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

Good day, everybody. Thanks for joining us at the Virtual Bank of America Annual Health Care Conference. I am Jason Gerberry, SMID cap biotech analyst, and I'm pleased to be introducing our next company presenter, Exelixis and CEO, Mike Morrissey. So Mike, thanks so much for joining us once again.

It's great to be here, Jason. Thanks again for the invite. Just before we begin, I'll remind everybody that I'm making forward-looking statements today. So please see our SEC filings for a description of the risks that we face in our business.

Great. So I guess, first off, what a difference a year makes. About a year ago, we were talking about the kinetics of renal cancer market and how that was leading to a decline in CABOMETYX. And now CABOMETYX is growing like a weed with the introduction of the CheckMate 9ER regimen. So maybe we'll start there just on some of the near-term commercial dynamics before we jump into the pipeline. And can you just talk about the progress that you're seeing early on with the 9ER launch? You put out a number of about a $1.5 billion run rate by year-end 2022. Is that a time point where you expect sort of to see the maximal benefit of patient stacking? And I believe a while back, you put out a 2024 number. That was before Merck had the CLEAR data. So maybe if you can just sort of [Audio Gap] in 2022 and how you're kind of thinking about the marketplace and some of these moving parts?

Yes. So you cut out on several -- on a part of that question. So I'll just try and wing it together. And if I'm missing something, just please feel free to jump in and help guide me on what I'm not speaking to. So look, we were very pleased with the -- with Q1, the Q1 numbers. Launch is going, I think, really well. We had really good data. That has been talked about extensively previously, so I won't belabor the point, but we were certainly well prepared for launching upon approval, and we were sprinting out of the blocks from day 1, if not hour 1. Cabo has been certainly a mainstay of RCC as a single agent for the last 5-plus years as has nivo, and certainly having those 2 well-known drugs now combine well. And with the 9ER data makes that -- I think that makes it a pretty important regimen and one that I think we're very effective at marketing with a variety of different prescribers. So the goal, the $1.5 billion run rate goal by the end of '22 is, I think, a very achievable goal. Obviously, we have to stay on the same vector that we're on now to make that happen. But certainly, I think that's within the -- within our crosshairs relative to where we're going. And having -- hitting a few more quarters under our belt as the dynamics evolve would certainly be good to see. We chose that date primarily around having it be a convenient time to gauge -- really gauge progress relative to having the patients who, with a long PFS, 20-plus month duration of response, those kinds of things, getting the compounding effect between the launch year in '21 with patients staying on therapy into '22. So that -- I think that makes sense as a kind of a ballpark number. There's no [Audio Gap] that is being the peak or the top of the plateau. It's just -- it was a good time to use the math to be able to take the compounding into effect and provide some context on how big we think this product could be. But it's by no means the max that we think we can achieve. So lots going on there. Happy to take some more questions. Hopefully, I can hear you better now and go ahead.

Yes. I think the only other part of my question was, I think you, in the past, had given some 2024 metrics. I'm wondering if those still hold. I think when you've given those in the past, the Merck and the KEYTRUDA-Lenvima combo had generated some data that looked intriguing as it pertained to CR rates and perhaps might be an interesting competitive variable in the equation. So just sort of curious, longer term beyond that, if those metrics still hold.

Yes. So the -- I think you're referring to the numbers that we provided at the 2020 JPMorgan meeting where we set the stage for what success could look like if we hit on all the various trials and indications, including frontline RCC. We had a $1.2 billion number there [Audio Gap] of single-agent CABOSUN data, single-agent cabo use based on the CABOSUN data, 9ER market share as well as 313 market share. So I think, overall, we were close to a $1.8 billion projection for -- if we were successful across the range of different readouts in 2025, would that be feasible. So those numbers, I think, are still aspirational goals that we have for what success looks like. And obviously, we want to be able to add to that with HCC, CRPC, lung cancer, DTC, obviously. So lots of moving pieces there, but it's a good stake in the ground for us and for investors to gauge our process and our progress based upon success, for sure.

