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

Hello, everyone, and welcome to Oppenheimer's 31st Annual Healthcare Conference. I'm Jay Olson, one of the biotech analysts at Oppenheimer, and I want to thank you all for joining us. It's my pleasure to welcome Exelixis to our conference. And it's an honor to introduce Michael Morrissey, the CEO. [Operator Instructions] And with that, we'll get started. Thank you so much, Michael, for joining us.

I thought maybe we'd open up with a few questions about your strong 2020 results. You delivered solid fourth quarter performance with $200 million of sales of cabo. And your 2021 guidance of $1 billion in revenues implies 35% year-over-year growth. Can you just maybe talk about what sort of assumptions you factored into your 2021 revenue guidance? And what kind of recovery from COVID are you seeing so far this year?

Well, first of all, thanks for having me on today. Really, it's great to be here and have a chance to chat about Exelixis. Didn't get a chance to chat with you personally. Before I begin, I'll remind you and the audience 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 yes, there's a lot to unpack there. We had -- 2020 was certainly a very challenging year for everybody within biotech, outside of biotech. It was a choppy year for us. We started the year with giving guidance that we thought 2020 would be a flat year compared to 2019 while we were waiting for new indications to hit and then file and launch. So certainly, we saw that choppiness kind of play out throughout 2020. We had, as you said, we had a strong fourth quarter as the country opened up. And some of the issues that we saw in Q3 and Q2 around just overall demand going down because of the shelter in place happening across the country, and I mean patients taking a step back in terms of either being diagnosed or going in to see their doctor, all that got resolved in Q4, and we're certainly seeing things get really back to normal right now. And I think that will continue as the vaccination process rolls out and really hits its stride, as I think it is right now actually, certainly in California. So yes, so we have -- look, we have very strong expectations for 2021. Last year was a year of data updates, top-line data releases, data presentations. Certainly, the 9ER filing was a big priority for us relative to doing that with BMS and with our partners, Ipsen and Takeda, on a global basis, number one. All the challenges of doing that remotely amongst 4 different companies, I guess, 5 different companies if you add in Ono there as well. So it was a really, really strong performance, and we had the data at ESMO in the fall and then an update at ASCO GU a few weeks ago. Really strong data set, the totality of the data from 9ER in terms of efficacy, safety, tolerability, improved health care, health-related quality-of-life data relative to the control arm and I think really sets us up quite well to launch effectively, which we're doing right now. Again, we were approved in late January and seeing very strong -- I think very strong support for the launch. And really excited about what we're seeing in the community and with the academics in terms of its uptake. So -- but the guidance for the year reflects really a building on that success and really taking the baseline, second-line level of [ $740 million, $750 million ] up with additional demand in the first-line setting. So we have a $1.5 billion a year run rate that we hope to exit with in 2022. That gives us time to see the obvious compounding of patients staying on drug for a long time. So we're certainly excited about that, but we're very motivated. And certainly with the data that we've got and the momentum that we've got relative to a variety of different trials and indications and big milestones this year, we're certainly excited about 2021 and cranking.

Excellent. And I think you mentioned previously that by the end of 2022, you anticipate a doubling of revenues in RCC. Can you just maybe walk us through what some of the key drivers of that growth will be? And where do you expect to see that growth coming from?

Yes. So that's within RCC itself, and that's reflecting what we think we can do relative to building the first-line market relative to 9ER. So with an approximate doubling of duration of treatment compared to single-agent cabo in the second line, we think we can build a pretty healthy market share in the first-line setting. Obviously, it's very competitive. All of oncology is, and RCC is no different. The first-line opportunity is probably a $5 billion to $6 billion a year market at steady state. So we certainly think we can play an important role there with baseline, with cabo single agent from CABOSUN, building on that with 9ER. And in the future, if we're successful with the triplet COSMIC-313, we can really make strong headwind there too. But certainly, on the -- on that 2022 guidance, that exit run rate really, it looks at us doubling revenues because of the first-line opportunity relative to 9ER. So I think it's definitely doable. We've got lots of momentum there. And what we're seeing so far, I think, gives us a lot of confidence that we can continue towards that opportunity.

Great. And I want to follow up on -- you mentioned the ASCO GU update. And congrats on the 9ER results presented at ASCO GU. Can you maybe give us a high-level summary of that updated 9ER data?

