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

Good afternoon, everyone. My name is [ Ray Wang ], and I am a member of the JPMorgan Healthcare Investment Banking team. Thank you all for joining the session today. [Operator Instructions] With that, it is my pleasure to introduce Mike Morrissey, President and CEO of Exelixis.

All right. Ray, thank you very much, and welcome, everybody. Thanks for joining us this afternoon. I hope everybody is having a good start to 2021, and a good first day at the JPMorgan conference. I am really excited to be able to take some time today and share with you our updates and plans for how we are building a leading multi-product oncology company at Exelixis. We had a very busy successful year in 2020 and super excited about where we're going in 2021. So I've got slides in front of me. I understand that you all have the ability to advanced slides on year-end individually. So what I'll be doing today is simply calling out what slide I'm on. And the numbers are on the bottom right-hand corner of the deck, and you can follow along as I go. And I'll be happy to answer questions at the end today to be able to provide more context where possible. So with that, I'll begin, Slide 1, our safe harbor. Please see our SEC filings for a description of the risks that we face in our business, and I'll give you a few seconds to take a look at this as well. From there, I will note that we are providing preliminary financial results today. They were also in yesterday's press release that we put out. They are in unaudited form and results may vary between now and when we have our Q4 call on February 10, shortly thereafter. Okay. So let's get into the presentation. I'm on Slide 3 now. I'm assuming many of you know who we are, what we do, where we've been, have a good sense of where we're going. We are, obviously, a company that's been around for 25, now 26-plus years. We have made the transition to becoming a successful commercial organization around the execution recently with CABOMETYX in both kidney cancer and liver cancer. Kidney cancer, obviously, is our main focus in terms of our label in the U.S. and with our commercial partnerships with both Ipsen and Takeda. We believe we have with cabozantinib, the generic name, a product that has true franchise potential, along with the ability to, in the future, potentially have a multibillion-dollar per year revenues. I'll note that on a global basis, both in 2019 and in 2020, we surpassed $1 billion in each of those years globally in terms of net product revenue. So it puts us in a -- I think, a pretty different category than many mid-cap companies in the oncology space. We've got a molecule with broad activity. We spent a lot of time last year in 2020 across a variety of different presentations talking about that activity either as a single agent or in combination with a variety of immune checkpoint inhibitors. And we're certainly looking to maximize that data and the momentum that we've got coming from 2019, 2020. Now into 2021, with a lot of important milestones from a commercial regulatory, clinical and even discovery perspective. So a lot going on there. We have 9 ongoing pivotal trials with label-enabling potential that we think could drive revenue growth in 2021 and beyond. This time last year, we talked about what success could look like in the 2025 time frame, if our efforts in renal cancer, liver cancer, prostate cancer, lung cancer, other thyroid indications were achieved, and we're certainly working towards that vision of success in terms of what we're doing every single day at the company. We're really proud of our depth and breadth and expertise in clinical developments. And obviously, that's a key driver for our ability to become a multiproduct company with potential franchise molecule in cabozantinib. So that's the first and certainly most important priority. Behind that, we have XL092, our next-generation oral multi-targeted multi-kinase inhibitor that's in Phase Ia and Ib studies across a variety of different efforts that will expand this year, I think, in a pretty dramatic fashion, and we'll talk more about that later. Certainly, our goal is to move this into pivotal trials in 2021. And it's obviously a full-court press here at the company to make that happen. We anticipate having new Phase I trials for XL102, our CDK7 inhibitor and XB002, a tissue factor targeting ADC, as well as potential other INDs this year as well. So the rich history of Exelixis in doing really top-end target discovery, target validation, depth in really the understanding of really important biological targets and pathways in the networks in the oncology area, coupled with our strength in drug discovery, which is now spanning from small molecules into biologics, I think, sets us up really well and complements the expertise and depth we have both in clinical, regulatory and now commercial. So we're fully integrated in the U.S. and certainly have plans to broaden that over time. But to make that process work time and time again, in a very really rapidly parallel fashion to be able to move assets forward, get critical data and then really expand the potential clinically and eventually commercially. So we have a lot of success here in the past. There are currently 4 EXEL approved drugs on the market. 