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

Good afternoon, everyone. I'm Andrew Berens, Senior Biotech Analyst and Head of Target Oncology for SVB Leerink. Thank you for joining us on the final day of our Global Healthcare Conference. We are very pleased to have Exelixis with us. We have Michael Morrissey, the President and CEO. Thank you for joining us, Mike. We really appreciate your time.

Thanks, Andrew. Great to be here. Thanks for the invite.

Of course. No, we appreciate it.

So for those on the webcast that may not be familiar with your company, can you give us an overview of the company?

Yes, absolutely. Before I begin, let me 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. So with that out of the way, yes, Exelixis is a commercial-stage biopharma company focused on oncology. We have a rich history in discovery, development and now commercialization. We have total of 4 products that have been discovered in our labs and have been approved and are commercialized by us and others. The lead one is molecule called cabozantinib, which is a next-gen, really exciting multi-targeted kinase inhibitor that has been approved in a variety of indications for renal, for liver as well as thyroid cancer. Strong data there as a single agent and in combination. We've done about $1 billion in revenue globally over the last few years, and certainly have very high aspirations for it as we go forward. So building a pipeline. I'm sure we'll cover all that today, but I think that covers it at a pretty high level.

Great. Thank you for the overview. You mentioned cabo commercially to date. You had, had very strong revenues. I think in Q4, it was a little over $200 million. Where are you seeing -- I mean, obviously, the renal cell arena is very dynamic. There have been a number of new regimens that have entered. It's been -- it's always been very competitive, but it's even more so, I think, now. How is cabo being used primarily now? And where do you see the drug being used as this opportunity evolves?

Well, prior to the approval in January for the combination of cabo plus nivo in first-line RCC, we had single-agent approval for RCC in both the first-line and second-line setting. With the introduction of IO/TKIs and IO combinations in general since 2018 or so, cabo has been really a mainstay in the second-line arena. And as the market leader, really, I would say, dominates that space for both progressives from IO/IO as well as IO/TKIs. Obviously, we're very -- we have been very interested in regaining market share in the first-line setting that we lost, a single-agent cabo when the combos came into play. So obviously, we're super excited about the top line data last year with 9ER now with the approval and really strong efficacy data, safety data, tolerability data as well as quality-of-life data. We're really excited about being able to get out now and market that to HCPs with, I think, a very differentiated and a very important set of data.

Okay. Can you give us an overview of what 9ER showed? And maybe put it in perspective relative to some of the other combination data sets that have been out there already?

Yes, for sure. So again, uber-top line summary, we saw doubling of PFS and response rates for cabo and nivo compared to sunitinib, which has been the kind of go-to control arm for a variety of the IO combination trials. Very strong survival benefit at the first interim, with a hazard ratio of 0.6. Really, I think encouraging was that we started at an optimized dose of 40 milligrams, which is taking a little bit off the top from the standard single-agent dose of 60 milligrams with full-dose nivo. That led to, by design, very low discontinuation rates in the 5% range for both molecules, and probably about 6%, 7% for cabo by itself. And that totality of data, when you think about efficacy, you think about safety, tolerability, better dose, led to improvements in a variety of quality-of-life metrics compared to sunitinib, both in terms of overall well being but also disease-related quality-of-life metrics. So it's the full package. And we think it's very important. That optimization that we did on the dose, I think, is a very important part of that story relative to and being able to have patients stay on drug for a long interval, a long duration. Duration of response is 20-plus months. Vast majority of patients respond. If you see our waterfall, most patients have tumor shrinkage. I think only about 5% had progressive disease as their best response. So it's a very strong package. And as people heard during the ASCO GU week a few weeks ago, the quality-of-life data is a really important differentiator. We can keep patients on drug. They're feeling good and giving them both longer survival and a chance to actually have high quality of life as well. How that compares to other regimens? That's somewhat in the eye of the beholder, right? It's always dangerous to compare across trials. We were very happy with the hazard ratio of 0.5 for PFS relative to the other metrics out there. CLEAR came in a little bit lower. That's the axi -- or the len/pem combination from Merck that was announced during ASCO GU. Lots of different, really, I would say, points of discussion there in terms of populations were different. They went in with the top dose of len. Had pretty significant tolerability, dropout issues, which I think is important to think about in terms of how patients stay on drug. Survival metrics were the same. So I think what's fair to say, number one, is that this is a big market. If you look at kind of doing simple math and some of the estimates, this is probably a $4.5 billion to $6 billion market opportunity for the first-line setting. So there's plenty of room for all of us to be able to address a very important patient need in a way that makes sense. The data between 426, 214, CLEAR and now 9ER are similar in some ways, different in other. They all had different populations. I think what we're excited about is we've got the trifecta of response rate, PFS and survival advantage on top of this improved tolerability, which led to really, I think, differentiating quality-of-life data, which we think we can really use to help educate physicians about the value and the benefit we bring to the patients.

