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

Okay. Good afternoon, everyone. We'll continue with the next session. I'm Paul Choi, the SMid cap biotechnology analyst here at Goldman Sachs. And for our next session, I'm very pleased to host Exelixis. Joining us is the CEO, Mike Morrissey; and also on the line is Susan from Investor Relations. And so as with prior sessions, with Exelixis here, what we'll do is let Mike kick it off with some introductory remarks, and then we'll go into the Q&A portion of the session. [Operator Instructions] And so with that, Mike, I'll turn it over to you for some opening remarks, and then we'll go into the Q&A.

All right. Fantastic, Paul. Thanks again for the invite. Sorry, we couldn't do this live, as usual, down in L.A., but it's great to be on the call with you and your team today. Before I begin, I'll remind you 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. In terms of my kind of 1-minute overview, I think most of you know us. We are a 25-year-old commercial stage company, biotech company, focused in oncology. We have a long history of drug discovery, drug development, recently -- most recently in the commercial area with our efforts to commercialize cabozantinib, both COMETRIQ and CABOMETYX, leading TKI in the -- single-agent TKI in the RCC space with additional labels for second-line liver and medullary thyroid cancer. Been a very exciting year in 2020. Lots of stuff going on in the world, obviously, and lots of data from us in terms of what's happening with cabo, especially in the context of cabo-IO combinations, which is the main focus we have as we go forward and expecting a busy second half of the year as well. So I think that's a good place to stop. Paul, I'll let you engage with questions. Please go ahead.

Great. Thanks for that, Mike. And so maybe in terms of questions, we can start with some big-picture things and some of the -- your longer-term views for the company. And you recently issued your 5-year top line guidance for the first time, which I think -- earlier this year, which surprised investors a little bit. Calling for potentially U.S. product sales of approximately $4 billion in the 2025 time frame. And so can you maybe walk investors through what assumptions went into that outlook that you put out to the market? And this seems to be, again, surprising investors. So what do you think, maybe from a big picture perspective, investors are currently missing with the Exelixis story here?

Yes. So there's a lot there. This is somewhat old news since we started the year at a different health care banking conference to I think kind of reframe the attention for investors beyond the main question that we got probably 1,000 times in 2019 and going into 2018 around 9ER. So our whole focus was to say the Exelixis story is broad and deep. Certainly, we're focused on cabozantinib as a main driver for value creation, along with a lot of emerging efforts in other compounds, other MOAs, early discovery efforts, along with a lot of, I think, very important BD activity to help us build a diversified portfolio. But we wanted, simply, to get investors to think about the cabo story beyond 9ER. And that was the main focus. In January because -- quite simply, we -- a, we were kind of sitting on a lot of good emerging data that now people have seen at ASCO GI for HCC, at ASCO GU for prostate cancer. We had the 9ER data come out in April. We had a very strong presence at the virtual ASCO meeting in Chicago -- that would have been in Chicago, I should say, with data for lung, data in bladder, another reprise of prostate cancer. So the whole way to kick off the year was to really focus people on the broader story across cabo indications in terms of what we're doing in renal, what we're doing in liver, what we're doing in prostate and lung, et cetera; as well as then highlight the importance of our pipeline with 3 new potential new INDs this year. So it's a big story. It's a broad set of activities. We're not the cabo-only company, even though we certainly have a view on how we can maximize success. The number you referred to is a number that -- that $4 billion a year number in 2025 is what success could look like if we hit on all of these trials and certainly coming off of a strong showing with top line data for 9ER and the other data sets that we presented this year, I think, gives us a lot of confidence going forward. But got to run the experiment. Got to get those trials done. Certainly a lot of moving pieces this year with COVID that come up since March. And I think the team has done a great job of navigating all those different issues. And we're looking forward to a really strong back half of the year.

Great. Maybe just a follow-up on the tail end of your comment there, Mike, with regard to COVID. You guys provided some color on your most recent earnings call on the impact from COVID. But could you maybe speak to what's been happening since then, both on the clinical and commercial front with regards to your operations? Have you seen things return more or less to normal? Are you still largely in a virtual versus direct selling environment? And just sort of help us mark-to-market on how things are going with regard to the impact from COVID.