2 different forms of cabozantinib, COTELLIC, a MEK inhibitor with Roche and MINNEBRO, our mineralocorticoid antagonist with Daiichi. And we're obviously advancing a large number of really next-generation molecules, small molecules as well as biologics, ADCs, through both our internal research efforts, collaborative efforts and a mix of both that really work hand-in-hand. So very proud of that. And certainly, there's been a big ramp-up in that area over the last few years, and that will continue as we go forward. Obviously, we have a lot of interest on the business development side in terms of partnering and/or acquisition of compounds, either in the preclinical study, early clinical, even late-stage clinical study. We have built a sizable war chest of cash and the ability, I think, to be very thoughtful and pragmatic and disciplined with how we allocate that cash around new assets that targets new molecules that will help us really achieve this vision of having a multi-product offering as we go forward. So lots of important moving pieces. We've certainly had our share of success as well as failure, and that certainly goes with the business. But I think we've -- as an organization, we've learned, we've been able to navigate some tough times, been able to stay humble in the good times and really push forward hard to be able to bring more value to patients as well as shareholders as we go forward. So -- and I'll give you an update today on where we stand and where we're going as a company. So moving to Slide 4. Kind of just to highlight, just the network of partnerships and collaborations that we have across the board around the commercial setting, our clinical collaborations as well as pipeline collaborations. I would certainly expect the latter 2 to grow in size and magnitude over this year and in the future. We certainly want to maintain a strong commercial control over all of our existing and future assets as we discover and develop them. But certainly, this is -- it's an area where collaborating with the competition is obviously very important in terms of new modalities and new combination partners as we go forward. And we've been leading that charge, and that will continue. But I'm super excited about what we've got going on the clinical collaboration front and as well as in our pipeline partnerships and collaborations. So I think the deals last year with Catalent and with NBE on the ADC side are going to be critical for us as we go forward. And certainly, the existing collaborations that we have with Aurigene and Invenra and SSTI as well as Iconic are all really, I think, moving forward very, very well. The team here is actively involved in managing those collaborations, doing science together, asking the key questions, and I think it's a great way to go. And that will continue to grow in size and depth and magnitude as we go forward. Slide 5 and Slide 6 gets into some of the numbers. Our preliminary and unaudited, both full year and Q4 2020 results, financial results are shown on Slide 5. We had, I think, a very good year last year. As you'll recall, this time last year at the JPMorgan conference beginning of 2020, we guided that we would have a relatively flat year. And that growth, if successful, with 9ER, would pick up in 2021, and we still obviously believe that. We also, when the COVID pandemic hit, predicted and guided that we see some choppiness quarter-to-quarter as the pandemic waxed and waned, and I think that's been the case as well. But to give you a sense of the high-level numbers, and I won't go through all these, you can certainly take a look at this yourself in more detail. Our revenues were very, I think, strong and in line with our initial guidance and updated guidance. So we ended the year -- full year 2020 with $988 million in total revenue and $741 million in net product revenues in the U.S. And again, that latter number is well within the range that we gave this time last year initially at the beginning of 2020. We had a very strong fourth quarter. Total revenues were $270 million. Net product revenues were $200 million. Again, it speaks to the bit of choppiness that we're seeing, say, Q4 versus Q3, but we're very, very excited about having that level of commercial momentum going into 2021 and the anticipated approval and launch of the 9ER first-line cabo/nivo combination with the PDUFA date of February 20. So the setup is really, I think, playing out well for us in terms of the Q4 performance. We ended 2020 with a lot of momentum and a lot of confidence with where this -- where these indications are going and our ability to navigate some of the key issues around the commercial setting in the middle of what's clearly a surge in the pandemic. So that's exciting. And we'll certainly provide more color commentary about the numbers and about the full financial results on the Q4 call that I believe is scheduled for February 10, 2021. Next slide, which is Slide 6, has our 2021 financial guidance. We're guiding total revenues to be between $1.15 billion and $1.25 billion. Net product revenues in the $950 million to $1.05 billion range. And then R&D expenses, amongst other numbers that I'm not going to go through in great detail, in the $600 million to $650 million range. So clearly, we're seeing -- we're guiding that we expect revenues to increase fairly significantly, again, on the anticipated launch of the 9ER cabo/nivo combination in fist line RCC. We expect to increase our expenses on both the R&D side and the SG&A side in an appropriate manner to be able to capitalize on the momentum we have clinically as well as commercially to prep the market for additional potential launches later this year, early in 2022. And we'll talk more about some of our regulatory milestones shortly. But it's -- in keeping with the kind of high, high-level guidance we gave years ago that, obviously, as we increase revenues we'll have the opportunity to invest more in a very thoughtful and pragmatic manner that will allow us to continue to build momentum and build quality assets and quality data sets that will allow us, if everything goes as planned, to continue to see top line revenue growth. 