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

There we go. Hello, everyone. Welcome to the second day of the Credit Suisse Global Virtual Health Care Conference. My name is Evan Seigerman. I'm the senior biopharma analyst here at Credit Suisse. And hopefully, next year, we'll be in person, but Zoom has to suffice for now. And with me to kind of close out the day on my schedule, we have Exelixis, and from Exelixis, we have Michael Morrissey, President and CEO. So before we jump in with Q&A, Michael, I was wondering if you could just give us an update. I know you had your third quarter call last week. Tell us kind of what's happening with Exelixis and get us up to speed, and then we can jump into questions.

Yes. Sounds good. Thanks again for having us. We've had a very packed day of one-on-ones.

Glad to hear that.

Multiple-on-ones. So that was a great day. Miss traveling to your meeting live. That's always a fun event for us, not going to New York, heading down towards warmth. So hopefully, we can do that next year. But again, thanks again big time. So before I begin, let me just remind everybody, 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, I mean, it's been a really productive year for us at Exelixis. We had a lot of opportunity to get things done this year to really set the stage for what I think will be a transformational year in 2021. This year is all about building the foundation for that [ undoubtedly ] uptick in commercial success potentially next year. So we're excited about that. We had our Q3 call last week, and we talked a lot about the 9ER data and the 9ER commercial opportunity topics I'm assuming we'll talk about it today?

Yes. Exactly. That's like my first question.

It sounds good. As well as a lot of data and discussion around 092, next-gen cabo as well as our pipeline. So happy to dive into it and talk about the key [ hot topics ].

Sounds good. Sounds good. So 9ER. So last week, you discussed CheckMate 9ER, the results and the filing status on your earnings call. So can you provide us with a quick review of that update, kind of what you said? And how you're thinking about the commercial opportunity in RCC?

You bet. So again, we had lots of updates in regard to 9ER this year, top line data in April, full data set presented at ESMO in September, filing in August. The filing was accepted with a PDUFA date in June -- not June, February 20, 2021. So lots of dates and milestones either that we have met or will meet. The data set is, I think, very compelling, a doubling of PFS, doubling of objective response rates, strong signal of survival benefit, 40% reduction in the risk of death, very I think surprising data on tolerability. Low discontinuation rate, which I think people were happy to see relative to what's been kind of the perceived, some of the perceived liabilities with cabo in the past. So going in at 40 makes a lot of sense, 40-milligram starting dose with full dose nivo. Very -- I think very solid health-related quality of life data as well relative to sunitinib. So the totality of data looks really encouraging and is certainly, I think, consistent across the board in terms of efficacy readouts, tolerability readouts, quality of life readouts. So we're excited about that and looking forward to finishing up the review and being able to launch ASAP upon approval.

And just that PDUFA is February 20, and you did get priority review, correct?

That is correct. Yes. Correct.

That is fine. And then when you think about kind of the commercial opportunity, can you frame that for us a little bit just so we understand how this could change RCC?

Yes. So there's about 15-plus thousand patients in the U.S. each year that present with -- that are drug eligible for first-line treatment in kidney cancer. Similar number, maybe a little bit more in Europe. And then the rest of the world is obviously covered with a different number. So it's a large top 10 tumor type. It's one that we've got a lot of experience in. Again, we launched the METEOR -- off the METEOR data in second-line RCC in 2016. We had CABOSUN data that we filed on and was launched on in 2018. So we've got a lot of very strong history here, strong data in both the second- and first-line setting, 9ER as on top of that. So we've got, I think, an opportunity to take a compound like cabo with very strong brand recognition, well known, viewed as best-in-class TKI, coupled with nivo, which has got great legacy data, great pedigree here in RCC as well and combining those as we move forward. So we're excited about that. And again, the -- our market research suggests that we have a very good opportunity to capture significant market share in the first-line setting. Obviously, we're seeing a doubling of our duration of treatment and PFS relative to single-agent cabo. So that's a big part of the overall equation, too. So overall, again, we're locked and loaded, ready to go. We just need to get the letter and be able to...

Got to wait for that PDUFA date or hopefully before the PDUFA date.

Hopefully, yes, for sure.

Exactly. So along those lines, so I know pembro and axi has a really strong position in frontline renal cell carcinoma. Do you see any potential challenges in your ability to compete, given that you have the second IO-TKI combo in that market?