Yes. So COVID has certainly been a big challenge for the entire -- well, obviously, the entire world, but certainly, the entire industry. We have continued to pull out all the stops to make sure that as a priority, we're keeping our employees safe, number one, and productive, in terms of working virtually; and then making sure that we're able to continue to get our drug -- our drugs to patients who need those drugs, whether they be part of a clinical trial or a part of the commercial world. So I think the team has done just a marvelous job, been really thinking out of the box, working out of the box. The challenge when you work from home is that you can work all the time, and I think the team has done that to make sure that we maximize the benefit we can bring to patients, whether they be through, again, a commercial setting or as part of our clinical trials. In terms of the commercial world, we are still working in a virtual environment, as is appropriate. That may start to loosen up as we head into the summer. We're very adept at doing that. Our team is very -- again, very skilled at doing both personal and nonpersonal promotions in a virtual setting. And we're finding that a lot of practices and a lot of clients like that. And actually, we get more time with them now than we have ever before because they're able to allocate time, and they're not quite as busy as they used to be as they're bombarded with visitors and everything else. So that's actually working out pretty well. On the clinical world, we have been, again, working on a, really, patient-by-patient basis to be able to track what's going on, obviously, as the pandemic has spread across the world. On a temporal basis, we have regions that turn on and turn off based upon the overall rate of infection and how the health care systems have evolved in real time to really address that. April was actually a pretty typical month for us in terms of enrollments. Screening was a little bit down in April. May was probably the most impacted month, and we're seeing, I think, a good turnaround in June. So all that being said, again, the team has done a marvelous job. It's still a very fluid and dynamic situation. We haven't changed any of our kind of top line projections and guidance for the year in terms of enrollment -- trials that complete enrollment, top line data readout, et cetera. That could change over time. It just depends upon how things evolve throughout the rest of the year. But I can tell you that I'm very proud and very pleased with just how well the team has worked to be able to mitigate all those issues and continue moving things forward.

Great. One of the things you mentioned earlier is 9ER. And of course, investors are aware that you top lined the results not too long ago with some very impressive PFS results and the interim look on -- in terms of OS, which has also showed a strong p-value. So I guess, what investors are looking for is sort of more detailed data. And so can you maybe update us on how you and your partner Bristol are thinking about disclosing more details from the 9ER study? And then I had a follow-up question on that.

Yes, of course. So look, yes, I mean, the top line data was really great to see. We're very, very pleased with how that data looks to us. And obviously, we've seen all the data, and we've only had a couple of hazard ratios in the 8K on April 20, when that announcement came out. Yes, we're expecting to have the full data presented in the fall. Details to be defined as they get worked out. Obviously, it's a priority for us and our partner to get this submission wrapped up and written up in -- ASAP, and the team is working together really, really well to get that done. We think it's a very strong data set. We think it's a very competitive data set. The PFS HR is a real standout number. And there's lots behind that, that I'm very excited to be able to have presented. The whole narrative in 2019 was really around, would you get survival at the first interim? Would that be -- would that pass the bound of significance? How would you compete, if you didn't have it? And what -- all of the hedging around did you get it or not? So obviously, we're very pleased to have that. We have a lot of experience from METEOR, having strong survival data and what that can mean in terms of being able to really use that as differentiating data in the marketplace, and we certainly plan to do that here. So we're very excited about it. Obviously, can't wait to get that presentation out there in prime time and to complete the filing and get it approved and be able to go out in detail on literally day 1, once it's approved.

Great. And again, let me offer my congratulations on the strong data. So I guess maybe as a follow-up here, Mike. We have a partial picture, as you mentioned, with the hazard ratios and some information on survival. But then as you look at the market, are there any particular areas where you see the, say, the checkpoint inhibitor plus TKI combos falling short, where you see the 9ER regimen having a particular advantage? Any particular subpopulation that you'd want to emphasize or any subcategory that stands out, at least in your mind, where you think you might make more of a push versus the competition?

