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

Hi. My name is Kennen MacKay. I’m one of the biotechnology analysts here at RBC, and it's my great pleasure to kick off our next session with Exelixis. From Exelixis, we have Mike Morrissey, the President and Chief Executive Officer. Mike, thank you so much for joining us here.

Kennen, how are you doing, man? Good to see you.

I'm doing well. I'm actually right across the South Bay from you now, and it's a treat to be out in the bay area.

Yes. I heard you moved. So looking forward to doing this live next year, right?

Absolutely.

Yes. Face-to-face is better. I'm kind of zoomed-out here.

And apologies to everyone who is on the webcast and tuning in for the technical difficulties and a few minutes of late start here. In-person is better, but working with what we have. Mike, before jumping into Q&A and sort of the fireside here, maybe you can just sort of set the stage for where Exelixis is now versus some of the 2025 aspirations that you laid out really at the beginning of the year here.

Yes, sounds good. So again, thanks for the invite. Always great to connect with you. We'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, get that out there first. So yes, so we've gotten off to a great start in 2021. As I said on earnings a few weeks ago, I feel like we're actually exiting COVID in a much stronger position than we were when we started COVID 15, 16 months ago. So true testament to all the great work by the team. Everybody works really hard. Suboptimal conditions, obviously, with everything going on: working from home, sheltering in place and all the other stuff going on. But I think the team just completely engaged and gave it the full-court press for the last 15 months or so to get us to where we are today. As you know, we launched first-line RCC with the cabo/nivo combination at the end of January. We had update on earnings on the Q1 call a few weeks ago, really strong print with $227 million net product revenue for the first quarter. That increase over Q4 was primarily due to the launch in first line. So we feel like we've got a really strong momentum there relative to the launch, the data, the -- we've had a strong team in RCC for years now. So to be able to plug that data and that approval into what is just a fantastically talented team to get out there as the country opens up from COVID has just been a great way to operate. So we're hitting Q2 strong. We've got lots going on relative to key milestones for second quarter and the rest of the year. You mentioned the 2025 aspirational, what the success look like. I think we're well on our way to that. So obviously, we've got some important readouts coming up this year and next year and a good p-value that really provides the momentum for what could come there in terms of both from a regulatory point of view and commercial point of view. But I'm just really excited and grateful to everybody on the team for working so hard. And between cabo and 092 and this emerging pipeline of candidates that we now have in the clinic with 002 and 102, we really feel like we're hitting our stride. And with the cash flows that we're bringing in, we can do a lot of good for patients across the board.

And Mike, maybe just going back to what you mentioned, the frontline combo label in what sort of drove that quarter-over-quarter growth there. I'd love to understand sort of what you think is a realistic market share for cabo/nivo in that sort of frontline combo market. What do you think is achievable? And maybe just thinking about that '25 guidance, what is kind of built into that?

Yes. So we're holding some of the projections on market share somewhat close to the best right now. It's obviously a very, very competitive space. The opportunity here in the first-line setting is literally a $5 billion to $6 billion annual market for frontline RCC. So we feel like we can capture a reasonable share of that relative to the competition, and there's lots going on there, obviously, but we think we've got room to grow and room to move going forward. We put the $1.5 billion run rate as we exit 2022 as an immediate goal for the company and for the team relative to what we think we can do from an overall totality of market share, duration of therapy perspective. I think in some ways, we're actually building ahead of that right now relative to where we'd hope to be after the first few months. So the uptake has been -- and the response to the data and the label and the outreach that we've done so far has been tremendous, and we're going to keep pushing that forward as hard as we can, knowing that RCC is just one component of a very important multi-component, multi-indication business that we want to build. Certainly, we've got that with HCC already and MTC small indication. But with the DTC data, with HTC frontline, HCC coming up, prostate coming up, we're enrolling rapidly for lung and for other indications. We're really excited about where that can go in the future.

And just speaking on some of these other indications in ATC, I mean what -- like what kind of data from the COSMIC-312 study do you think would be necessary to achieve sort of a really, really competitive profile here?