Well, being second is never optimal, right? Rather be first. In this case, we're second in terms of combination data but with 2 well-known brands that have best-in-class data as single agents by themselves, so we're not starting from square 1 here. I think the way we look at it is that we've got this momentum from 4 or 5 years of marketing individual agents and certainly very excited about being able now to combine those together with data that is arguably best-in-class. So look, we've got a strong share of voice, strong team at Exelixis. Very clear direction to the team relative to what it means to be able to be competitive in this space. So we feel good about the data set. We feel great about the team. We feel certainly very confident in our relationship with BMS. So it will be a full court press, right? And we're going to gain market share back across every possible segment as we go forward.

And along those lines, on your call last week, you projected a $1.5 billion run rate by year-end 2022 in RCC based upon the potential approval of the 9ER kind of combination. So how confident are you in those numbers? And can you discuss some of the considerations that you went -- that went to those projections?

Yes. So as we talked about on the call, it's taking the look at the market size and then a reasonable market share that I think is conservative and leaves room for upside as well as the longer duration of treatment with the doublet that gets us into that number, relatively conservative ramp up to steady state and also assuming that there would be other -- 5 other -- or 5 total IO combinations for the competitors in that space. So I think it's a very conservative view on what success could look like with an exit of 2022 with that $1.5 billion a year annualized run rate. It's one that we can achieve and one that we can build on going forward. And again, that's just for RCC. And then when you think about what else we have going on in other RCC trials, say, with 313, the triplet cabo/nivo/ipi versus nivo/ipi, 312, our cabo/atezo study in first-line HCC, prostate, lung, et cetera, I think it really builds on some of the messaging we did back at JPMorgan earlier in the year around how the cabo franchise could grow if we're successful in all these trials to a $4-plus billion a year run rate by 2025.

And along those lines, kind of how do you get to that $4 billion-plus run rate by 2025? What assumptions or what trials or indications need to come online to get there? And do you have kind of multiple avenues to hit that revenue target?

So we went into great detail on the math. In fact, there is a slide in our deck and that kind of went through that indication by indication, line by line, et cetera. I won't try to recapitulate that.

Fair enough. Fair enough.

But in Slide 11 from our deck, I talked about that a lot going back to that. So I guess what I'll say is, it's a view of what success could look like relative to the opportunity in renal, in liver, in prostate, in lung, in thyroid if we hit on those trials. And that was -- we put that out there back in January before we had the 9ER data readout and before we presented, I think, really encouraging data with cabo plus IO in liver, cabo plus IO in prostate, cabo plus IO in lung, cabo plus IO in bladder. So it's -- you fast forward now, what, 11 months in the future from that time point, and we've got, I think, really encouraging data that speaks to the activity and the potential of cabo-IO combinations starting at this 40-milligram cabo dose, which shows great activity, tolerability, safety with response rates in those Phase Ib presentations. And then certainly, the totality of data from 9ER. So all in all, we're moving in that right direction. Obviously, we need trials to read out effectively and positively. And that's on tap for 2021, 2022, et cetera. But we're feeling pretty good right now about the data we've got, the momentum that we've got and the opportunity that we have to build on the success of cabo in RCC based upon METEOR, CABOSUN, 9ER and then CELESTIAL, too.

Right. Excellent. So kind of taking a step back and we were talking about COVID and getting out of the pandemic with the vaccine hopefully. But obviously, it's presenting a challenge for your industry, for everyone really, but how has it really affected your business? And can you speak to some market dynamics that are at play for why the entire TKI market was kind of down over the past, what is it, 6, 7 months now? It's hard to keep track.

Yes. Well, I think it's true in general. In fact, as I look back on the quarter, I can't think of too many examples of certainly Part D products that had quarter-over-quarter growth Q2, Q3, I mean, across the board. Within oncology, outside of oncology. I mean the health care system is obviously impacted right now by COVID and has been for the last 6, 7 months. The numbers, when you look at infections, you look at hospitalizations, you look at the vector for death, it's all going in the wrong direction. So we have, as a country, a lot of work to do to get back on track here. Obviously, if you look at some of the peripheral data from payers, from different organizations, tracking visits, tracking diagnoses, even tracking billing, right, numbers are down because people are not going to see their doctor for either routine checkups or for mammograms or for colonoscopies or whatever. I mean across the board, it's having an impact on the -- on health care system. And I think the bad news here is that patients who might need to be diagnosed and are delaying that are going to show up later in the system whether it be in Q1 or Q2, whatever, with much more advanced disease, which is bad for them and certainly limits their options for mitigating that more advanced disease. So it's a real issue. It's a real concern. Certainly for the RCC market basket, for the HCC market, we've seen across the board decreases in demand, decrease in revenues for those different products. So it's a sign of the times per se. And hopefully, these vaccines, as they come online and we get this under control over the next 6, 9 months, we'll turn things around, right? So...