Absolutely. So it was actually fairly similar with what we saw back at ESMO a few months before, longer follow-up, which is always an important part of the story. We're seeing nice, nice consistent data across all the key efficacy parameters, again doubling of response rate in PFS, strong survival signal. The overall tolerability continues to look very, very strong. Low discount rate for the combination or either component of the combination, which we think gets back to the important optimized dose of that 40-milligram starting dose in cabo. So taking a little bit off the top, the average -- the normal starting dose for single-agent cabo is at 60 milligrams. So but going into it, we had very clear ideas about wanting to make this combination a chronic therapy for patients with first-line RCC. So that -- and that seems to be the case. And again, the quality-of-life data continues to really, I think, shine relative to when you look at all the totality of that data put together, leading to improved quality of life relative to the control arm. It's really, I think, pretty compelling, and it's a great story and great messaging for us now. We're going out and talking to prescribers and investigators and various health care professionals about what this regimen can do for their patients with first-line RCC.

Excellent. And then there were some other combination data sets in RCC at ASCO GU. Could you maybe talk about how you would compare cabo plus nivo versus other TKI plus checkpoint inhibitor data? And how do physicians view the cabo plus nivo data versus the other combo regimens available to them?

Yes. So we've gotten very good -- very good support for the cabo/nivo combination. A lot of it's been public now in terms of podcasts. And we had an investor briefing relative to -- after the ASCO GU meeting as well where we had 4 world-class KOLs talking about the data. We've done a lot of market research as well, both in terms of ad boards but also in large, blinded studies to really ask those key questions. The data resonates really well with prescribers. In terms of the efficacy, again, doubling PFS; doubling response rate; strong, significant survival signal. The tolerability again has always been somewhat of a surprise for prescribers. And again, cabo has been best-in-class TKI in RCC for the last 5 years now. So for them to have an opportunity to look at strong efficacy with a lower starting dose that they can keep their patients on trial for 14, 15, 16-plus months, and then have the ability to actually have improved quality of life relative to sunitinib, that's a really strong message. And the data set, I think, compares really, really well with other data sets in terms of what was presented previously at other meetings and certainly what was presented at ASCO GU in February. So look, we've always known this will be a competitive space. We're certainly prepared to compete. We've got a great data set. We've got a great team. We've got great messages. So we were very effective going back to 2016, when we launched our METEOR that we staffed up appropriately with real veteran -- a real veteran commercial team and organization that could take the data and then help educate prescribers on the utility and the benefit it can bring to their patients. So we're in the middle of that right now. Super excited, looking forward to having the opportunity to talk about the numbers on the Q1 call. And it's just par for the course. We're just going to keep cranking and just keep adding indications as we go because we think we've got real momentum with cabo. And it's a great compound, and it can bring a lot of benefit to patients as we go forward.

All right. One of the things that we heard a lot of investor excitement about at ASCO GU was related to the retrospective analysis you showed with intracranial activity of cabo in metastatic RCC patients with brain metastases. Do you think that those results will further drive uptake of cabo in the second-line setting? And are there other KIs that have intracranial activity in RCC? And I guess ultimately, is it reasonable to think that cabo could prevent new brain lesions?

Yes. Those are all really important questions, and a lot of that's going to require additional prospective clinical work to understand the scope and limitations of that opportunity. It's a very important data set. It's a very important population for patients with RCC. Obviously, patients with brain mets are often excluded from clinical trials because of the complications that can bring. So I was really, really excited to see that data get presented. And I think it certainly adds to the halo of what cabo can potentially provide to patients. Again, it's not from a randomized controlled study. So I don't want to speak to it in a too granular fashion because it's really hypothesis generating. But you have that data, you have the bone data, you have the -- some of the data from the SWOG study that Monty Pal talked about with the papillary RCC beating sunitinib in a variety of more selective MET inhibitors. It just provides more momentum and more, again, really increases the intensity of the halo around the molecule, certainly in RCC. So now we can't promote to it, and we wouldn't do that because it's not in the label, and that wouldn't be a compliant thing to do. So we're very careful about that, but it's generated a lot of excitement for the compound and a lot of other ideas that we're now processing through various people in terms of maybe new ISTs or new trials that we're going to do going forward. So again, it's great to have good data. It's even better to have surprising data and somewhat provocative data. And if we can use that momentum to go forward in other combinations, other approaches, we're committed to always raising the bar for patients, right? That's how we operate as an organization scientifically, clinically and business-wise. The only way we're going to be successful, and I would say anyone, it's the only way anyone is going to be successful with the level of competition in oncology is to consistently ask tough questions and raise that bar, do better by patients by raising standard of care. And I think this is really another great example of how we're doing that going forward.