2020 was flat. I think it's safe to say that we expect to return to growth in a pretty significant fashion in 2021 and beyond. And you can now see the vision that we articulated last year kind of coming to fruition with multiple plans for multiple potential, sNDA filings this year as well as in subsequent years as we go out to meet that aspirational goal. So lots of moving pieces. The team is certainly up for the challenge, I have to say, performance last year under certainly less-than-ideal circumstances, working from home, working remotely for 9-plus months was just outstanding. Morale is extremely high. Everybody is really excited with where we're at and where we're going, and I'm just really pleased that we're here in 2021 with an opportunity to, again, bring other compounds, other indications for cabo, move 092 forward in a way that we think can drive value for patients and for shareholders. So let's move to Slide 7. Again, just talks about the execution in 2020, which I think really sets us up very well for growth in '21, growth in terms of commercial success, financial success, regulatory success, clinical success, across the board. So we're a multicomponent company. We have many different levers that we push and pull every single day. And it's great to look -- take a step back at 2020 and just think about where we've come and where we're going. So obviously, clinical execution provides the data, the momentum, the energy for them pushing forward into regulatory and ultimately, in commercial, if that's successful. We had a really strong year last year with the 9ER data, the 021 data sets that we presented. Certainly, within metastatic CRPC was one of the more interesting ones, and certainly one that we hope to capitalize on this year with a filing. At the end of the year, we had very promising top line data with the COSMIC-311 trial in differentiated thyroid cancer. So again, very solid execution across the board in terms of top line data readouts, trial enrollments, either advancements or completion. Think about 312, enrolling that study globally in the middle of a pandemic, and it kind of -- it probably went ahead of schedule based upon some of the early ideas for when that could actually conclude. So we're excited about our ability to work with really a global network of investigators across a variety of different trials, soon to be a variety of different compounds to be able to advance our science, our clinical efforts and certainly bring these therapies, at least experimentally, to patients through these trials. And again, we were -- again, middle of a pandemic, middle of last summer, initiated 3 additional pivotal trials for the CONTACT-01, -02 and -03 for non-small cell lung cancer, for prostate cancer, for second-line renal cell. Again, across the board, and those are up and running and activating sites and enrolling well, considering the challenges with the pandemic on a global level. In the regulatory area, obviously, that was -- has been the #1 priority for us is to get the 9ER filing -- sNDA filing in that was again submitted at the end of August with the PDUFA date of February 20 priority review. So we're certainly pursuing that very aggressively in terms of that review. And very pleased to see with Ipsen and Takeda, the brand has now been approved in 50-plus different countries across both renal and liver indications. So again, really, congrats to those groups and those regulatory teams and those commercial teams for being able to launch the molecule broadly and be our partner in commercializing and developing this important molecule. On the pipeline side, again, we had a lot of progress there. It's great to be back in the drug discovery, early development area again after taking a short hiatus while we were able to kind of turn the company and put it on a very strong financial footing, the XL102, the CDK7 inhibitor has an active IND, and we expect to start Phase I shortly. We have progressed XB002 towards both the IND filing and the Phase I initiation. We're just -- we're doing the final work to validate the drug release assays that are rate-limiting there that would then drive the IND submission. So that's happening in the short term. Very excited about that. Big effort on XL092 last year in terms of moving that forward, looking at combination opportunities. We've got the first one going now with XL092 and atezolizumab in a collaboration with Roche. I would expect to see more, shortly, different ICIs, different pharma players, but really gives us the momentum there to be able to push that forward in a very broad development program, which we think has a lot of value when you consider the modern white space that's available in the ICI landscape. And the real meaningful but relatively small impact so far with cabo. So we've learned a lot with