Yes. And then maybe just last one just commercially, and it's kind of more of a fluffy question, right? But in terms of this quality of life dynamic, right, is that kind of the marketing hook that you feel like is resonating and driving this early adoption? And as we think about more IO/TKI combinations coming to market, a lot of investors sort of feel like this just sets up with a lot of combinations that look pretty similar across the board and just a very strong marketing battle. But I wonder if you characterize things differently.

Look, we market on the totality of the data and [Audio Gap] the 9ER data set is compelling from an efficacy, safety, tolerability and quality of life point of view. So it's the totality of data and the benefits that we bring to patients as well as to their prescribers in terms of their discount rates, the tolerability that I think is pretty compelling in that -- in those different dialogues that we're having either virtually or in person. So it's -- look, frontline RCC has been estimated to be between a $5 billion to $6 billion a year market. Plenty of room for everybody to do well there based upon the data they have and the muscle they put behind. But I don't think anyone is going to dominate that space. And I don't think anybody really needs to, to be able to do well and to monetize their data in a way that can further establish them and move forward. So we're excited about that. We have, I think, a pretty healthy and realistic set of expectations around what RCC can do for us, and we're certainly going to build on that. And then build across indications with cabo and 092 and the rest of our pipeline to drive growth in the future.

Okay. Now Merck announced positive top line for KEYTRUDA in the adjuvant RCC setting, and we'll see detailed data at ASCO relating to the adjuvant setting, potentially the interplay with frontline metastatic treatment algorithm and, I guess, more proportion of patients getting treated in that metastatic setting were treated and caught in the adjuvant setting.

Yes. It's early days. Hard to comment on that before I see the data. Obviously, RCC adjuvant has not been really utilized that much because there hasn't been data there to support that with, say, single-agent TKIs that even if they kind of right-shifted that, the disease-free survival end point didn't do much for overall survival. So hard to say right now. I really want to see the data at ASCO, see the radiographic end points, see the survival Kaplan-Meier to be able to really understand that in better context. But certainly, I think it's an exciting way to go. We're looking at, in general, adjuvant approaches, I think, very carefully and very broadly with 092/ICI combinations as well. So we want to be in that game, and there's lots of single-agent ICIs across tumor types that are -- those [ governments ] are cooking right now. [Audio Gap] again continue to be part of the process to improve outcomes for patients there as well.

All right. Sounds good. Maybe we'll shift gears to the late-stage cabo pipeline, and then we'll go to early-stage pipeline with probably the remaining third of the call here. So maybe COSMIC-312, this is the next update presumably in the Exelixis story. And I know in the past, you've analogized HCC to RCC. And I'm just kind of curious your sense where we're at in this paradigm shift now. I think Roche has got about a year under its belt. They're doing seemingly pretty well. They characterize about a 50% share, but is that a 50% share of a growing market? Or is that just 50% of the market that had low systemic treatment rates and TACE was commonly sort of being employed by, I guess, interventional radiologists, right?

Right. Right. So what's the question again?

Yes. I guess where do you think we are in the paradigm shift? It sounded like almost from your body language that we're probably still very early innings.

Yes, that's my sense. And I think the level of insight we can gain from Roche and their experience outside of the data they present is relatively modest right now. Certainly, they're gaining market share. [Audio Gap] the quality of the IMbrave data relative to single-agent TKIs like sorafenib or lenvatinib. So not surprising there. I don't know how big that pie has grown. And I don't -- it's hard to say after 6 months of the launch or 9 months of the launch if that's even the right time frame to even look at. So if you look at the Epi, either in the U.S. or globally, HCC is a very high incidence tumor type, certainly bigger than RCC. The question is just is the data there. Is the treatment either as single agents or combinations there to be able to really move the needle and change standard of care for patients? And that's going to come in increments. And I think as that continues to evolve with novel doublets and maybe even triplets going forward, going early, going late to be able to have a somewhat analogous set of tool compounds that is available in RCC, then I think we'll see that pie grow over time. And I think that's going to just take time and better data and certainly a lot more muscle on the marketing side to get that moving forward. So this is a game of patience and focus and long-term investments, and we're certainly there with cabo and 092 as going forward as well. So...