Yes. So I think the situation is similar to the dialogue we had for the majority of 2019 with 9ER. Statement of the obvious, right? Oncology is really competitive, right? And that's the case. And literally every indication, every biopharma, large and small, that's investing in oncology is going all-in because the unmet medical need is still high and the opportunity to raise the bar from the standpoint of standard of care. And that's something that we've done consistently over the last 5 years, starting with the METEOR result back in 2015. The only way you're going to be successful commercially in the oncology setting today is to have data that’s competitive. Data that basically raises the bar. METEOR data, from a pure competitive point of view, is not going to get pretty far, right? So we spent 2019 really debating and getting a lot of questions from the buy side and the sell side, how do you get survival with the competition? How do you match what, say, the competition has either with IO-IO or IO-TKIs? So -- and I think that -- we're patient and confident, and that turned out pretty well. So I think the same situation applies to first-line liver. Obviously, vem/atezo is -- has reset the bar, reset expectations, for the first time, beating sorafenib head-to-head, and we have to be competitive with that. But in terms of how the hazard ratios look, how the medians look, I won't speculate on that right now. But knowing that in order for us to be competitive commercially, we have to compete with them clinically, right? And it's exciting. And when you think about the [indiscernible] trial versus the 312 trial, the only real difference in a real material sort of way is swapping of Avastin for cabo. And in that regard, I'm really happy we've got cabo. You look at the data between those 2 molecules with other caveats, comparing temporarily, and cross trials and combinations of single agents. We've got a great molecule on our hands, and I think the data that you've seen with METEOR and CELESTIAL and now 311 and 9ER, and et cetera, really reinforces that it's a very active -- broadly active molecule that can work in these big populations. So we're ready to engage. And we have a lot on our plate for the back half of the year in terms of potential new filings, but it's full steam ahead for sure.

And I love to go back to your comments around what it takes to be differentiated as we get to some of the pipeline beyond cabo, especially I would love to talk 092 for a moment. But before we get there, do you have a couple of potential indication expansions coming up? And I would love to get your perspective on sort of where we are in lung and then also in prostate.

Yes. So prostate and lung are both really important indications for us in the context of cabo, cabo/atezo combinations. We certainly have a long history in prostate cancer with single-agent cabo going back to the COMETs. We learned a lot from those studies that, obviously, weren't successful. But the learnings from that work really enabled us to design better trials, understand the different degrees of freedom we had relative to how to actually potentially bring benefit to those patients. So you saw the data last year at ASCO of the first cohort of patients from COSMIC-021 cohort 6, the first 44 or so patients. Really, I think, really encouraging response rate data, PFS data, duration of response data with that combination. That cohort 6 enrolled rapidly and fully, and we're just basically waiting now for the blinded independent review. At the same time, we got CONTACT-02 going, which is the confirmatory large global pivotal trial looking at a similar population in both trials or the cohort from 021 and the trial with CONTACT-02. We're looking at patients with RECIST 1.1 measurable disease. So we're taking the whole question about response assessment in terms of bone scans, and we're just moving that aside and asking the question in a very simple clinically validated way by using RECIST 1.1. So we're excited about that. Obviously, with lung, we've got cohort 7 that's enrolled now 80 or so patients, and we're working with Roche to enroll the CONTACT-01 study. So that, again, is going, I think, very well, and we're looking forward to having that data -- having that trial fully enrolled and then having that trial readout sometime in 2022.

And just going back to prostate, thinking about when that readout could come. Is that -- that's something maybe that could be a back-half event. As I've sort of [indiscernible] those numbers, it seems like maybe Q4, but would love any color that -- any help you can give us around that math there.

Yes. Sure. So we've guided the cohort 6 BIRC data to be available around midyear. So we haven't given more precise guidance on that, so stay tuned. Certainly, that's 1 of the 3 trials and indications that we hope to file for, data pending, in terms of 311 that we saw data on top line data on last year. We'll have a full update at ASCO shortly. And then 312 data pending if it's successful as well as cohort 6 from COSMIC-021. So for a company of our size, and we've certainly grown over the years, but we're not this huge biopharma to have 3 potential filings kind of in the cards as milestones for this year is a pretty important goal for us and one that we're staffing up for and really excited if the data is there to be able to push that forward rapidly.

