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

Good morning, everybody. Welcome to Barclays Healthcare Conference. My name is Peter Lawson. I'm one of the biotech analysts at Barclays, and I just want to thank everyone for taking time out of their day. For questions, institutional clients can e-mail me at [email protected] or ping me on Bloomberg. And it's my great pleasure today to introduce the management team from Exelixis, so Mike Morrison -- Morrissey. Thank you so much.

And I guess, maybe to kind of kick things off, Mike, just an opening question would be your 2- to 3-minute kind of overview of like your kind of differentiation in the oncology space. There's lots of oncology companies. How you're differentiated? And kind of what do you define as your core competencies?

Yes, sounds good. Well, first of all, thanks, again, for the invite. Great to see you again over Zoom as we were talking in the green room. I'm looking forward to doing this live. Hopefully, in 2022, we get over the hump with the vaccinations and get to open up the country and get back on track. So -- but again, thanks, appreciate the time. Before I begin, 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 we're unique amongst the mid-cap oncology players. We have been around for a while, going on, what, 20, 26 years now. We have had the typical drama and ups and downs of any biotech over that time frame. Come out the back end, I think, pretty successful. We have $1 billion a year product in cabozantinib that did, again, $1 billion globally over the last couple of years. Strong data, either as a single agent or combination that is driving, certainly, our growth right now relative to what we hope to do with top line revenue over the next few years and reinvest that cash then back in the business as we build out, and really elaborate pretty exciting pipeline of compounds that we think based upon our core expertise, legacy expertise in chemistry and biology and the intersection of those 2 areas can, I think, provide a lot of very interesting matter. And the subject of future discussions as we generate more clinical data across the board. So we have a lot going on. We're growing pretty dramatically. We grew a lot last year during the middle of a global pandemic we added 150 or so FTEs. So lots of momentum at the company in terms of the overall organization, the culture is strong. People are really excited. And we feel like we've hit our stride now and can do a lot more great work with cabo and next-gen cabo 092 and all the other compounds that are coming up behind it. So a lot to discuss today and certainly lots to watch as we go forward in 2021, for sure.

Yes. I mean it's been an interesting dynamic. Like kidney has seen multiple changes in new entrants, IO-IO combinations, IO-TKI combinations. Just as that space has evolved, how do you kind of see that changing for cabozantinib plus PD-1 and as other therapies kind of moving into that space?

Yes. It's a really good question, and it's something that I think about a lot. And certainly, over the last 6 months or so, I think we've been able to frame what we're doing in very simple terms. And our job, which is something that we take very seriously is to constantly push the bar, raise the bar for what standard of care is for patients. And obviously, that's the right -- that's the right way to operate to improve patient care, patient outcomes. It's also really the only way I think you can be successful now as an enterprise in the oncology therapeutic area. Oncology in biopharma is the most resourced, the most competitive, the most funded area across the ecosystem within biopharma from venture all the way through to large pharma. It's probably one of the more challenging therapeutic areas in terms of the science and what drives tumors to grow and survive and then become resistant to novel therapies. So we really have our work cut out for us. And we're constantly asking the question with cabo and with 092 and with the next-gen molecules that we're bringing up right now, how do we raise the bar for patients? How do we really deliver either single agents or combinations that will have better outcomes, right? How do we raise that bar for standard of care? So that -- I think that's our mission, and we take that in very simple terms very seriously because being me to being 2 years, 3 years late with similar data, doesn't really help patients and arguably doesn't really help the company either. So we have to push the envelope constantly. That being said, with cabo, we've done that. You'll think about the COMET programs, you think about the COSMIC program, you think about the CONTACT programs. We're constantly consistently asking those questions, how do we improve outcomes for patients? How do we raise the bar? And I think when you look at kidney, right, starting with METEOR in -- reading out in 2015 to CABOSUN reading out in 2017 to now 9ER and 313, the triplet. We're doing that. I mean, we're really living that day-to-day in terms of asking those very important questions about how do we improve therapeutic options. So we're excited about the 9ER data and launching, I think, in a real strong fashion since we got it approved towards the end of January. We've got a lot more work to do there, and we have a lot more work to do with what's going on with 313. But we understand it's a competitive space, and we're -- we kind of revel in that, and we're going to be very aggressive as we go forward, both clinically and commercially.