Okay. I mean -- and so in the past, when you and I have talked about this trial, COSMIC-312, I think you've said it's very, very similar to the [Audio Gap] your data will be compared against. And so one of the things that I hear a lot from physicians is, "I feel a lot more comfortable with a TKI on board than Avastin just because if there's a bleeding event or a risk, I don't really typically manage these things. I can off-board the TKI much quicker than I can off-board the Avastin agent." And so I guess the one thing we were looking at from a trial design perspective that perhaps looked a little bit different was just IMbrave did require an endoscopy for varices within 6 months prior to treatment, whereas your study protocol was silent on that in the enrollment criteria. So I'm wondering, is that a meaningful difference at all in terms of potentially your study populations as we look at them? Or should we really just think about it as more about the theoretical aspect of being able to get the TKI off-board if the patient does have a bleeding risk event?

Yes, you're correct. That's the one -- I think one difference in terms of the impact on just over-bleeding and the inability to turn Avastin off -- bevacizumab off when that happens, and you see that across trials in the past as well. So they scoped everybody. We didn't feel the need to do that and have certainly been looking very closely around that from a standpoint of the medical inclusion criteria to make [Audio Gap] of issues with varices. So again, we've been through the quarterly IDMC reviews for safety and feel good about that feedback, too. So I think that's the only real difference in the populations per se. But when you look at the totality of the patients who are enrolling, the temporal nature of when they were enrolled, a lot of the similar investigators, similar sites, the populations are pretty contemporaneous overall. So we feel good about that. And obviously, just got to get the data and see how it looks. So we're on track for that this quarter, so stay tuned.

Yes. So we'll eagerly await that. And I guess, obviously, since -- I guess then the question then becomes next steps. And one of those next steps seems to be that at least Roche is looking at atezo/cabo -- I'm sorry, atezo/bev with TACE. And so is that something that you guys would consider looking at atezo/cabo with TACE, just given that there seems to be a strong bias to using TACE? And do you think it makes sense to sort of combine the approaches just given the market dynamics?

Yes. Let me answer that question by saying that we're looking very, very closely at a lot of types and certainly in HCC with 092 and different combination partners and approaches. So I think it's safe to say that we're looking closely at this one as well. So...

Right, right. So -- and we'll get to that. It sounds like 092 gives you -- a lot of people probably underappreciate the different ways that you can kind of explore that clinically in some areas that are not total white space and have been clinically derisked. Is that a fair assessment?

Yes. That's -- I think that's fair. And the question is do we -- how do we add upon, how do we build upon the data we have with cabo, the data that's out there. And then to ask the question of what's either incremental or what is a bigger step relative to how we can bring 092 into play relative to its cabo-like activity with a more clinically friendly half-life.

Yes. Okay. And then I guess the other key update for 2021 will be prostate. And cohort 6 is an update that we eagerly anticipate. And I was wondering if you could maybe talk a little bit more about the patient population where you believe you could secure an accelerated approval of the data permit. And can you talk a little bit about -- I think in the past, you've talked about accelerated approval for second-line CRPC. I think [Audio Gap] they will need a confirmatory trial in all-comers in first and second line. And so I guess, just trying to peel away the onion a little bit in terms of the patient population where I think you've said that data permitting, you'd have like an opportunity to file for accelerated approval.