Yes. It's a great question. It's hard to answer that question without going into data. And I obviously can't do that today. My advice to people on the sell side and investors is to look at the totality of the data when it's presented. It will be a very, very fulsome data release and presentation in terms of efficacy, safety, subgroups, tolerability. And I think that's one of the big -- that latter issue, the tolerability of a 40 milligram starting dose of cabo with full dose nivo is, I think, going to be one of the surprises of the whole data set when it's presented. What's really important in these early line settings where you're looking to chronically dosed patients is to obviously keep patients on drug, right? So you really want to have a low discount rate, and you want to be able to really fine-tune the -- and the balance between efficacy and safety and tolerability. And I think we did that with the 40 milligram dose here combined with full dose nivo. There have been some incremental data releases in ASCO GI, at ASCO GU, at big ASCO, a few weeks ago, around the -- that dose in combination with either nivo or atezo that I think point to these low discount rates, good overall tolerability, et cetera, which I think plays into the story. So from my point of view, we're seeing very consistent activity and behavior with this approach. And it's very exciting. So -- but again, I think the totality of data is what's key. And again, looking forward to being able to get that out there and then give people like you and your colleagues a chance to do all the cross-trial comparisons, which nobody shouldn't do, but everybody does within EXEL to be able to figure out how these things look side-by-side with all the caveats going into it. But we're very excited. And again, we think we did a lot of market research for the year or so before the trial read out to understand kind of get an early jump on potential scenarios for data from the trial. We've done a lot since the trial came out, and we're getting a lot of very positive feedback, a lot of excitement for that doublet and the data that we've got. So obviously, can't wait to get it out there and certainly get it filed and approved and then start getting it to patients.

Great. We definitely look forward to more details on the data and more clarity on what's driving your enthusiasm. Maybe taking a step back and looking at the market here, Mike, can you maybe tell us where you and your colleagues in the sales force are seeing penetration and sort of utilization of the checkpoint inhibitor plus TKI combinations? What does that adoption look like in the market currently based on what you're seeing? And then I had a follow-up with regard to cabo monotherapy utilization.

Yes. Sure. So again, in the RCC space right now, IO combos really dominate the frontline setting on any given week or month, quarter. They have -- the combined, if you will, IO combination market, penetration is about 80% -- 75% to 80% for the overall first-line markets, the rest being TKI monotherapy. That combined IO combination basket, if you will, market basket, is approximately split 50-50 between IO-IO and IO-TKI. It varies month-to-month, quarter-to-quarter. I'm not sure if there's a big significant difference, but we certainly see some flexibility there. So opportunity is, I think, broad to be able for a combination like we have from 9ER to be able to capture share from both as well as, again, even further kind of reinforce the issue that -- for those patients that are getting, again, TKI monotherapy, how they should maybe move to a doublet like cabo/nivo. So lots of opportunity, lots of upside from my point of view. We've articulated the vision that based upon the totality of data, we believe every patient with kidney cancer, with metastatic advanced kidney cancer should see cabo in either the first-line setting or the second-line setting based upon the totality of data that we've got from -- previously from METEOR and from CABOSUN, but certainly 9ER reinforces that. So we want to maximize our penetration in the frontline setting because to state the obvious, right? The longer duration of therapy can really be the multiplier, both for patient benefit but also from a revenue point of view. So we'll be certainly engaging there in a very compliant manner but certainly very aggressively to maximize every share point we possibly can in the frontline setting.

Great. That makes tremendous sense. And then just one more market question, which is just with regard to cabo in the second line. Any update on how sequencing has been going, just given that TKIs are now being used in combination? Any delay from your feedback in terms of the sales force on getting patients on or longer time lines to get it on? Or just sort of what's happening with regard to the second-line market where you seem to be gaining the...

Yes. So yes, yes, yes, it's a great question. We've certainly spoken about this a lot in the context of 2019 earnings. The kinetics of transitioning from first line to second line are different between, say, IO-IO versus IO-TKI. And there was -- that equilibrium had a reach steady state after the IO-TKIs were approved last year. So that happened kind of I want to say in the Q3, Q4 time frame. And we have seen steady increase in our second-line share as patients are progressing on a more predictable manner based upon the various PFS values that are out there, number one, and as kind of we track it month-by-month, quarter-over-quarter. So we are very strong. Again, we're the leading second-line agent by literally any metric and certainly, post-IO as well. So it's behaving as we predicted. Going back to 2018 when ipi/nivo was approved, it's just taken a little bit of time for the actual kinetics to work themselves out as the math would dictate. So -- but all in all, it's gone really well. So very pleased about that. And the team has done a great job of making sure that we maintain that market-leading position.