When you've presented data in the past, how long has it taken for the effects to be seen in scripts and revenues, et cetera? So as we think about 9ER, would that fit into that same mold as well?

Yes. It really varies -- launching in the middle of our -- at the end of a global pandemic certainly is a bit of a handicap, not that we're going to make excuses for our performance. It's just -- we've got a great commercial team. And obviously, we have great data in the virtual nature of our work in terms of nonpersonal promotion and virtual mechanisms to be able to reach prescribers and educate prescribers is really strong right now. So yes, I would say launch kinetics are different from case to case. I certainly enjoy the narrative. If you even go back to METEOR back in the day, there was a lot of discounting, how do you compete iOS on the market ahead of you, how are you going to make a name for yourselves? Is this really going to matter? And again, strong data, strong team, very clear focus and level of urgency, got that going. So I'm looking forward. I mean, you can see the IMS scripts that are published weekly and gain some insight there. I won't speak to that now because it's mid-quarter. But yes, we're really excited about being able to talk about our performance on the Q1 call. If that's in late April, early May and to be able to put that in perspective. But we're engaged every single day looking to help every single patient with previously untreated first line RCC. And we think we have the offering with the data from 9ER to be able to really move the needle for patients. And we're thrilled with that and working very hard to make that a reality.

I mean with the CLEAR data, we kind of knew that, that was going to come through in a positive fashion. But is there anything from ASCO GU kind of change the way you think about the potential in first-line and how competitive it will be? And maybe how you have to pivot a marketing strategy?

I don't think so. We certainly -- as you said, we were expecting a positive outcome. We're not overly surprised by the data. The -- I think the KOL community did a really good job dissecting that data for us and for others in terms of the pros and cons, some of the questions. So we have -- again, we have very strong data. We have the clinical benefits, strong survival signal, doubling of PFS, doubling of response rate. I think the tolerability aspects of 9ER, where we are starting at the optimized cabo dose of 40 milligrams, really was the right move and really paid off in terms of a low discount rates. The quality of life data resonates really, really well, both with investigators, but also in the community. So yes, so we're very thrilled with that data. We're looking at first of all buying RCC as really moving that into a chronic treatment mode. So tolerability and the patient experience is super important, and we think we've got the right data set to be able to, again, put a stake in the ground and educate prescribers and help their patients. So we're thrilled there. And again, the team was ready to go, right? So -- and certainly very motivated and a lot of experience. So it's fun times for sure.

The quality life data that's come up several times when we spoke to KOLs. And is there more coming? And do you know if there's any competitive coming? Quality of life data coming through?

Yes. I wouldn't want to speculate on what's coming. We had a pretty good update. Again, at ASCO GU, which I think was very, very well received. And the ESMO presentation back in the fall gave -- kind of gave the headlines and then the detailed poster at GU was, I think, very, very helpful to kind of put it all into context. From a competitive point of view, again, I wouldn't want to speak to that, certainly curious to see what CLEAR comes up with, as I think has been discussed, the KEYNOTE-426 trial didn't lead to a positive quality of life outcomes for the axitinib pembro combination versus sunitinib. So again, that's, again, all the care and caveats and cross all comparisons. But certainly, the KOLs have picked up on that and spoken to that pretty eloquently. So we've got it. And I think it just speaks to the totality of the 9ER data. And that, coupled with the fact that cabo and nivo, as individual agents aren't. They're really not new drugs. They've been around for 5 years. They've been the leaders in RCC for -- since they were launched in the 2016, end of 2015 time frame. So there's lots of familiarity with those individual agents. And certainly, the combination has been, I think, anticipated for a while. So we're thrilled to be in the mix. And again, looking forward to making every day count for patients, for sure.

There was differences in your patient set versus CLEARs. Yours is slightly more fits in with the current treatment paradigm and current patients out there. Just -- is that data point kind of being picked up by KOLs, is it important?