cabo. We've done a lot with cabo, and we're now looking forward to taking all that energy, all that knowledge and applying it to what we think is a better next-gen analog here that we think can really add a lot of value as we go forward for both patients and shareholders. We have a variety of preclinical assets. Some may hit IND this year. We have a whole range of different opportunities for new development candidates with both small molecules as well as biologics and ADCs that could be INDs in 2022 and beyond. So I really like the idea of how we're operating in terms of having this fully integrated organization drive innovation, drive value every step of the process that allows us to move, I think, very aggressively as we go forward here. And with a strong financial foundation and balance sheet to be able to make it all work, right? So it really all goes together. And obviously, we were active on the BD side, 2 really important deals last year. I am counting on having a lot more of those this year to really provide that additional level of innovation and novelty as we go forward with our early discovery and development efforts. So it's a great year last year. Slide 8, again, is a very busy slide. I'm not going to spend a whole lot of time going through this cell by cell, row by row. But I'm really proud of the fact that last year, we used important international meetings in the oncology setting to really get the data out there across 7 different presentations, including the top line data for DTC for COSMIC-311 at the end of last year. But it really -- I think this slide encapsulates to a large degree why we're so excited about what we've got across 2 pivotal trials, across a variety of cohorts and different readouts from other trials. We're seeing very strong level of activity with cabo, either by itself, say within 311 or with cabo IO ICI combinations across a whole variety of different tumor types, kidney, liver, renal, lung, bladder, others that really highlight the opportunity and the upside that, that combination of approach can bring. So obviously, this work is driving the next generation of trials and potential filings and everything else, but I thought it was really important to be able to highlight the fact that this 40-milligram dose of cabo combines extremely well, provides really solid activity, great activity across the board, along with good tolerability, low discount rates and just the profile that you'd like to see here across these large tumor types. So this is one for the records, but it's certainly a great resource to have all on one slide. Slide 9 talks about some of the catalysts that we're looking at going forward. And again, this builds off what we saw last year and what we projected last year in terms of that overall clinical plan with cabo, right. The nearest term opportunities are certainly within first-line RCC based on CheckMate 9ER, the market share and the duration considerations from either our analysis or from the actual data leads us to believe we can create significant revenue growth in 2021 and beyond. We put a number out there for the 2022 exit run rate of $1.5 billion. And we -- it's a very -- in our view, that's a very achievable goal based upon that analysis. And it's one that really, I think, highlights the opportunity to be able to essentially double our RCC revenues over a 2-year period in the U.S. is a very important goal for us to achieve. But we have a variety of other potential CABOMETYX label expansions, efforts that are ongoing. If you look at the bottom of the slide, Slide 9, the top 3, 311, cohort 6 for CRPC as well as the frontline HCC 312. These are sNDA filings that we plan to pursue this year. Again, very important priority for us is to get data -- again, data -- warranty and trials working, data looking good, get those sNDAs filed and moving forward. And then we have a variety of other efforts going on in non-small cell lung cancer with CONTACT-01, the 313 study, looking at the triplet cabo/nivo/ipi and frontline RCC, again, pushing the -- really the boundaries of standard of care with really the best of both IO/TKI and IO/IO as well as the cabo/atezo combination in second- and third-line RCC with CONTACT-03. So many opportunities really speaks to the activity profile of cabo in combination with immune checkpoint inhibitors and the opportunity in these large tumor types to really make a difference for patients with these cancers and certainly drive potential upside value for the company and for our shareholders. So again, just to review, this is a slide, I think, from the Q3 call, the opportunity for CABOMETYX based upon CheckMate 9ER, we had data at ESMO last fall. In terms of the full data set, very clear, just in our minds, strong differentiation from other ICI combinations that are currently available, doubling of the meeting median PFS, progression-free survival, as well as response rates, superior relative to sunitinib significance overall survival. We saw a clinical benefit across the different IMDC risk categories. Again, the tolerability with the low discontinuation rate was notable with the combination. And certainly, the kind of the combination of all those things together, driving, I think, very favorable health-related quality of life data, which is really, I think, an important differentiator all by itself. So again, all that together, you think about doubling of the PFS compared to sunitinib, you look at