All right. And I do want to follow up on -- you mentioned the SWOG 1500 study data. Is there a viable opportunity for cabo in papillary RCC?

Papillary is a relatively small but important population. Our label has never been differentiated between clear cell, non-clear cell, papillary, non-papillary. So our label covers all advanced RCC. So arguably, we've been in that space for a time anyway. I think, again, if you look at NCCN and other formats, conventional wisdom is that sunitinib is the -- been the #1 agent there. Does this change that perception? Possibly. We'll see. Have we been used there in the past? Absolutely. And the fact that papillary has always had this MET kind of connotation with it, and we had some early data even back with foretinib back in the day, back in the early 2000s with that compound clinically. Now we've been playing there for a long time. So again, does it help us make the message, send the message that we're strong in RCC, and we've got -- we have a molecule that can cover all the bases potentially? Absolutely. Is it our main focus? No, but we're not trying to differentiate one over the other. We're looking to market cabo and now cabo/nivo to every eligible patient every single day. It's a molecule that has broad activity across different subtypes potentially. But certainly, the data from METEOR, from CABOSUN, and now from 9ER really, really underscores the idea that this is a best-in-class compound; 9ER, a best-in-class combination. And we think we can use that to drive momentum and uptake going forward.

Excellent. And as you look ahead to the first-line RCC opportunity, how do you expect the first-line RCC treatment landscape to evolve? Do you think the market share of TKIs plus checkpoint inhibitors will further increase? And do you think that any change to the first-line treatment paradigm will have an impact downstream on the second-line opportunity for cabo?

Yes, it's a great question. And my crystal ball is as good as yours right now in terms of how that's going to play out. It's a very large market, and the patient population unfortunately isn't changing. So it's -- the question is can you convert that opportunity into a chronic therapy opportunity? Can you -- by having better drugs, better combination with -- all with survival like cabo has, both as a single agent as a -- within a combination IO or ICI combination, can you increase the percentage of patients going from first line to second line, second line to third line? So you just give patients and their prescribing physicians more options to keep them healthy and alive and be able to really attack their disease. So it's always going to be a competitive space. I don't think any one player, any one combination is going to dominate here. Our view is we have -- and we certainly have the leading market share in the second-line setting. We don't think that's going to change because the first line is never going to be dominated by any molecule or any combination, including the one that contains cabo, unless we get -- we have really good data with 313 and that might change things going forward. So -- but our view is, certainly, my view is that first line will be segmented between the various combinations. You've got some real believers in IO/IO approaches. So they'll use that. I mean maybe some of the more pragmatic people might want to use IO/TKIs, and they'll have different flavors and different favorites and those kinds of things. But it's a big enough market where we can all do well by doing better by patients, right? And by again, by raising that bar and making sure that the patients have the best available therapies at all times. So we're dedicated to that and certainly from a clinical, regulatory and commercial point of view, trying to get that message out every single day.

I'm glad you mentioned COSMIC-313. I know a lot of investors are very excited about the potential for the triplet of cabo, nivo and ipi. There is always a delicate trade-off between safety and efficacy when you add another agent. How are you thinking about the risk-benefit profile of this triplet? And what are your expectations for the triplet to provide significant incremental benefits, considering that you've already set a very high bar in first line?

