines of therapy. And that certainly, I think, is reinforcing -- that vision is reinforced by some of the data we're seeing now with 9ER that we'll hopefully present later in the year. So yes, it's full speed ahead. COVID has been -- it's still a fluid situation. But I think we've handled it pretty well, and we're excited to keep things moving, for sure.

Yes. And so CheckMate 9ER pretty well received by The Street. What's been the initial feedback from the physician community on top line? I don't know if it's too early to be discussing based on top line. And I'm assuming that the virtual ASCO and virtual AACR too will help reinforce and get the message out, but any initial feedback?

Yes. So never too early to talk to KOLs.

Deal with a couple of data points.

Yes. No, look, I think the feedback has been really strong. Everybody, again, statement of the obvious, everybody likes the idea that we have a strong signal for survival. That's kind of the ticket to entry here, which isn't a big surprise and something that we spoke to, but was great to see. The -- I think the noteworthy part of the data that has been put in the 8-K and certainly talked about with KOLs is the PFS data that was surprisingly good relative to what we -- similar to what we saw actually in CABOSUN both in the 0.5 range in the first-line setting against sunitinib and what that means relative to the other IO combinations at play, right? So we're excited about the totality of data. We've seen it. Obviously, no one else has. So we're excited to get that full data set out, as I said previously. For me, the big -- I think the big news isn't so much the activity data, which is I think is really, really good, but it's really around the tolerability data that we're seeing, starting with the 40-milligram dose of cabo, where we're seeing what is very varying, compelling survival PFS response rate, duration of response data coupled with the tolerability with low discount rates, which really does kind of go hand-in-hand with exceptional efficacy. Patients need to stay on drug and gain benefit here, right? And we really, I think come up with the right overall approach, the right starting dose that allows patients to maintain long durable benefit with the combination. So the read-through there, I think, is for 313, the triplet cabo/nivo/ipi versus nivo/ipi is, I think, notable as well as you think about all the data we've generated this year in starting with ASCO GI with liver, with cabo ICI combinations in liver and liver cabo ICI combinations in prostate, 9ER data we have coming up at ASCO, certainly in our press release and the abstracts for lung and for bladder, where we're just seeing very low discount rates and the ability to keep patients on drug. So it's encouraging, and I think it bodes well for what we've got going across the board, either existing or planned trials with combinations with ICS.

And what's the sort of subgroup population that's the best opportunity for Opdivo plus cabo? Is it the favorable risk population? How do you think this will ultimately get positioned fully understanding that you mentioned COSMIC-313, but at least for the more near term, where does the 9ER regimen play in?

Yes. It's hard to answer that question without the data. I can tell you that we're very pleased across the continuum of subgroups and how that looks relative to other regimens. And it's always dangerous to make cross-trial comparisons and infer what that might mean, even though everybody does it, it is just inherently dangerous and flawed. But we're human, and we do that, too, and it looks really good to us, right? And what that could possibly mean for -- as BMS characterized on their last call, I mean, best-in-class regimen for I-O/TKIs. So how we -- and then how we question it and the focus is how we maximize the value of that now, get it filed, get it approved, get in the market. And then how we can take that momentum and the learnings from that and how we're applying it. Not how we will, but how we are basically applying that with a variety of other trials. So I think the potential upside is significant relative to what we're seeing in 9ER as a large global randomized pivotal trial, but then all the early signals we're seeing in prostate and liver and lung and bladder, et cetera.

And can you remind us what the experience has been for I-O/TKI in real world -- the differences that have been seen between community oncologists and academic oncologists, has there been a material difference in how it's used between those 2 communities? And I asked that in the context of as folks try to parse out some of the differences in the data such as what you alluded to with regards to better PFS and safety profile. Is that more important to the community guys, the academic guys? Any kind of color would be helpful.