Great. And maybe the last question on RCC is, can you maybe frame for us how you and -- you're seeing the Japan opportunity here? This is a major market where it's still early days, potentially, for cabo here. And so can you update us on what's been happening there with cabo and just how you see the commercial opportunity potentially being incremental to Exelixis?

Yes. So it's the last region that we'll be launching in. Obviously, our partner, Takeda, has had success there, and it's a very challenging regulatory environment to go through all the different steps to get approved there. So congrats to them for getting that done. If you look at the numbers, say, 2018 numbers, which are probably the best numbers I have from a variety of sources, there's between 12,000 to 13,000 patients there annually who are drug-treatment eligible. First line is in the 6,000-or-so level -- patient level range. Second line is maybe 2,000 or so, and then the rest are late line. So it's an important market. It's one that, obviously, we have been excited to be able to enter, again, with the success of METEOR and CABOSUN and certainly, now 9ER, which will go into their overall filing approach since they were involved in supporting that trial. And we're excited about getting that going, right? So it's a big piece of the global marketplace, and we have a very motivated and professional partner with Takeda there. So just -- we'll keep an eye on that and certainly be prepared to update the revenue numbers and their growth as that proceeds going forward.

Okay. Great. I want to switch gears maybe if we could to HCC. And besides your recent 9ER update, I think some of the most interesting data you presented, at least from my perspective this year, was the mixed population of frontline and later-line HCC patients in terms of the combination regimen with regard to cabo in HCC patients. So you saw pretty impressive result there, in my opinion, and I think this is something that supports, potentially, a promising future there. So can you maybe just remind us what you presented here earlier and then just what are sort of next steps for the combination regimen with cabo here?

Yes. So we have a lot going on here and as I've spoken to previously. We think the liver cancer opportunity is really one of the largest growth opportunity indications in all of oncology. If you look at the -- just the epidemiology, the number of patients who are diagnosed every year globally, broadly speaking, but also in the U.S. and the need -- the urgent need for better therapies, better combinations, et cetera, we think that there's a lot of patients that could be much better served with better therapies that would eventually consolidate treatment like you see in renal cancer, like you see in lung cancer, in breast cancer in a way that brings really maximum benefits in a very controlled way. So we're excited about that. We have -- obviously, you have the IMbrave study with bevacizumab and atezolizumab that has now been approved based upon the IMbrave data, which had survival benefits last year. Has approved right during the whole ASCO meeting recently. And really, I think, sets the stage for really drawing patients into the medical oncology sleeve, if you will, that can give them really better benefit than what's been seen previously with a compound like sorafenib or lenvatinib with what looks to be like very, very good tolerability as well. Our data -- so we had data at ASCO GI from cohorts with BMS in their 040 study. It was a mixed population of first- and second-line patients with a mix of doublet cabo/nivo as well as triplet cabo/nivo/ipi. So you start slicing and dicing that overall study, which had less than 70 patients, and you get down to some pretty small numbers. We were very, very pleased to see some of the longer-term follow-up data around survival for the various different mixes, if you will, of those -- of the overall population but also the different cuts of that population. And we think that is indicative, again, of the potential of these kinds of doublets and triplets in that study. And we're certainly very excited about the 312 study, looking at the combination of cabo with atezo in the first-line setting against sorafenib that has enrolled well and is nearly completed in terms of its enrollment. Again, this is very similar to IMbrave only you swap out cabo for bevacizumab. And that's -- to be quite frank, is a trade that I like a lot relative to the activity profile of cabo. So -- but again, we've got to do the experiments. We got to get these trials done and see how the data looks. But coming off the momentum that we've got this year, it's hard not to be excited about what we think we can do there relative to what we've seen with the combination in other tumor types so far. So -- but you got to get it done, and you got to open the envelope and see the p-value and see how it looks. So stay tuned on that. But if things go well and we get the events we need, we're projecting that we'll have top line data by the end of the year. So stay tuned.