Here's hoping. So do you -- hopefully, by the back half of next year, do you expect things to potentially recover, assuming we get a vaccine and kind of make the progress that we really need to make?

Well, I would...

I know -- looking at the future, right?

Yes. I really wouldn't want to speculate on timing micros [ as to all there is ]. I mean we're looking at the same data in terms of whether you look at stuff in the mainstream media or stuff from the Hopkins website, the vector for infections, hospitalizations and deaths is going in the wrong direction. And we're going into what's arguably the worst time of year in terms of people being inside more than outside, dry air, making these respiratory particles much more long-lived in terms of being transmittable. So it's really -- it's going to be a tough couple of months. That being said, I don't know the kinetics of diagnosis, especially within oncology. At what point does a patient basically have to stop ignoring whatever symptoms they're feeling and go see a doctor? And is that right shifted by 3 months? Is that right shifted by 6 months? Nobody knows that question. So -- but I think eventually, it will stabilize and then go back in that kind of uptick that we're expecting to see. The question is just when. So -- but look, we're ready to respond in any shape, manner or form. The good news for us is that we've been very effective at managing the risk around trial enrollments, trial initiations. So all of the key development and regulatory milestones we're keeping track of, and kudos to the team. We've got a group that's, again, working from home, but literally living at work while they make sure that they take care of all these patients on a global level. So I'm super impressed and inspired by their commitment to patient well-being and patients' enrollment into these trials because we think we can help more patients as we go forward.

And kind of along those lines, you've, as you just said, continued to keep pace with all of your clinical development trials from COSMIC-021 to CheckMate 9ER and whatnot. So kind of can you provide me the current status of these key clinical development activities, and when we can expect the next set of clinical milestones? And what do we have to look forward to despite the pandemic even when we're doing this virtually?

Yes. So we have a pretty full roster of milestones coming up, starting in Q4 with the first look at response rate data for 311, that's the trial of single-agent cabo in differentiated thyroid cancer, going into 2021. 312, that's the first-line liver trial, liver cancer trial looking at cabo/atezo versus sorafenib. We have -- that's fully enrolled outside of China. We expect top line data in the first half of 2021. Event rates are a little bit slower than we anticipated. We had hoped to see that by the end of 2020, but it is what it is. So that got pushed based on purely not enrollment issues, but just simply event rate issues that happen sometimes as you model versus actually count events. 313, which is the triplet cabo/nivo/ipi versus nivo/ipi, again, has enrolled extremely well. I think the success of 9ER and the continued success of 214, the CheckMate 214 of ipi/nivo doublet has kind of supercharged interest in that trial, also, again, middle of this pandemic and Europe opening and closing and U.S. having the same kinds of issues, that's enrolled really well. So I would expect that will read out end of next year, early '22. It's a big trial. Obviously, lots of opportunity there to really redefine standard of care with a triplet as opposed to taking the best of IO-IO and the best of IO-TKI together in that space. The 021 trial. Again, this big basket trial has been incredibly productive for us in terms of different tumor types with the cabo/atezo combination. Prostate is probably the highest priority there. We have fully enrolled cohort 6 with 130-plus patients. And we're just finishing up the enrollment in the single-agent cabo and atezo cohorts. Filing is expected next year if the data continues to look good. Lung has completed enrollment for the first 80 patients in cohort 7 and the single-agent cabo cohorts as well. So tracking that closely, trying to understand how that data looks from a kind of a longer-term perspective to understand if we add more patients there or not. And the 3 CONTACTs in lung, in prostate and in second-line RCC are all up and running and adding sites and enrolling, I think, pretty aggressively. So again, it's been fun for me to watch the development in regulatory. Clinops team work in a very focused manner to make sure that we get these trials enrolled. We're setting up to be able to unblind and look at top line data and then get new trial started. So it's been a great year for them and super proud of their effort, for sure.

A lot of time on Zoom for your team, for sure.

Yes. No doubt. I think they're more [ technical ] than I am. Exactly.

I have to have a little levity because I am a little sick of Zoom as well, but it does work well. I actually have an e-mail question that I want to share, kind of talks about cabo in the front-line RCC setting. So what person or front-line share do you have with cabo, with CABOSUN currently? And what do you expect to happen as you get uptake of 9ER in that front-line setting?