Yes. And I think -- yes, I think it's a great question. And I think the kind of the conventional view of how the market share split is the academic setting is -- those docs have the capabilities, number one, to be able to deal with some of the severe irAEs that arise infrequently, but when they do, it's a meaningful event with the IO-IO combination. So there, with the higher CR rates that you see with IO-IO and which is aligned with their therapeutic intent, which has been explained to me, which is really curative in nature for the 10%, 11% of patients that have these durable CRs, which is different than what's in the community. It's a much more, I would say, pragmatic approach to long-term disease stabilization, good quality of life, et cetera. So there's room to maneuver in both populations of prescribers. Certainly, we hope to get started with that with the 9ER data based upon kind of how we see that getting in relative to the best of both worlds out there right now with IO-IO and I-O/TKIs and I'll refer back to you to 313, which is the triplet, right? So if that really is the best of IO-IO and the I-O/TKI combined, it's impossible to see higher CR rates. It's impossible to see better activity in the PD-L1 negative population in the maintenance phase. And I think there's a new answer that people forget about, but in that trial, those -- that regimen is really almost 2 different phases. You've got the acute phase where it's ipi/nivo for 4 cycles, up to 4 cycles. And then it goes to the maintenance phase, which is just single agent in nivo. Well, on the triplet, that maintenance phase would be basically 9ER. It would be cabo/nivo versus nivo, right? So is that a better way to proceed? And obviously, we need data, we need to understand the pharmacology there and the impact on the clinical benefit and everything else. But based upon what we're seeing with 9ER, can you possibly win in both components? Higher, better activity as a triplet but then also better maintenance in terms of durable disease stabilization, maintaining responses, et cetera, as well. So to be determined. But certainly, the 9ER data set provides lots of opportunity to understand where we might see potential benefit over standard of care.

And can you remind us the timing for COSMIC-313, please?

Yes. So at the beginning of the year, we had the goal of completing enrollment by the end of the year and then a readout in '21. Again, it's too early to tell if that's going to be the case or not and might slip into early 2021 with enrollment. We had very, very strong enrollments in that trial before COVID hit. So that certainly took a hit in the March, April time frame. It's back on track now. It's moving again pretty well. So just -- we'll see. Yes, yes. But it's one that has taken on a much -- think about this year, and I mean it's May 19. I mean, it feels like it's been 5 years now since early January. But we had very strong, I think, hope and insight on that trial, and that's been magnified with the 9ER data. So as you would imagine, we are pulling out all the stops to make sure we enroll that well and get all the data we need to be able to put together a convincing filing, if appropriate.

Perfect. And then in the second line RCC setting, is there -- as 9ER, COSMIC down the road take up some sales in the first-line setting and obviously, the second line overall for I-O combinations goes down as an opportunity. Is there -- are there some pockets of patients that can be preserved? And if so, what is the profile of those patients?

When you say preserved, what do you mean by that?

I just mean that there are some pockets of patients that could still be addressable in the second-line setting, RCC setting for cabo.

Yes. Sure, sure. So look, it's not realistic to think that we're going to get 100% market share frontline. Cabo is the bona fide standard of care right now in the second-line setting based upon market share, based upon MOA, based upon HCP feedback. So I mean, again, our goal is to make sure that everybody with kidney cancer receives cabo first line or second line. So somebody that got another first-line regimen once they're in the market, when that patient would inevitably progress, to go on to cabo would be, I think, a great next step for that patient based upon, A, standard of care and B, all the data that we've generated there. So again, we're going to do everything we can to be a player in the first-line indication for RCC. But knowing that for those patients that go on to another regimen, cabo is there for them as a second-line therapy is, I think, very reassuring for them and for us.

And then in the adjuvant setting, can you remind us what your development plans are for adjuvant RCC? How big is that market opportunity relative to the metastatic setting?

Yes. We're still at the early phases of that discussion. So nothing to give you that's definitive right now. Obviously, there have been numerous single-agent TKI adjuvant studies with some of the first-generation EGFR targeting TKIs. I would say that data was lukewarm at best in terms of degrees -- disease-free survival with no OS benefit. Question really comes into, is there a better approach here with a tolerable I-O/TKI regimen that can stabilize disease and give -- provide really long-term benefit. So very interesting concept, something that we certainly like to pursue at the appropriate time, with the appropriate combinations. So stay tuned. But it's a big population. There's a 65,000 patients a year in the U.S. who are diagnosed with kidney cancer. Many of those are cured surgically, at least for a while. Question is how many of those patients would be appropriate for some kind of adjuvant opportunity as well. So time will tell.

Perfect. And with that, I want to actually allow my associate Prakhar Agrawal to jump in with a few questions on settings outside of renal. Go ahead, Prakhar.

Thanks, Navin. Mike, my question is on the recent lung data at ASCO. So cabo showed response rate close to 30% with encouraging PFS of 4 months. Any color on the abstract data in late-line lung cancer? And the differences in baseline characteristics of patients in this cohort that we should be aware of as we compare data with IO monotherapy and chemo in the setting?