Yes. Well, it's really a great question. It's one that we've been pondering for years now, right, in terms of again asking the question, can we raise standard of care by taking best-in-class IO/IO and best-in-class TKI or adding cabo to ipi/nivo or adding ipi to cabo/nivo? Can we accomplish the same goals? And you look at the 214 data, that's been around now for 4 or 5 years. There are some -- there is potentially some ways to improve upon that data with a molecule like cabo and its best-in-class pharmacology relative to having more patients respond, right-shifting the PFS, maybe raising the curve -- the tail of the curve, there's all kinds of things you could imagine. But we have to -- you got to run the experiment, right? So -- and that's what we're doing. And I'm so happy that we pulled that trigger years ago. It's a trial that enrolled really well, even in the middle of this global pandemic. This underscores the level of interest and the level of enthusiasm for the molecules, for the approach and for the idea that you better really swing for the fences here in terms of really taking what's already good data and making it potentially better with a triplet like cabo/nivo/ipi. So we'll see the data when it reads out. Certainly, we had an important update at ASCO GU from Dr. Andrea Apolo on the final Phase Ib workup from her study or her investigation looking at both the cabo/nivo doublet and the cabo/nivo/ipi triplet across a variety of rare and maybe not so rare GU histologies in malignancies. So that data, it really continues to look pretty promising with all the caveats that it's a single-arm, non-randomized study done by a single institution. But strong response rates vectoring towards 40% across a variety of pretty heavily pretreated patients, good tolerability, understanding how we can make that potentially mitigate some of those issues in terms of watching for various early signs of adverse events. So a great study, and now we're doing the right experiment in terms of looking at the triplet in a randomized sense. And we'll see the data, and we'll know -- we'll see it read out at some point in time, probably end of this year, early next year. So exciting stuff, but it just kind of reinforces the idea that we're constantly looking to raise the bar. That's what we -- that's our goal. That's what we do.

Okay, we'll look forward to those results. Maybe shifting the gear for a moment. Last year, you had really impressive data for cabo in second-line plus DTC with a 0.2 hazard ratio. And then recently, you got breakthrough therapy designation, congratulations, for cabo in DTC. Can you maybe talk about the commercial opportunity there and the potential for cabo in first-line DTC?

Yes. So DTC, I mean again, we've got a strong history in thyroid cancer. The first indication that we were improved upon back in end of 2012 was for medullary thyroid cancer, a very rare form of thyroid cancer. Differentiated thyroid cancer is a much bigger opportunity, much larger incidence. And again, many of these patients are cured with radioiodine. So these are the ones that we're looking at who are refractory and metastatic to that. So again, smaller population, I think our market research shows that there's about 4,000 second-line patients per year. We've talked about first line. But again, I think from a standpoint of how to operate and how we're moving forward relative to other indications, I think we have our sights set on much bigger indications for both cabo and 092. But this is a very important one obviously. A hazard ratio of -- in the 0.2 range is always exciting to see. And getting BTD off that is, again, a real shot in the arm from the point of view of just momentum. So while this is probably $100 million-plus a year indication for us, again, there's no real standard of care for second-line DTC. So it really builds on our commitment and investment in thyroid cancer. And certainly as we go forward with the other COSMICs and the contacts and what we're doing with 092, we hope to build upon that really across the board with other indications, both as a single agent or single agents as well as combinations going forward.

Okay, okay. And then I guess maybe one of the larger indications is HCC, where there's still a huge unmet need in first line and a substantial opportunity there with their COSMIC-312 data coming in the first half of this year. Can you talk about how large the market is there, and how much growth potential you see in the first-line setting? And also, if you could comment on the comparison of cabo plus atezo versus atezo plus bevacizumab?

Yes, absolutely. So again, liver cancer has been a real focus for us with cabo for years now. Obviously, the success we had in the CELESTIAL trial showing overall survival benefit really help us put a stake in the ground in this indication. The -- it's a very different disease, say, than kidney cancer. But it has a lot of similarities in terms of the kind of some of the basic tumor biology that we've been following for the last decade or so. So we're very excited to be in the space and with the opportunity for 312 to read out in the first half of 2021. The data that we generated previously with CELESTIAL is, I think, complemented nicely by some of the recent data that we had last year at ASCO GI with the cabo/nivo and then cabo/nivo/ipi combination from the 040 study. So different ICI partner, but again pretty -- I think pretty compelling data with all the caveats in terms of response rates, strong PFS and survival number, with all the caveats of it not being randomized, which look really encouraging. So 312 is very similar to the IMbrave study that Roche ran. Again, we've got cabo/atezo versus sorafenib. They had bev/atezo versus sorafenib. Similar patient populations, if you will, similar investigators for that matter, so pretty contemporaneous trials. So we're excited about that. Again, it enrolled really well in the middle of this pandemic last year, really underscoring the -- just I think the interest level and the size of the opportunity and really the need for better therapies, better combinations here. And hats off to the Roche/Genentech guys. I think IMbrave was a great study. It was the first one, which actually beat sorafenib head to head with the survival benefit. So the bar here is high for us similar to 9ER relative to renal back in the days, but we like the horse we have in that race. And certainly, cabo is a very strong anti-tumor anti-vascular agent that we've now been able to combine pretty well with a variety of ICIs, again using this optimized 40-milligram dose. So we hope to see results first half of the year. And if that's successful, then obviously, it's a priority to get that filed ASAP. Again, as some of the early guidance that we had back in January of this year, we hope to have 3 sNDAs filed this year for DTC, frontline HCC, and then the first second-line CRPC based on the COSMIC-021 cohort 6 experience that we've been able to generate. So there's lots of momentum there. And as you would imagine, the team is working very diligently in a very focused fashion to make sure we can get all that work done, if the data is there to support those filings.