So the market share front line with single-agent cabo depending upon the method by which you look at the data, whether it be brand impact, Rx, you look at charts, you look at claims, it's in the 5% to 10% range. That's what we've seen consistently since the IO combinations came online. Again, single-agent TKI monotherapies across the board is about 20% of the overall first-line markets. I think there's room to be able to capture some of that share with the combos. And certainly, we'll be looking at that with 9ER as well as IO-IO and IO-TKI from a competitive point of view. What's the upper limit there? I wouldn't want to speculate on that. Obviously, we have a number based upon our $1.5 billion 2022 exit rate for RCC, but we'll leave that one go from a competitive point of view right now, for sure.

Fair enough, fair enough. And hopefully, you actually grow beyond that $1.5 billion rate.

That'd be good.

I don't think you're limiting yourself. You're just putting a tie-up marker out in 2022.

Yes. And again, that doesn't count success in 313, which could really change that dynamic dramatically, especially in the U.S. Yes.

So to be determined, I feel like that's kind of where you're going with this. And hopefully, we have more upside from there.

Yes.

So looking at the pivotal COSMIC-312 study with cabo plus atezo and front-line HCC, what are your thoughts around the development of the HCC market and the commercial opportunity there?

Yes. That -- I think it's a fascinating indication to now, I think, watch evolve. For years, if not a decade or more, that's been really languishing in terms of you have a large number of patients with this huge unmet medical need that just didn't have the drugs, the single agents, if you will, that can really move the needle for them. So it's so exciting to see IO kind of enter the space. The IMbrave data with bev/atezo was clearly a stake in the ground that IO combinations, IO-VEGF targeting combinations are effective here. And it's capturing market share very quickly. There is between a 30% to 50% market share gain already since that was launched in the summer. So we're excited about that. Obviously, we like the horse we have in that race with cabo and cabo/atezo against sorafenib in that setting. The momentum and the enthusiasm for that trial was just -- during the enrollment phase, was just amazing to watch in how fast that enrolled and just the momentum that we were able to generate with that trial. We had, I think, pretty encouraging data with cabo and nivo plus/minus ipi at ASCO GI back in the early spring, which, I think, put a stake in the ground on what you would expect to see kind of how cabo would perform in that regard as part of an IO combination. Some of the other data that we presented at the 40-milligram dose, while not in HCC, further helped kind of reinforce the approach here. So again, we've got to get the data, get to turn that card over, but we're certainly excited with the opportunity and the size of the market. I mean it's just so underserved, and better data will continue to drive patients towards medical oncology and systemic therapy.

And that -- just to be clear, that data is event-driven, but you could have it in the front half -- first half of next year, correct?

That is correct, yes. That's the current modeling would suggest.

Perfect. And then you had some interesting, promising data in prostate and nonsmall cell lung cancer cohorts of the COSMIC-021 study earlier this year. Are you planning an accelerated filing strategy for one or both indications? What kind of data package do you think you would need to get those -- to get that potential approval?

Yes. So we've talked a lot about prostate, had discussions with the agency. We've got pretty good understanding of what we need to get that file in for review with a high profitability of success. Obviously, it's all data gated from the standpoint of what we would need to show from a response rate point of view with supporting data around other efficacy readouts, safety readouts as well as the obvious involvement of understanding the contribution of components here. So again, we've got -- if you look at the historical kind of requirements for a sub-Part H approval, and there have been 50-plus of those over the last 4 or 5 years in the oncology therapeutic area -- losing my voice here, you need about 100-plus patients. You need a response rate in the low teens up. And you need to have very clear signs of that combination being better than either single agent in a -- in that combination. So we've got all those components built in. Again, the ASCO data that we had at ASCO GU for prostate was pretty compelling. We've learned a lot from the comments back in the 2013-2014 time frame. We asked some very simple questions around patients with measurable disease by RECIST 1.1. So we took the controversy out of the equation in prostate where we're not looking at bone scan activity for efficacy. We're looking at it for progression only as defined by RECIST 1.1 and asking very simple questions around response rates in patients with measurable disease, yes, either in visceral organs or in lymph nodes. So very clear-cut, easily quantifiable response assessment that is obviously both -- accepted both from a clinical and regulatory point of view. So we're doing all the right work here, asking all the right questions in a very simple, straightforward manner. And obviously, the data is -- continues to look good. We'll push that forward as the highest priority possible in 2021.