Yes. So again, it's -- you've captured the kind of the headlines for the abstract and certainly the press release that we put out when the embargo was lifted. I would again reinforce the idea that this is a heavily pretreated late-line population, equal mix of second- and third-line patients. About half the patients had primary refractive disease, which means that when they had their IO, they -- as their best response, as measured by RECIST, had progressive disease. So they never really gained any benefit from the IO therapy. The other important point is that 90% of the patients had chemo as well before coming on the study. So they either got that sequentially or they got that as part of their IO regimen in the first line. So again, heavily pretreated. We're very pleased with the high response rate. And again, the good tolerability. These are late-line patients who have pretty serious disease and they have a 3% discount rate in lung, and we had a 0% discount rate in bladder, starting with 40-milligram cabo dose with full dose atezo, I think, speaks to us really having the right dose to go into these trials with as we go forward.

Right. And how are you thinking about the market opportunity in late-line lung cancer? Do you think the uptake of IOs in the first-line setting could increase the eligible pool for cabo over time?

Oh, absolutely. I mean, I mean, standard of care, I think from all the market research we've done is first-line is depending upon the PD-L1 status is pembro or pembro plus chemo, patients that a small -- a relatively small fraction of patients that might get chemo upfront and then get IO second line. So -- but essentially, you have a bolus of patients who are IO experienced, IO resistant, IO refractory moving into the either pure second or third line population that need therapies, better therapies to help them manage their disease when they become resistant or refractory to either IO sequencing or an IO containing regimen with or without chemo. So it's a big population. I think by our math, it was about 70,000 patients per year. So yes, that's a meaningful number, and that's one that we would like to be able to help and certainly are committed to across the board. I mean, I look at cohort 7 in 021 and [ contact ] 01 that will be the pivotal trial that we'll do with Roche/Genentech and this is just the first step in the process. We've got a lot of other ideas there and lots of interest in being able to work in that space and help as many patients as we can.

And finally on the lung cancer, could you comment on the regulatory path forward for cabo in second line? Is it possible to file for accelerated approval based on the COSMIC-021 data?

Yes. We get that question a lot, and we've gotten that question a lot today. I want to be extremely careful to not overstate it or understate it. We certainly -- if you look at the cohort 6, the prostate cancer cohorts for -- from 021, we've put a stake in the ground there, where we're certainly interested in pursuing that path if the data continues to look good. And the totality of data from the standpoint of what the agency is looking for. We have arguably the same optionality here. And we're following a similar playbook with cohort 7 in lung that we followed with cohort 6 in prostate. As I said previously, prostate maybe passed step ahead of lung right now in terms of enrollment, in terms of how that's evolved. So it's early for me to and for us to definitively commit one way or the other. But we certainly understand the optionality that we have, we certainly understand the different moving pieces that we've got here. We've added additional 50 patients into cohort 7 back last year. We have added a single-agent cabo cohort to understand the contribution of components. So again, following the classic playbook that has been, I think, very well-defined regulatorily as well as if you look at the 40 or so approvals that have happened since 2016 due to the Subpart H filing route, what's involved there. So look, it's something that we understand how to navigate this. And as we get more data and as we have a definitive view on the probability of success there, we will certainly articulate that with investors.

Sure. And then moving on to prostate cancer now where cabo has again shown encouraging durable response rate and castration-resistant prostate cancer, could you frame the opportunity for cabo in this setting? I think your guidance -- your long-term guidance at the start of the year highlighted this as a potential $600 million opportunity. But based on the data that you have seen so far in COSMIC-021, how confident are you in achieving this guidance? And could there be more upside?

Yes. So again, prostate cancer, we have a long history in prostate cancer. It's one that we're -- we've learned a lot from our early attempts at showing benefit there, the COSMIC -- the COMET study is back in the 2012 to 2014 time frame. We have arguably a better dose. We have a more appropriate patient population, and we've got a large number of GU investigators who now know really how to use cabo because it's been in the market for 5 years, and they've used it for their renal cancer patients to a great degree. So it's a different day, different setting. We're very -- certainly very excited about the data we had at ASCO GU in the early spring, late winter, again, it feels like it's about 5 years ago, but it's only a few months ago. The opportunity is clear in terms of all the NHTs moving up into the castration-sensitive population and/or M0 nonmetastatic population, only leaving pretty large gap in terms of unmet medical need for patients who are resistant to first NHT. So we think it's a sizable population. We think we've got very encouraging data. Again, tolerability was, again, in a late-line elderly population very, very good based upon the 40-milligram starting dose with cabo. So again, we have yet to get all the data. We've -- we're targeting 130 patients enrolled -- to be enrolled for cohort 6, along with single-agent cohorts for both cabo and atezo as well as a post-NHT, post-chemo population in cohort 24. So we've got a lot going on there, feel good about the data, but we've got to get it done. And we have to look at the totality of that data. And then move that forward, if appropriate, along the Subpart H passed, if appropriate, while we're doing [ contact ] 02 which is the pivotal trial that will -- Exelixis will be running ourselves, and we'll be co-funded by Exelixis and Roche.