Well, I think it certainly was picked up by the KOLs who are very much in the mix and online and highly visible at ASCO GU. So yes, I think you're looking at a more favorable population with CLEAR and 426, if you look at the number of favorables and the shift between the -- what you normally see with large populations within the IMDC network of reviews and distribution across the poor intermediate and favorable risk population. So again, all of our studies in the past, including the METEOR, including CABOSUN and now 9ER had very -- had the distributions that were in line with what's been seen with thousands and thousands of patients. So we think it's a very reflective data set relative to what you see broadly in the community. And I think that's been accepted as just based upon the pure numbers there. So yes, for sure.

Is that -- those nuances in data sets, is that picked up, do you think, in the community setting? Or is that a big push for your side of things?

Well, it certainly -- we certainly talk about our data in the appropriate compliant manner. Yes, I think the community -- most community physicians get it from the standpoint of what nuances go into a trial and how that could sway the data one way or the other, right? We spend the vast majority of our time talking about our data because it's so strong. And we're trying to frame and educate the docs, whether they be on the KOL side or on the community side, what our data set can bring to them as they treat these patients. So it's -- again, it's a relatively simple discussion, and we don't need to convince them of the activity of cabo because they've been using cabo for the last 5-plus years. So it's just a matter of updating them on the data, helping them understand the nuances of how we can frame 9ER for them, and it's so far been very successful. So lots of momentum, and that's great because that just kind of lays the foundation for the next set of trials that are going to read out. We had DTC at the end of last year. We're expecting 312, the first-line liver to come out in the first half of this year. Again, prostate is going through the blinded independent radiological review. So the whole idea of having a wave after wave of trials reading out and if successful, then being able to eventually kind of lead to further -- after filing an approval, further use in the community is a very important part of our business, for sure.

Got you. For liver cancer, so COSMIC-312, kind of the next update, how many patients do we get in that interim PFS and OS readout and kind of what do you view as the, I guess, the next steps there?

So the coprimaries or PFS and OS. So obviously, kind of like with 9ER, I mean, the narrative we had and the discussions we had at ad nauseum in 2019, are you going to get OS, how do you get an OS when there's competitive agents in front of you, blah, blah, blah. The same narrative is operational here, right? The EMBRA data, which is really, I think, reframing the opportunity for first-line HCC patients with the BEV-ATEZO combination. Again, they had strong data with the survival benefit. So we feel obviously that, that's going to be an important part of the 312 story for us to have a competitive offering in that space. Trials are relatively similar. Populations are relatively similar. They're contemporary -- I would say, pretty contemporaneous trials using a lot of the same regions, a lot of the same investigators. So the only real difference is swapping out cabo for Avastin, which, to be quite frank, I certainly like that swap for us because of the -- again, with all the caveats, the relative difference in activity, certainly in liver cancer, for single-agent cabo with the CELESTIAL trial and the survival data we have there. So it enrolled well. I guess that was one of the real highlights for me during the global upheaval of the COVID pandemic last year. That trial enrolled really, really well. And again, the team did just a phenomenal job. We had a couple of slow months in the April-May time frame, but to be able to manage all the aspects of executing on a global trial, maximizing supply chain kind of flexibility and kind of oversight. Certainly, safety is important working with investigators, the team did just a phenomenal job. So again, we were hoping to have the events in place to have a top line data update at the end of last year. That didn't happen. Events came in slower than we expected and modeled. So we're on track to do that in the first half of this year. But it's a really important readout, as I talked about previously. I think it's one of the larger growth opportunities in oncology due to the large number of patients globally and just the lack of really good agents to be able to help patients. So stay tuned.

Okay. On prostate, I guess, another kind of interesting expansion opportunity. We got the final ORR analysis. Just what's the bar to beat there? And kind of what durability do you think kind of excites doctors there? We've had some great KOL calls around that so just...