the PFS data we have from CABOSUN and/or from METEOR, we're essentially doubling that as well. So certainly, the doubling of that duration of treatment potential, coupled with, I think, pretty conservative market share estimates, again, gets us in this projected run rate of $1.5 billion for the U.S. RCC business by the end of 2022. So very important goal. And obviously, we're very excited to be able to get out there and start educating prescribers and physicians and their colleagues as soon as approval comes. A quick view of the marketplace. Again, just to give you a sense on what's happening here in the U.S. frontline market is a little bit more than 15,000 drug-treatable patients annually. The ICI combos currently dominate the frontline market with about 80% share. The ICI/TKI new patient share is about 50% based upon the brand impact data. So again, it's a clear driver of that market. And again, our view quite simply is that based upon the 9ER data, we think we can very effectively market to all 3 segments: the monotherapy TKI population, the population of prescribers that use IO-IO combinations as well as the IO/TKI combination. So I think the data is strong. And as you know, we've had a very solid share of voice in the RCC space and a great team in place ready to go. So we're -- obviously, need to get the approval in place and will be out within hours to be able to start really educating and changing that narrative around the value that cabo and nivo can bring in that study. I'm on Slide 12 now. Vectoring over -- moving over to frontline HCC, the COSMIC-312 study. Again, next big indication that we hope to see data for this year. As you know, we've guided to having top line data in the first half of 2021. We had hoped to have some data at the end of last year. Events came in slower than modeled so that's been pushed off into this first half of the year. Second-line CABOMETYX commercial sales are really in line with expectations, relative to the celestial single-agent cabo data. I think it's a little bit early to start seeing a shift there based upon the IMbrave data. That's been on the -- the bev/atezo combination has been approved now for frontline HCC for 6, 7 months. So it's still a bit early, but we would expect to see growth in that area as well. But certainly, that data set has really captured the attention and, I think, the imagination of GI oncologists in terms of this indication, having the ability to, for the first time, really improve upon the sorafenib and/or lenvatinib single-agent data with an IO combination. We are clearly very excited to be able to essentially run the same or very similar trial, swapping out cabo for bevacizumab in our combination, and we certainly like that opportunity relative to the totality of data with cabo. So the clear opportunity here is to provide beneficial data from both a PFS and OS basis. You got to get the data, obviously. But again, we're very excited about the opportunity. And being, really, playing a role in helping move this market towards systemic therapy in the frontline setting for the vast majority of patients with this very debilitating disease. So stay tuned there. Again, top line results expected in the first half of the year. Primary endpoints are PFS and OS. Move to Slide 13 for prostate cancer. Again, this is the other -- an additional indication we plan to file sNDA on this year. Again, we had the first data set at ASCO GU in 2020. Strong response rate, 30-plus percent response rate, in a population of patients who have RECIST 1.1 measurable disease. So we've taken the -- really the one variable around prostate cancer, where you really have a hard time measuring responses if it's a bone predominant or only population, we're looking at patients with either visceral or soft tissue, but measurable disease by RECIST 1.1. And we're very pleased with the data that we've seen. We have fully enrolled cohort 6 after 2 expansions to 130-plus patients. We are finishing up the expansion of the single-agent cohorts that would help provide the context for the contribution of components in any filing. And the next big milestone is the blinded independent review of all the scans from all these patients, which is ongoing right now. So again, we're hoping that data, obviously, if the data continues to look good, is to have an sNDA filing, looking at accelerated approval for this combination in 2021. We think the unmet medical need is extremely high here since the novel hormonal therapies are all moving up into the castration-sensitive population or the non-metastatic population so really leaving a big vacuum for patients with metastatic disease after they progress on one of these NHTs. So the opportunity is really, I think, exciting. The -- I think, the feedback from a variety of physicians and KOLs globally is that if there's an alternative to chemo there, they would view that in a very, very -- they'll be very excited by that. So I think our job is to move this forward as quickly as possible. You all know that we have CONTACT-02 also up and enrolling. The pivotal trial looking at the combination after a single combination of cabo plus atezolizumab after a single NHT against the second NHT, that's enrolling globally now and enrolling quite well. So we've got the confirmatory study up and going, which is always an important consideration in these kinds of discussions. So that's gone well. And again, data continues to be supportive, we'll have that filed this year. A variety of other pivotal trials and milestones are shown on this slide, all 3 contacts at the bottom of the table. COSMIC-311 for DTC, again, the plan is to file off the data we had in December. Again, cabo reduced the risk of death or progressive disease by 78%, so a hazard ratio of 0.22%. So a pretty stark win there for a second-line refractory population post the first TKI. So really happy to see that and really, again, puts another stake in the ground for cabo as a very active agent in a large global randomized pivotal trial. 