Great. And just as a reminder to investors listening on the call, for the CheckMate 040 study, it was a mix, as you mentioned, Mike, of treatment-naive and treatment-experienced patients. And with regard to the median OS, the doublet did show almost 22 months of survival compared to 10 months for the second-line patients and 8 months for placebo. So clearly, very promising results. And I think undergird your enthusiasm that you mentioned, Mike, for the 312 study, which is coming up. So just in terms of maybe following up on 312, your frontline study, as you mentioned here, just what would -- what has enrollment been like? Has that been something that's been -- what was the enrollment status, I guess, prior to the COVID? And maybe just a follow-up on that. And you said it sounds like you're on track to maintain your time line here and just what will you, potentially, disclose here towards year-end in terms of data.

Well, yes, so it's all been based. And certainly, primary endpoints are both PFS and overall survival. So endpoints that we're constantly looking at, right? So yes, it's a very standard-type trial. And it's a very -- if you think about the data that was in The New England Journal of Medicine from IMbrave and some of the other data that we recently presented, we just need to get it done now, right? So -- but it's -- we have a great team working on this within developments, and obviously, there's lots of enthusiasm for the approach relative to the single-agent activity of cabo that we saw in CELESTIAL, again, giving a survival advantage compared to placebo in the second-line setting and the overall activities that we're seeing both earlier, as you mentioned, in the 040 study with other IOs. So again, exciting times. We've got to keep our eye on the ball, and there are certainly challenges involved with the COVID pandemic, but I think we've done a great job, and the team has been very, very focused on making sure that we're tracking the situation very carefully. So again, things can -- there's always a level of fluidity here. So no, we're not done until we're done, but I really like the momentum that we've got here as we go forward.

Great. Maybe just on the commercial side with regard to HCC, Mike, can you -- you've historically commented that you view it as immature market as sort of where RCC was a few years ago and one that needs to be sort of built and educated with regards to cabo. So can you maybe update us on how the commercial efforts are going there? What is the sort of the run rate, if you can provide any quantitative metrics in the HCC indication going right? And just what has adoption like been so far?

Yes. Absolutely. So as we've talked about, and I think as we predicted, this would be a slow ramp due to the fact that the second-line setting was historically been dominated by IO prescribers, and HCPs like to switch MOAs here. So the classic paradigm was start -- first line was a TKI. Second line was usually an IO. And then third line would be another TKI, even though some of the data on the IOs in the second-line setting is modest at best. That was just -- I think the overall gestalt has always been it's better to change MOAs, and there's no real data to say that, but that's kind of the way people behave. What that -- what's happening and what will happen, I predict, will be that now with the IO frontline data from IMbrave looking so positive, that will get used, I think, predominantly as we go forward. So that will be a big draw for new patients for -- to eagerly expand the size of that population, getting IO upfront. And that will exhaust IO then based upon the fact that a second IO has not been able to -- no one has shown that a second IO can salvage refractory or resistant patients who gets IO frontline. So that then opens up the opportunity for compounds like cabo second line, and cabo is one of the few that has a clear bona fide survival advantage in the second-line setting. So again, as predictions go and take that for what it's worth, it wouldn't surprise me if we see an uptick kind of, again, at somewhat steady state as patients start coming off of the frontline IO combination. But for us, the real focus is to maximize that opportunity while we have it. But then to move up the frontline ourselves if the 312 data is positive and differentiating and allows us to be able to move in that much larger opportunity and to get the treatment-naive patients who can benefit from that doublet, if we have the data. So stay tuned.

Okay. Sounds good, Mike. You have, obviously, in addition to 312, many other trials going on here, most notably, I think your basket trial 021, and you've been providing various updates from the various cohorts over the past year or 2. And more recently, you've provided an update in the lung population. Can you maybe frame for us how you're thinking of the next steps here based on what you presented most recently at the ASCO meeting? What did you see in the data that viewed as most encouraging and that supports developmental efforts here in lung?

