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

All right. Good morning. My name is Michael Schmidt, Senior Biotech Analyst with Guggenheim Securities. It is my pleasure to welcome Michael Morrissey, CEO of Exelixis, the next company that we'll be discussing now. Mike, thanks so much for joining us this year.

You bet. Good morning.

So I think most of us dialed into the earnings call last night, so some of this may still be fresh. But I still wanted to give you an opportunity to briefly highlight the company to those who might be new to the story.

Fantastic. Well, good morning, everybody. Thanks for joining us today. Michael, thanks again for the invite. Great to be here. Before I begin, let me just say 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 Exelixis is a commercial stage oncology-focused biotech company. Main product is cabozantinib. And globally, we've done $1 billion in revenue the last couple of years. A strong, strong commercial presence in both kidney cancer, liver cancer, thyroid cancer. Lots of exciting trials that are in progress right now. Big news this year so far has been the approval of the cabozantinib-nivolumab combination in first-line RCC, which we have -- we were launching within hours of getting approval a few weeks ago. So lots of excitement and lots of momentum across the portfolio. So you're right, we had earnings 18 hours ago. So I'll try and not make it too redundant or too boring, but lots going on here, for sure.

Great. Thanks. Yes. Again, a lot of this was talked about last night, but I did have a few follow-up questions, I guess, on the commercial trajectory of CABOMETYX, especially in RCC. You did put out some very good guidance earlier this year suggesting strong growth. The fourth quarter sales figure looked very good too, I thought. And all of this already ahead of the CheckMate 9ER approval, especially in the fourth, where we saw a significant tick up in prescriptions. And I think as we learned last night, inventory in-stocking was not a major factor in this context, but I think you talked about that a lot of this was driven in -- by second line demand. Could you help us understand those dynamics, especially given that it's been somewhat slow before the fourth quarter in terms of second-line growth?

Yes. So 2020 was -- as we said earlier in the year, we were going to have a relatively flat year, and we thought it would be a relatively choppy year once COVID took hold. So we had, as did most oncology companies, have a lot of, I would say, a relatively bouncy year in terms of revenue. So we weren't overly surprised with the fourth quarter performance based upon what we saw in Q3 and the momentum we've got going into 2021 and the launch. So bottom line, look, cabo is the market-leading TKI in RCC. It really dominates the second-line setting and that's been building over years. And the METEOR data with survival and the -- just the differentiation in that setting has made that the market leader. And we have great data, a great sales team who's been able to really help educate docs in that regard. So we're excited about that. Obviously, the growth is going to come in the first-line setting as we go forward. But we think we can maintain our second-line dominance as well, and really, again, get to that 2022 exit run rate of $1.5 billion per year. So a lot of work to do, but great position with great data and a great team for sure.

And again, this was talked about last night, but when we think about the front-line setting, TKI checkpoint inhibitor combinations seem to have the biggest share right now. And maybe just in a high level, do we know how that has been evolving? Are TKI checkpoint combos taking share away from IO/IO? Or is it really more coming out of the single-agent TKI bucket, where some practices seem to have some more less-dynamic treatment clinical practice approaches?

Yes. So the IO combinations have been in the 80% of the first-line share since the IO/IOs came out, and then were complemented by the I-O/TKIs soon thereafter. So that 80-20 split between monotherapy TKIs and IO combinations has been -- that's been pretty stable for the last 18 months or so. That's not a big surprise. We see fluctuations between IO/IO and I-O/TKIs depending upon where you are temporally, but also what source you're looking at from a market research point of view. Every one of these publicly available kind of research data sets has limitations in how they capture data. We have our own data, and I certainly like our data better because we're so much more involved and in-depth in the actual analyzing of that. So... But whether it's 50-30, 40-40, there's a big pool of patients out there, about 15,000 patients per year in the U.S. that need first-line therapy. We're really excited to be in that space right now. We think we have an offering with the totality of the 9ER data set to be able to really help every individual patient that needs therapy in that first-line setting. So we are, again strong data, we're out educating physicians literally as we speak. And I'm really excited about moving forward here, for sure.

Okay, super. And then again, this came up last night too, but there has been some chatter -- or not chatter, but investors have been wondering about the CLEAR study from ESI Merck and to what degree that combination might potentially pose another competitive headwind for cabo. The data that we saw in the abstract, in my opinion, not too surprising. I think we always knew that this was a potent combination. I was a bit surprised that the overall survival was not better. Just again, by avoiding redundancy, but wanted to get your take on that. And maybe in addition, thinking about safety, tolerability as opposed to incremental changes in efficacy, how important that is to prescribers based on your market research?