Well, what was the main tolerability issue with Lenvima/Keytruda protocol that caused the dropouts?

Yes. It's not clear based upon what was actually driving that -- those dropouts. If you look at all-cause adverse events, it's probably 15%, 20% higher than what we saw in the 9ER study. Those details are still, I think, to be published and presented. So again, it's a lot of the typical TKI, VEGFR-targeting TKI adverse events, which, as a class effect, impact all of these molecules. The question really is, at what dose do you start with? And what does that lead to in terms of the long-term efficacy, safety, tolerability as well as quality of life, which, again, I think what we tried to do is take a little bit off the top, keep patients feeling good, keep them, obviously, in the active zone of that combination in a way that could really drive clinical benefit for a chronic setting, right? We're talking about keeping patients on drug for potentially 2 years or more. So with that situation, you really want to be able to optimize that. And that impacts, obviously, the longer they're on therapy, the more benefit they have. The more likely they are if they're feeling good to go on to a second therapy -- a second-line therapy as they progress -- if they progress. So those are all really, really important metrics to think about as you're thinking about what combination to use with the first-line patient, for sure.

Okay. And where does 9ER leave the nivo/ipi regimen in terms of the treatment paradigm?

Well, that's, I think, a really important question. Certainly, the ipi/nivo data has matured nicely over the last 4-plus years. The tail that you now see with this really mature data, both in terms of PFS and OS, with about 1/3 of the patients having long, durable responses or survival over that time frame is really compelling, and there's always a trade-off with -- in terms of toxicity and these IR adverse events. So it's all around balancing that right now, at least by our metrics that we see in public databases. Nivo/ipi has about a 35% market share or so compared to the 50% that the TKIs have with the IO. So the question is, how will that evolve over time? Nivo/ipi is certainly a favorite of the KOLs who have really a therapeutic intent of curing the patient, whereas I think in the community, it's more managing that disease on a chronic basis. So different intent with those different modalities there. But certainly, we're very interested and focused at addressing using the 9ER data to address every eligible patient every single day. And if we take share from the IO/IOs or from the IO/TKIs, that's fine. We think we've got the offering to be able to do that.

Okay. I did get it inbound from an investor, and I do want to remind everyone on the webcast that you can feel free to ask questions through the dashboard, and we will try to get them in. And this is in line with what we're talking about now. And the investor is interested in knowing about the impact of downstream for cabo in the second-line as the drug moves to the frontline. And then can you give some commentary around what you expect to be the real-world usage in the frontline? And what you've been seeing in the second-line?

So our second-line share for cabo -- single-agent cabo is very, very strong. We're -- by every metric we look at, both internally as well as through public data sources, cabo is the market-leading second-line agent, with a 45-plus percent share, plus or minus, as the -- as you're looking at different sources. So it's the real work course in the second-line setting. We think that will continue. Obviously, we're not going to dominate. We're not going to get every patient frontline. So I think the current paradigm where our patients as they progress, move on to cabo from an IO combination makes sense. And those patients that we don't capture with cabo/nivo frontline, then we're very confident we'll get them second-line with single-agent cabo. And if you look at some of the early data coming out from ISTs and other randomized pivotal trials using cabo as a control arm, cabo is very, very effective in that space -- in that second-line space. So real-world data, we're seeing 8-plus-month duration of treatment in the second-line setting, and we think that could continue to grow over time as patients come on to cabo after progressing on the first-line with good overall performance. But certainly, we're very focused on building. That's the foundation in terms of our second-line market share and our second-line business and then building upon that in the first-line setting, where our duration is probably twice that relative to what we saw in 9ER. So it's a very good way to operate, keep that business, build on top of that, and then grow in a very -- what we think could be a very dramatic fashion.

Okay. And how is the commercial responsibility between you and Bristol for promoting this newly approved regimen of Opdivo plus cabo?