Yes. So the -- certainly, the 30-plus percent response rate, we talked about at ASCO GU last year is pretty good signal. Again, these are in patients who have measurable disease by RECIST. So we've taken the mystery and the drama, idle response assessment with the bone scans in terms of a positive tumor shrinkage using good old RECIST 1.1 with measurable disease in patients with either visceral or soft tissue disease. I want to speculate on where the bar is at relative to what's coming up next with the BIRC on the full 130-plus patients. But obviously, that's an area of very great interest to us. If we feel like we pass that bar, then our plans, along with 311, DTC, along with 312 pending good data. If we get good data from that BIRC, then we'll be sprinting towards pulling together a filing and pushing that forward ASAP. And that's -- our #1 priority this year are those 3 potential sNDA filings. We're all about driving top line growth. And the best way to get that is to add new indications post-approval and you need good data and a good submission to get that done. So that's the main focus right now, and the team is aligned around that and pulling in the same direction to hopefully get that done, again, pending good data.

And then the commercialization in prostate, would you have to add people? Or is that something that already gets covered in -- with RCC, for instance?

Yes. Sure. So we have a very strong infrastructure, and I would say, foundation within commercial. You never want to launch lightly and especially in these competitive areas, you just need -- you need the right level of resource and the right level of talent and the right level of data to make that successful, especially when you're like us and you're competing with big farmers left and right. So I think, again, we look at a first-line liver opportunity at a first-line or the next prostate opportunity as a growth opportunity for commercial, but that's incremental growth, right, which is warranted if we have good data, and we feel like we can certainly grow the top line. So -- but our infrastructure in place right now, we've got a couple of hundred FTEs, if not more, within the commercial world and they're phenomenal. They just -- we've built really, really well with great talent and great energy and great experience. And I think it's just -- that's a magnet to bring in more talent as we get good data, which also obviously helps the cause, too, so.

Got you. Maybe we can spend a few minutes just talking about the, I guess, the deeper pipeline -- the pipeline that's been kind of rekindled. Maybe on the ADCs, firstly, you kind of -- your strategy there. You've kind of done a number of deals within that space kind of just how are you thinking about migrating into that area?

Yes. It's -- we really like the ADC space. It's the ultimate -- I view things in very simple terms. And it's the ultimate Venn diagram view of chemistry and biology kind of merging together, if you will, right? So -- and we have deeper expertise in both areas. So this is a natural extension to -- you really expand the modalities we go after, but use our core strengths in those 2 disciplines to be able to really -- I think, choose the right targets, choose the right binders, have a suite of linker warheads that we can mix and match, merge and purge based upon whatever tumor we choose to go after there. So I think that's -- it's a natural extension of -- again, our legacy is really strong in science and really strong in chemistry and biology. I'll also say that I would like -- back to the kinase effort we had back in 2003, '04, '05 if we're going to do something, we're going to go in strong. We're not going to just dabble and do a little bit here or there and see what happens. If we're convinced, and we have conviction in a technology and our ability to navigate and bring in new science, then we're going to go in strong with the right level of resource and the right level of both financial and human capital to be able to move the needle there. So we're doing that. And you've seen these deals. We had another one this week with WuXi over some targets and cell lines that we're really excited about. Whatever we can do to expedite that we'll do because, again, for us, it's all about having critical mass and domain expertise in an area that I can -- we can really help us go faster and build broader as we're building a portfolio. So the first molecule from Iconic is at the -- we filed the IND. So we're waiting on that to get clearance before we can move into man. So that's progress. And we have another whole suite of molecules that are being profiled across different targets and different warheads with different kinds of binders going forward as well. So we're -- I'm just super excited about this. And to be able to have an arm on small molecules, kinases, non-kinases have another research effort focused on biologics, bispecifics, ADCs, et cetera, really plays into our strengths around R&D. And I think, again, from a development point of view, I like the idea that whatever we're doing, we always have a fast-to-market approach. If it makes sense to do it, then we've got to be able to move quickly if we see a signal and set up things to be able to do the right level of development quickly to be able to get to a subproduct filing if that's possible. So -- but the team is just cranking right now, I'm super excited, and we've got a lot going on and can't wait to talk more about this as the year proceeds.

Great. I think we're at that 25-minute mark, which is unfortunate. It's a pleasure speaking to you today. Mike, thank you so much.

All the best. We'll see you soon, hopefully live.

yes. We've got a busy day so I'll let you guys go. And...

All right. Sounds good.

Thanks for speaking with us today...

All right. Thank you. Yes. Bye.