Yes. So I agree, and we've talked about this before too. We're not surprised by the data. We were expecting it to work. We were expecting it to look good. We took all that into account in terms of our -- both our market research and our forward-looking guidance in terms of the 2022 exit run rate. So again, no surprise at all. I think the abstracts came out on Monday. We'll see all the data on Saturday. And we'll have our investor event Saturday afternoon to help, I think, put it all into perspective with really 4 just fantastic academic KOLs that can, I think, really know the space well. And we'll talk more about that later. Look, we probably -- there's more to learn right now about that data set than we actually know in the abstract. So I thought Gisela did a great job yesterday of framing what we don't know about the patient population, about the disposition relative to the risk status, the nephrectomy status. Disease burden, you mentioned tolerability and discount rates. Quality of life is super important. We designed 9ER, and we made the conscious decision relative to the dose that we use to -- you start with the 40-milligram dose, take a little bit off the top potentially from an efficacy point of view to really maximize the opportunity to give patients better quality of life, better tolerability. Stay on that combination longer to maximize their benefit. And I think that was the right move. And we had numerous presentations last year which highlighted that approach across different tumor types. And obviously, 9ER was the first large global randomized trial where we did that, but we're real pleased with that. I think when you're thinking about really taking any oncology indication and trying to make that into a chronic therapy, tolerability, quality of life, those are really, really important issues to the patient. And we've got a lot of feedback over the years about that, and I think we made the right move. Now we certainly could have gone up in dose. And the 60-milligram dose, we know, is a little bit more active. So does that incrementally help us? Possibly, but you give something up with that. So we're happy with that. And again, I think that overall approach of having -- doubling of PFS, doubling of response rate, great survival data, great tolerability, the quality of life data, which is really important, resonates well in our market research and as we're talking to customers. So we'll see. We're excited to be there. And obviously, this is a really important part of our story going forward.

All right. So with that, I'd just like to move on and talk about some of the future growth opportunities. So the COSMIC-312 study in frontline liver cancer is the next bigger opportunity for CABOMETYX with data guided for the first half. Can you maybe help us understand how much of a growth driver that label could represent in terms of market opportunity?

Yes. It's a big indication globally. It's, as I've said before publicly, it's probably one of the largest growth indications in all of oncology in terms of the size, the incidence that really I would say, until recently the lack of great agents that really improve outcomes for patients. So you've got a lot of patients that need better therapies, large unmet medical need. And the question is can you go to this combination approach with I-O/TKIs and be able to move the needle for those patients? And certainly, the IMbrave data of looking at the combination of atezolizumab plus bevacizumab looked really encouraging, first study in the first-line setting to actually beat sorafenib head to head. Great data. The question is how does 312 look? Very similar to the discussion we had in 2019 with 9ER around the PFS OS response rate tolerability metrics. So we're excited about that. We really -- we're running a very similar study to what they ran with IMbrave, only we're looking at basically swapping out cabo for Avastin. So we like that swap, and we certainly are very excited about the data we have in this setting. So in terms of market opportunity, we had some numbers last year at -- in 2020 at JPMorgan with, I would say, modest market share growth in the first-line setting. So again, reasonable numbers in terms of market share, duration and those kinds of things. This could be a $700 million, $800 million a year opportunity for us in the U.S. alone. And obviously, ex U.S., it's even much bigger. So we're excited about that. Again, fully enrolled, it enrolled extremely well last year in the middle of COVID on a global level. So I think it just shows the interest in the indication and the enthusiasm with the combo. So yes, we're excited to go, for sure.

And based on your market research, how is the Avastin-TECENTRIQ combination being used at the moment? Or how has that been adopted into clinical practice? And how do you think about positioning relative to that?

We think the uptake there has been very strong. Again, just I think reinforcing the idea that the level of satisfaction with the existing monotherapy TKIs was light. I mean you use what you've got when you can. But if there's a better approach, then obviously it's going to get used. For us, we have to see. We have to see how the data looks. I don't want to speculate on that. Obviously, I think if we have a very competitive offering relative to those efficacy parameters, we'll be able to compete very well there. So again, cabo has, as a label in the second-line setting, it has survival relative to the CELESTIAL study. So that kind of -- it's a standout there relative to its existing data set and be able to layer atezo on top of that, hopefully have even better data in this much larger frontline setting is one that we're very excited about; as is our partners, Ipsen and Takeda. So big opportunity, one that we are certainly very excited about.

All right. Great, so looking forward for that. And then you did make some comments also around filing in prostate cancer mCRPC, which is a very big opportunity. And I think you said we'll get the independent final data analysis midyear, and then filing would be data dependent. What -- I guess how should we think about that clinical bar in this setting and relative to the data that we've seen so far from you?

Yes. I wouldn't want to speculate on where that bar is. Obviously, we went in with a 30% -- 30-plus percent response rate at the ASCO GU presentations last year. Strong data set. Again, great, great response rate in patients with measurable disease. So the issue around response, response assessment is really kind of not at play here relative to using RECIST 1.1. We enrolled the cohort 6 in totality of 130-plus patients pretty quickly. So lots of enthusiasm there, obviously. The next bar to pass is the BIRC, and that's in progress right now. But obviously we want to get that data, look at it carefully and if it looks good, move forward.