So I don't want to speculate too much here on the population per se. I think what's probably safe to assume is the patient population you study is usually what you would seek some level of regulatory approval for. In this case, it's for patients with at least just 1.1 measurable disease. So as we've talked about previously, we took the response assessment variable out of the equation by looking at patients with measurable disease, soft tissue, visceral disease to be able to get a very clear picture on response with cabo/atezo. So I think that -- in my mind, that is just go with what you look at and what you investigated in the trial knowing that, that's usually how things roll with the regulators. In terms of your analogy back to [indiscernible], again, I wouldn't want to speculate on what they've done or said or what feedback they've gotten. I can [Audio Gap] a big difference between a compound like cabo that's been in literally tens and tens of thousands of patients globally with a very deep, well-known safety database and proven efficacy across different tumor types versus a compound that's been in a handful of patients going forward in the very, very early days of Phase I, Phase Ib development. So it's really hard to connect those 2 and say they're analogous. Again, we've had good discussions with the agency. We understand the parameters by which accelerated approval is a viable option. As we talked about previously and talked about even as recently as last week on the earnings call, the next big milestone is to get a blinded independent assessment of the scans and then push that forward if data is warranting. So stay tuned. We're all excited about this opportunity. CONTACT-02, which is the confirmatory pivotal trial [Audio Gap] we're excited about that. And again, we have a very clear picture here for the short term with cabo/atezo and then lots of ideas and lots of plans and ongoing work with 092 combinations here as well.

Can you just remind us your thoughts on the bar for accelerated approval? Is it ORR-driven? And do you think you'll actually need PFS data in order to secure AA?

Well, if you look at the historical behavior of accelerated approvals, and this has certainly been under some level of discussion over the last few weeks with the back-to-back ODACs on this topic. Response rates in the context of other supportive data are enough to, again, based upon past performance, achieve accelerated approval. So that's the variable that people key on, but you have to have all the supporting data in place as well to certainly get that over the goal line.

Adcoms on dangling AAs did not diminish your confidence regarding the pathway here.

Yes. I really thought those were great discussions, and I thought all sides presented really strong supporting data for the overall approach. I think the agency has done a great job of being able to manage that process relative to not only getting patients access to promising therapies early on in the process as well as then making sure that the confirmatory studies or study is either going to be make or break relative to maintaining that approval. So I wasn't surprised at all from the outcomes, wasn't surprised by the votes. I think it's very consistent feedback and behavior by -- with an accepted approach that I think really is there to benefit patients to get them the earliest -- to get them new drugs for unmet medical need in areas that is very high on the list of everybody, all the different stakeholders involved.

And then maybe just shifting gears to the second-line non-small cell lung program, and I know that you've got the potential. I think that when we last spoke, it's like we don't want to have little drip-dried data updates. When we get our next update, it will be final data and just from Phase I/II, but you've also started Phase III, I believe, as well. But I think there's maybe a small degree of hope that there could be an accelerated pathway. But given how many companies are developing IO/TKIs, I think ultimately, you're going to have to win in Phase III here if you're going to establish traction in the second-line lung cancer setting. I don't know if you'd overall sort of share that view, first off, I guess.

Yes. So we were, I think, pretty clear earlier in the year that we don't envision seeking a Subpart H filing of single-arm combination data from 021 in second-line non-small cell lung cancer. So we put that stake in the ground earlier in the year. CONTACT-01, which is the combination versus docetaxel in that pivotal trial that's ongoing, so that -- and I think we've been pretty clear about that. There was some hope and some discussion around that last year, but we've clarified that, I think, pretty explicitly earlier in the year.

And are you anticipating with CONTACT-01 that you'll have an interim analysis there? I assume that you would. When we look at Mirati with their IO/TKI in lung, I think the plan is to have an interim OS. I guess theirs will be now pushed from year-end '21 to sometime in 2022 but maybe just as we start to track these programs and think about the important updates that are coming in the future.