So we operate independently. There's no co-marketing, co-promotion agreement. We have our focus, they have theirs. Obviously, we have very different businesses to run and to build upon and protect. And so we've agreed that we'll do our thing with our -- it's all the same data, right? We'll do our thing. They'll do their thing. And we have very -- I think, a very important message to send to prescribers to educate them on the data relative to what we think the cabo/nivo combination can do for their patients. So we talked to BMS. They've been a great partner for literally decades, and now we have this commercial discussion going. But again, we're focused on our messaging, we're focused on our business and being able to help every single patient every day with this new important combination, for sure.

Okay. And you have another study, COSMIC-313, that's testing nivo, ipi and cabo. So a triplet. How should we think about the tolerability? And what is the incremental efficacy likely to be with that combination? And any insights on where you're starting the dosing, I guess, for cabo in light of what you said about 9ER?

Yes. So exactly. So again, the cabo starting dose of 40 milligrams, we had a pretty extensive update from Dr. Andrea Apolo from the NCI at ASCO GU with the final update from the doublet cabo/nivo and the triplet cabo/nivo/ipi across a pretty good number of rare GU patients that she's been working on now for the last 4-plus years. So again, tolerability looks good. Efficacy looks good. I think our overall response rate was in the -- just a little bit shy of 40% across a variety of very rare tumor types, along with some renals and some prostate cancer patients. So very strong data. We've seen good activity with cabo/nivo/ipi as well in a mix of front-, first- and second-line liver cancer patients as well. So the opportunity to layer cabo on top of ipi/nivo, I think, is a really important one. You earlier asked the question, can you raise the standard of care from either the IO/IO combination or an IO/TKI combination by doing this triplet? And it's a theme that we're very interested in with 313, obviously, since we're trying to take the -- all this data from the doublets and improve upon that. But in general, I think we're very interested in taking that triplet concept with either cabo, or more importantly, with our next-gen version of cabo, XL092, and really applying that across a variety of different tumor types. So it's -- we're in the business of generating better data for patients. And if you can differentiate your combination or your regimen in a way that improves standard of care, then that differentiation is what drives commercial success. And I think going back to METEOR in 2015, 2016, again, RCC has been competitive for a decade or more. So the recent competition in frontline RCC isn't -- I mean, it's new for doublets, but it's not new for renal. It's been that case forever, right? So the fact that we came out of the market very, very late as the 11th or 12th entrants with a single-agent, multi-targeted TKI that was designed to be different and gave a survival data that nobody saw before, drove the interest and then drove the value opportunity that we had in terms of patients and then for the company itself. So we're in the business of doing that again and again and again, and it's always about not just generating kind of me-too data but we have to generate better data because better data drives commercial success. There's no question about that.

Okay. And you also presented some interesting data at ASCO GU with a Merck compound, a HIF-2 alpha inhibitor, belzutifan, 6482. Can you talk about the rationale there? And what you've seen? And where you think that could fit into the treatment landscape?

Yes. So just to be clear, that wasn't our data, that was data from Dana-Farber looking at the second-gen HIF-2 alpha inhibitor combined with cabo. This is work that Peloton started before Merck did that acquisition. So it's interesting data. It's hard to dissect out a small number of patients and a combination that's not been randomized from a large -- kind of large network of contributing organizations or institutions. We'll see. It's early days. The compound by itself is clearly active. Hard to say that it's as active or more active than cabo. The combination itself had a response rate that was similar or maybe even a little bit less than what we see with cabo in that setting right now. PFS was a little bit longer, but actually matched what we saw back in the initial Phase Ib study of about 15 months with cabo by itself. So again, it's early data. It looks interesting. It looks active. But obviously, you need to have more patients randomized to be able to actually understand if there's separation between the doublet versus a single agent or not. So that's work that I'm sure they're doing in some shape, manner or form. And we're very interested. Our view is really I would say a little bit different, right? Asking the question is, what drives resistance frontline to IO combinations? Is it an antiangiogenesis approach? Or is it a more IO tumor immunology approach? And we've got some -- I think some pretty interesting data that we're following up on in the CONTACT-03 study, looking at the combination of full-dose cabo with atezo in these second-line patients post IO. So again, whole goal is to raise the bar for standard of care in that setting, do better by patients, and success and differentiation can drive commercial movement going forward, for sure.