Sure. So we had our first data presentation for cohort 7, the first 30 patients that were enrolled. Again, just to kind of reframe the opportunity to a certain degree. We've added an additional 50 -- we've added enrollment up to an additional 50 patients as well as a single-agent cabo cohort 021, following the protocol there to be able to further characterize that, understand the opportunity relative to other potential regulatory approaches. The data that we had at ASCO, I thought, was very, very encouraging, and we got a lot of positive feedback there from a variety of investigators and KOLs. It was a late line, heavily pretreated population. Looking at a IO second line population post IO. So those patients were either resistant or refractory to the initial IO, and in fact, half the patients were refractory to their IO, meaning that they never had any clinical benefit, and they had progressive disease as their best response to their frontline IO treatment. 90% of those patients were also -- had received chemotherapy as part of their either combination IO or first- or second-line IO approach. So there was a heavily pretreated population, and about half of the patients were all actually third-line patients as well. So it was a heavily pretreated, heavily refractory population. And in that context, we saw a 27% response rate per RECIST 1.1, which means that they were all confirmed responses, obviously, they don't play by the rules here, and with good overall tolerability. And for a late-line population like that, with good duration of response in PFS. So it's good. It's very strong signal of activity in a very late-line refractory population and one that has certainly been driving us with our partner Roche/Genentech, not only in lung but also in prostate and then second-line renal to embark on a pivotal trial program where we will co-fund those trials. We'll run prostate. They'll run lung and renal with the idea that this is a classic combined and conquer opportunity where we take our 2 drugs with good, if not great, emerging data and push them forward, right, to get the definitive data that we need in the right trial and the right situation. So we're excited about that. And those 3 trials, we would expect to start midyear, plus or minus. Things may be a little bit delayed with the COVID situation, but there's lots of excitement there and lots of people moving around, doing stuff to get those things started, for sure.

Great. In our closing minutes here, Mike, I did want to maybe spend some time on aspects of the Exelixis story beyond cabo, which is something we mentioned in our early discussion about the longer-term outlook here. And specifically, maybe turning to the pipeline. And one of the questions we have for you is, last year, you kicked off a Phase I for your pipeline asset XL092, and so can you maybe just provide an update on how that's going? Where is that -- what's been happening given all the events that have been happening this year? And when could we potentially expect an update on that? And how you're thinking about development in any particular indication?

Yes, for sure. So we've committed to having a presentation on 092 in the second half of the year. The details of who, what, where, when will follow once we have the abstract accepted. So stay tuned on that. In fact, we're going to get -- we're going to have a broad offering of updates for our IND candidates going forward in the second half of the year. It's super important for me, and I think it's important for us as an organization to put a stake in the ground and talk about these molecules to kind of really get people to understand the data, understand the opportunity, understand how we're going about doing discovery and early development again. So I think you'll have a pretty fulsome description of more than just 092 in the second half of the year, which I'm personally really excited about, really glad that we're at the stage in terms of our data accumulation and data generation to be able to do that. 092 is, look, it's super important, right? We think we spent the last decade understanding the clinical pharmacology and the activity profile of cabo. We've learned a lot. We've taken those learnings, and we think we've designed a better next-gen molecule. And we'll talk about why we think it's better and what we did to make it better per se when we present the data. But this is -- we're going to clearly invest a lot in this molecule going forward, right? And I think the mindset is that starting in 2021, potentially, you'll start seeing us transition late-stage development from cabo to 092, right, in terms of next indications, next combinations, next doublets, next triplets, et cetera, because we think that's the best way to be able to broadly characterize the franchise around cabo/092 in a way that really drives value for patients and for shareholders. So stay tuned. Lots more work to do, and lots of more thinking to go into that, but we have a lot of momentum there. And certainly, the success that we've seen this year in terms of our clinical updates gives us a lot of confidence in the overall approach.

Great. We're definitely looking forward to that, Mike. So unfortunately, we've come up on time here. So we have to end the discussion on that note, which has been very helpful and thoughtful. My thanks to Mike and Susan and Exelixis for participating in the Goldman Sachs Healthcare Conference. We'll have to end it here. Thank you very much.

All right, Paul. Thanks. Have a good day.

Yes. Thank you, Paul. Take care. Bye-bye.