313 study, which is the triplet cabo/nivo/ipi versus nivo/ipi in frontline RCC in poor intermediate risk patients. We have expanded the enrollment to 840 patients to provide additional power to assess the overall survival secondary endpoint. Obviously, it's a very important consideration. Now that the CheckMate 214 medians for OS are known based upon the ASCO data from last year, we were able to check some of our assumptions and repower that study to be able to adequately power for OS, and that's been done now. And again, we would expect enrollment here to complete shortly, and we're looking at a really event-driven analysis sometime early 2022. And then the contacts are all going as well as some important cooperative group studies that I won't belabor, but are on clintrials.gov and certainly happy to chat about further. Slide 15 moves into XL092. We think this is a very, very important molecule for us. I spent a lot of time on the Q3 call relative to what we've done, why we've done it, again, kept the target inhibition profile very similar to what we've got with cabo on purpose. We think all those different targets and all the cell types in the tumor microenvironment that we modulate, activate, inhibit are important. So we went after the one really weak link in the molecule and that's it's very long clinical half-life, and we've made it more, I would say, more user-friendly and more clinically friendly, if you will, easier to use by taking a 4-5 day half-life and dialing that down to about 24 hours. So all the data is here, I won't belabor the point in terms of the preclinical and clinical work. But certainly, been able to validate the clinical PK to ourselves that the hypothesis are correct. And now we're really actively sprinting across a variety of different opportunities and frameworks to be able to broadly and rapidly develop XL092 across a range of different solid tumors in the GU space, in the GI space, thoracic as well as GYN as well. We really think we've got a lot of learnings here and the momentum from the last 15 years with cabo play right into XL092. So we have a lot going on here, and we really think this has the potential to become really the standard-of-care combination partner with a variety of IO combinations by themselves, as doublets or even triplets with other add-ons, other IOs, other I/chemo or IO/new modality combinations and triplets that we think could really give us very clear opportunities clinically and commercially with the time and the momentum and, obviously, the cash flows to do that in a very exhaustive fashion. Another slide from the Q3 call, again, I won't belabor the points here. We've got a very broad development strategy across 4 different tactics. On the right-hand side of Slide 17, you can see some of the thoughts we have about how we can play this combination game to an extreme, again, with the time, with the insight -- with the pharmacological insights and biological insights as new modalities come into play. So we're really excited to look early, look broadly, look within tumor types, that we already have some activity with cabo, but certainly haven't been exhaustive in terms of the different parts of that process. So overall, this is going to be a major focus for us in 2021 and beyond. And certainly, very excited about making this happen for patients. Okay. Let's move to Slide 18. Two new IND candidates, again, XL102, this is the CDK7 inhibitor that we collaborated with Aurigene to be able to discover and develop. IND is active, and we expect to start Phase I trial shortly. XB002 is the tissue factor -- next-gen tissue factor ADC from Iconic Therapeutics. We opted in here in December of last year. We plan to file an IND once the drug product release assays are finalized and validated and then move quickly into the clinical setting in 2021. Just to give people a high-level view of what this could look like in terms of both trials, I think we've done a really good job over the last -- excuse me, last few years of being able to make these kinds of efforts happening to the standpoint of taking the biology as well as the expression patterns from these different agents and move forward. So stay tuned on that. I'm running out of time. I'm getting zapped here by the person stuff. I'll wrap up relatively fast. Other discovery and development opportunities are shown here. I will note that XL265 will not advance into development due to a signal that we've seen in GLP tox. Other molecules coming up behind it. So again, this is part of the process. So not all that surprising. It happens, and we're going to just move on from there. And then I'll just summarize with, again, thank you for your time and your interest. We've got a lot going on this year, and I'm really looking forward to updating you as we go forward across all the different parts of our business. So I will...