Great. We'll look forward to that. And any comments you could share with us on the potential for a triplet in first-line HCC with cabo, atezo and bevacizumab?

Other triplets, it's something that we're thinking about pretty seriously, probably use 092 instead of cabo. I'm not sure there's a lot of value in combining either 092 or cabo with bev. But certainly, asking the question, if you have a molecule like 092 and you combine that with an ICI, so you have that doublet, that baseline doublet, then what makes sense to add on to that in a histology-specific fashion. So renal will be different than liver, potentially different than lung, different than bladder, inside GU, outside GU, et cetera. So we're doing a lot of that work right now. We're super excited about the opportunity for 092, a lot of interest there. We have the first combination going with atezo, but you can imagine that we're talking to a lot of people about other ICI combinations there and then other triplets in a very, I'd say, a focus -- very focused but very biologically relevant manner. So stay tuned for that. It's still a little bit early to talk about that. But as that stuff rolls out, we'll be more than happy to share the details, for sure.

Okay. And I want to come back to -- you did mention cohort 6 of COSMIC-021. And I know we're expecting a potential sNDA filing this year in metastatic CRPC. You had at ASCO a 32% ORR in small cohort. What sort of ORR would you expect to support an sNDA filing?

Yes. Well, the most important data there is from the blinded independent review of the scans, and that's ongoing right now. I don't want to speculate on where the -- what number is the threshold. We'll know it soon enough, and we'll be able to base our plans on that going forward. Obviously, look, we had very strong data at ASCO GU, 33% response rate in patients with measurable disease. So there was no -- there's no debate, there's no drama about response assessment. We're using good old RECIST 1.1 in patients that have either liver -- soft tissue or visceral mets. So it's a very solid endpoint. The bone scan drama from before is just out of the picture completely here. So we're excited about that. And it enrolled really well. Again, having the investigator-read responses is the first step in the process. And then obviously, the gold standard for the FDA here is the blinded independent review, which is ongoing. So as we get that data, if it continues to look good, then we will push forward very quickly with the filing and look forward to getting that out in real time afterwards. So stay tuned.

Okay. All right. We're just about out of time, but since you mentioned 092, maybe I could sneak in one more question. I think that you've previously mentioned that 092 has a shorter half-life than cabo. Can you just maybe comment on the importance of that, and how you plan to position 092 relative to cabo longer term? And then I think you're running a combination of 092 with atezo. Maybe any thoughts on when we should expect to see data from that?

Yes. So again as we talked about previously, the shorter half-life makes it easier for physicians to basically dose adjust in terms of adverse events that pop up over time. Shorter half-life, it takes less time to do that to kind of have that washout happen and then rechallenge the patients. So it's clearly a -- really our attempt to take the one kind of complication with cabo, this 4- or 5-day half-life and make it easier for doctors to dose adjust, which have to happen basically for all TKIs. Again, yes, look, we're super excited about that molecule. We think we've -- say, as Celgene did with Revlimid back in the day, we've learned a lot with cabo. We've done a lot with cabo. We made a lot of mistakes with cabo. So to take all that momentum, all that learnings and use that with what's arguably a better molecule, where we have again a 20-year runway in terms of exclusivity, makes a lot of sense to us. So it's full steam ahead. Yes. We talked about the cabo/atezo combination before, and there's many more on the way. And again, our goal is to start pivotal trials there this year.

Okay. Excellent. Well, we're out of time, and we'll wrap things up there. This has been super informative, and a pleasure catching up with you, Michael. Thank you so much for joining us today and updating us on the impressive work you're doing, and we'll look forward to future updates.

All right, Jay. Thanks again. And I look forward to doing this live next year, okay?

Absolutely. In person.

All right then. See you later.

All right. Thanks, Michael.

Bye.