Yes. So we haven't -- yes. This is a trial that's just started enrolling last summer, middle of the pandemic. So we have not focused on, I would say, clarifying or providing guidance on time lines and [Audio Gap] pivotal trials. It's enrolling well, and we're really excited to be working with Roche and Genentech on CONTACT-01, CONTACT-02 and CONTACT-03 with the cabo/atezo combination. We haven't provided discrete time lines for any of those CONTACTs yet. I mean the main focus is on the COSMICs in terms of 311 readout. 312, we'll read out shortly. 313 is fully enrolled, so it'll read out later this year, early next year. That's the -- along with 021, cohort 6 for CRPC. That's the real -- kind of real short-term milestones that we're focused on. So CONTACTs come later after those. So stay tuned on that. We'll get to the first wave and then start thinking about the second one -- or talking about the second one at the appropriate time.

And can you just remind us, I know there was some debate around the enrollment criteria in a post-IO re-treatment type of setting. And are the patients that you're focused on treating and that you're enrolling, are they having any response to their IO in the frontline setting? Or are they relapsed/refractory basically after, what, a cycle or 2? Just sort of curious [Audio Gap] focusing on in this CONTACT-01.

Yes. I think from a high-level logistics point of view, it will be a mix of both. Patients who had a response and then became refractory are those who were resistant out of the box, right? So there's no hard-core definitive exclusion criteria around there. I think both subsets of that population are very important to treat and have a very high unmet medical need. So we're looking to capture as many of those patients as possible with this trial and, obviously, from a commercial point of view if we're successful.

Yes. Okay. And ultimately, I would imagine that a successful trial, even if frontline standard of care changes, that -- you would anticipate that, that would ultimately alter or impact physicians' willingness to go to these modalities in a second-line setting given -- look, doctors had docetaxel and they never studied it post IO. So presumably, you stick with what you have and what you know works even if the science isn't perfect.

Moving standard of care, changing that standard of care bar is -- that's our job. That's the primary thing we seek to do every single day. So we want to be able to raise the bar here for patients with refractory-resistant non-small cell lung cancer. And the way you do that is you obviously have a combination like we have here that has very good potential, and then you go out and run the experiment. So if that were to be successful, if we move the needle on right-shifting overall survival, that would be a great impact for those patients, and we would certainly seek to then move that forward aggressively, for sure.

Okay. Maybe shifting to the early-stage pipeline, XL092 or particularly a son of cabo. It seems like it's right now, obviously, a program that you don't get a lot of credit for. My sense is that investors just want to see the Phase I, the recent data card turned over before they can ascribe a little bit more value. I think the triple, you talked about the shorter, the half-life story. And I think it's become a little bit of show-me story, right, with investors. You can correct me if I'm wrong. But [Audio Gap] of the XL092 story. Could we be in a position to get data -- combination data and expansion cohorts and potentially start to see 092 getting moved into pivotal trials by year-end? Could you maybe just frame that just so that investors have a little bit more context for how the story evolves?

Yes. So we don't get a lot of credit for things, but they actually happen anyway. That certainly is the case with, say, the first frontline launch in RCC and has been the case with cabo all along. So that's the status quo, and that's fine. I don't mind being a show-me story and earning both upside and respect as we generate positive data across any number of different components of the business, right? So look, with 092, the most important priority for us is to certainly initiate a pivotal trial later this year as the first one, if not more, if possible and then run as many, initiate and really implement as many new collaborations with a variety of different combinations [Audio Gap] across that IO landscape, whether it be 2 dimensionally or 3 dimensionally or 4 dimensionally when you start thinking about triplets and different combination partners there. So we've got a lot of work to do there. Overall, the priority for the company is essentially sNDA filings. We're on time for 3 of those this year, data pending. Certainly starting new -- finishing enrolling pivotal trials with cabo, and then starting new ones with 092. We did 8-or-so different presentations last year. So we're certainly able and capable of doing that, but my #1 focus is driving top line growth. And in order to achieve that in the short term, you need to have approvals and filings and then good top line data. So that's the focus for us this year. We'll certainly get 092 data out as it matures and as we have that as a priority. But for right now, it's all about filings and approvals and launches.

All right. Well, we're out of our time. But Mike, I appreciate the conversation as always. And thank you for joining us at the conference.

All right.

Good night. Bye.