Got it. And moving on to some of the novel mechanisms in RCC, Merck recently had very interesting data from their HIF alpha asset in VHL RCC that presented ASCO and I believe it's actually being studied in combination with cabo as well. So what do you think about this target scientifically and maybe potential competition to cabo and RCC longer term?

Yes. Certainly, the VHL/HIF axis is clearly important part of the biology that drives the tumor genesis and the pathogenesis of RCC. So certainly, VEGF is part of that, next part of that. So we've played downstream from there in a, I think, a very effective fashion. But a lot of the concepts that went into the initial design of cabo in terms of dual net VEGF inhibition were directly related to the transcriptional machinery, which is induced by VHL and HIF. So, yes, we believe in that biology. We've capitalized on that biology. We've exploited that biology. They're targeting HIF as opposed to downstream, an interesting data. I think the abstract they had at -- in the ASCO abstract release was really targeted on patients with VHL germline mutations, which is a tiny fraction of the patient population. And it certainly provides, I think, for them, good concept validation for their overall MOA approach. The disease gets a lot more complicated than that for the vast majority of patients. So the read-through there is TBD in terms of how that's going to play out. Certainly, it's got, I think, in the broader population, the 20% response rate looks pretty good. The PFS, I think, has looked pretty good in the past. So yes. It's farther behind, which is certainly an issue. So -- but look, statement would be obvious, right? This is -- everything in oncology is competitive. RCC is competitive. We'll see, yes. Not too worried about anything that's out of our control. We just need to keep our eye on the ball and continue to generate data that will move standard of care in pivotal trials like 9ER, like 313 for renal and then new indications, lung, prostate, liver, et cetera, and keep our eye on the ball. So -- but yes, it's -- again, oncology is incredibly, incredibly competitive. And you're never all known anywhere in this therapeutic area. That's for sure.

Sure. And moving on to HCC now, coba has been launched in this setting for almost slightly more than a year. Any update on how the uptake is proceeding in this setting?

Yes. So second line liver is proceeding as we guided, as we expected. It's a small fraction of our demand on a weekly, quarterly basis, largely because we've been competing with IO in the second line, which those agents are not super effective, but there are a different MOA from VEGF inhibitors, which are used frontline. So now with the IMbrave data, number one, I would expect the pie to grow. Many, many more patients are going to want to use a much better tolerated regimen, much better with better efficacy in terms of some of the data that's been presented and now published with bev/atezo when that gets approved plus then the read-through to trials like 312, looking at cabo/atezo in that space as well. So again, it's early days in liver. It's a market, as we've said previously, it's one that we have to really help rebuild. And certainly moving IO up with the IMbrave data is a great start there that I think will benefit from in the short-term post-approval of that regimen. And then the question is just how good is our data from 312 with cabo/atezo. But that's why we run the experiments, right, to get the data to see how it all fits it.

Got it. And with that, I'll hand over to my colleague, Jon.

So I'd like to take the conversation to XL092. My question is, when do we get any preclinical or clinical data for that? And how does that asset really differentiate or improve on the cabo profile?

So we -- on our last earnings call, we again, reaffirmed our plan to present data on XL092 as well as other assets that are marching towards IND status later in the second half of 2020. So stay tuned on that. We have not talked a lot about that asset about 092 for competitive reasons in terms of how it's different, how it is potentially better than cabo, but I think that will all be very clear once we present the data. So stay tuned on that. Again, we've been in the clinic now for about a year. We think we've been able to generate data so far that helps us validate the approach clinically that confirms our -- some of our hypotheses and certainly some of our guiding principles around how to make "better next-gen cabo." And now the question is just moving in the ICI combo cohorts that will allow us then to give us the flexibility that we need to think about new indications, new lines of therapy. New combination partners and potential label-enabling studies as we go forward.

I like this answer, Mike. This sounds super intriguing. You feel free to break some news at the UBS conference, if you like.

Yes. But then I'm going to get beat up by my team back here. So I got to -- have to behave...

Yes, it sounds intriguing. Sorry, Jon. I just got intrigued. Go ahead.

So along those lines, I just wanted to see if there's any color you could provide us on those 3 potential INDs in terms of, generally speaking, what types of indications or therapeutic areas we may expect to see these types of IND is coming from?

Yes. For sure. So the 3 assets are CDK7. We have that in our -- from our collaboration with Aurigene. That is nearly IND ready. We have an ADC based on a tissue factor antibody that binds in a noncompetitive fashion with Factor VII. So potentially less impact on the coagulation cascade. And then we have a TAM internal program that's targeting the TAM kinases, Axl, Mer and Tyro-3, that is on track for an IND later this year, too. So part of the cabo profile that we basically carved out that is really looking at specifically activating the innate immune system. So CDK7, again, is part of the self cycle pathway -- kinase pathway downstream from CDK4/6. So could that be involved in, say, breast cancer, maybe? Yes, certainly. That makes sense from a pathway biology point of view. It's also involved in activating phosphorylating RB. So is that a potential marker that could be used in terms of focusing on that patient, those patients with RB mutations, for example, that could be sensitive. So early intriguing possibilities, time will tell. I talked about tissue factor. Again, that's a very well-known if you will, kind of beacon that is seen on a lot of different tumor types. The main biology, it has is, again, within the coagulation cascade. But it certainly is very prevalent than many different kinds of tumors. So can you use that to target toxics via the ADC approach? Again, there's some -- certainly some pretty good precedence for that. We think we might have a better agent depending upon the noncompetitive nature of that. So -- and then we've got a whole wrap of different lead-out programs internally and externally that are delivering kind of on the path to lead optimization programs and new development candidates. So look, it's great to be back in the discovery game. We certainly played a played in that space for a long time prior to our focus on cabo. That focus on cabo was never meant to be strategic in nature. It was a purely tactical decision to kind of reorient the company, focus on becoming a vertically integrated product based company that would allow us to generate free cash and freeing up our balance sheet, all the stuff we've done over the last few years. So we're very excited about being back in the game and looking forward to having both more programs and more data coming out in the near future.

And I'll jump back. Mike, we just the last couple of minutes we have here just on -- I have topics to hit on. Can you remind us -- there's been some questions about the timing of cabo's patent exclusivity. You're defending it well. You've highlighted some opportunities for a prolonged market exclusivity, I think, relative to how The Street is thinking about it. Can you kind of remind us and bring us up to speed for those who may be fully up to speed on what your IP is and how you're going about defending your exclusivity?

Yes, for sure. And I'll focus comments on the composition of matter patent with extensions goes until the end of '26. We have a very solid polymorph patent that covers what we believe to be all the relevant and viable polymorphs that goes through the end of 2030. Obviously, there's a NDA that's been filed and there's litigation ongoing for both of those patents. So I don't want to get into the details there with except to say that we're very -- we have very strong patents. We have very strong enablements. We have a very strong team that is both internally and externally focused on making sure we maximize the value of those assets and those patents and protect our hard earned and well documented IP. So I know that there's some overhang with that. And these things take time to resolve, but we're quite confident in the data and the patents and the team that we've got to be able to defend those going forward.

And the last question here in the last minute, you have over, a little over $1 billion in cash and still a good runway of cash generation for cabo. Obviously, you're focused on BD for diversification and have done some late-stage deals in 2019. Should we expect more of the same sort of these early-stage deals over the course of the next couple of years?

Yes. Look, we're very focused on the plan to diversify our portfolio. And that's really what the company is doing, right? We want to expand cabo indications, bringing along 092 to further reinforce the cabo franchise as the first main focus. Equal focus is on building a diversified offering of products that can certainly help patients and build value in the company. We can only do so much internally and through this network of collaborators, we certainly plan on doing more of that. We have an appetite to do later stage deals. If we have the conviction that can help us understand the transition of clinical data that's existing through the generation of differentiating clinical data to the transition of commercial success. And I think that's the most important focus that we have right now is really gaining conviction that assets that we're interested in, either partnering or acquiring can help us generate differentiating data, which then drives that success in the commercial setting. There's been so many examples recently where -- it's never easy, but it's relatively straightforward to generate data that you can use to file and get approved, but then those launches basically go nowhere because the data is not different enough to convince somebody to -- some execute or change their prescribing habits. We did that with cabo, and that was very successful commercially and very illuminating from the standpoint of what we want to do again and again and again. But it's got to be that continuum where you have the ability to generate differentiating data clinically that can then drive that success in the commercial setting. So we have a lot going on there, a full team effort, very pleased with how that's evolving. But we're being thoughtful and pragmatic and careful, right? Big pharmas can do deals and miss, and nobody thinks about it twice. We can't do that. We're not in that situation.

Fair enough. And with that, I surely want to thank Michael Morrissey for joining us, CEO of Exelixis, for this lovely discussion. Thank you again, Mike, and for everyone on the line, hope you have a wonderful day.

Okay. Thank you.

Thank you, guys. Take care. Bye bye.