And looking forward at maybe a couple of years or maybe a year or so into the future. If CONTACT-01 is successful, do you think this is something you could bring forward into even frontline lung? Or how would you think about -- in the indication expansion within lung?

Yes. So we have a lot of ideas and a lot of emerging plans for, I would say, literally every large indication out there within the context of XL092. So I wouldn't expect to see a lot more new pivotal trials starting with cabo per se with -- as the COSMIC's read out, as the CONTACT's read out, then we will be transitioning to 092 in terms of those -- that broad development plan across tumor types, across lines of therapy, across novel doublets and triplets. You've seen some of the collaboration we've announced, say, with Genentech-Roche, with Merck KGaA, others on the way. So it's a really important next-generation molecule for us. Again, as we talked about previously, we've looked back at history and used -- say, used the Celgene Revlimid example of learning with the first molecule and then applying those learnings to a second more optimal molecule. And certainly, in the case with 092 having a shorter half-life, gives, I think, clinicians much better flexibility with how they dose-adjust, which all VEGFR-targeting TKIs need. So look, we're all-in on 092. We're excited about that. We think we can really gain a lot of traction there. And a traction that can really span a couple of decades because it's a brand-new NCE, and we have a lot of flexibility there with the franchise from cabo driving cash flows that can then really fund the entire operation. So it's a great model of build the foundation with cabo and then use that to then expand with 092, new molecules, small molecules, biologics, and really build Exelixis potentially into a multiproduct company that can span for years to come, helping thousands and thousands of patients potentially every single day.

And Mike, to your point that it's an excellent strategy for sort of establishing and then building upon the foundation that you've created. But when you have data like CheckMate 9ER, or even maybe some of the triplet data, cabo/ipi/nivo, that we should maybe be getting in a year or so, how do you sort of improve upon that? I mean just thinking about 092, maybe there's sort of a room for safety improvements. But is that kind of where we should be thinking about that? Or is there potential to even surpass cabo on efficacy there as well?

Yes. I wouldn't want to speculate on that level of, I would say, expectations relative to efficacy and safety. I mean we have to run the experiments. I would be cautious about guiding anybody to think about what's going to happen versus what's potentially possible. I think the way we look at 092 is quite simply, it's a more user-friendly version of cabo with a half life that's about 24 hours versus 100 hours. So as patients invariably will need to be dose-adjusted, especially when you're talking about like with 9ER, where patients are on therapy for 15, 18, 20-plus months, it's always common to be able to dose-reduce them over time to maintain their clinical benefit, but to kind of address this long-term chronic toxicity that you'll see with basically any molecule, right? So -- but I don't look at -- and we haven't really kind of framed cabo replacing or cabo being replaced by 092, but it's 092 building around cabo, building on top of the foundation cabo has built in new indications with new combinations, new lines of therapy, et cetera. So don't look for us doing head-to-head trials with cabo. Look for us expanding on that playing field in a 2-dimensional or a 3-dimensional sense around all the other opportunities that we haven't explored yet in label-enabling trials. But then we got a lot of data on with cabo. You think about 021, you think about some of the earlier work, the RDT trial that we did years ago. We know a lot about where cabo can be active. The question is what's the best way to proceed going forward and to be able to slot 092 in there with a real enhancement around how user-friendly it is relative to the shorter half life could make a big difference. So early days, but lots of momentum, lots of interest, lots of energy. So super excited to be in that space right now.

And maybe then just going back to COSMIC-313. So that's the frontline cabo/nivo/ipi data could see that event-driven analysis reading out next year after that trial completed enrollment in March. Where would that sort of be positioned versus VEGF TKI?

Yes. So it's a really interesting trial. And it, again, reinforces the idea I mentioned before that our job -- as I see it, our job is to push the opportunity to improve standard of care. That's how you help patients. That's how you gain market share. That's how you build -- in 2021 and beyond, that's how you build commercial depths by always having literally the best data possible so that physicians, patients, health care providers come to you because they want your drugs because you've got arguably the best data. So COSMIC-313 is an example of that. We're looking at taking the best of IO-TKIs and the best of IO-IO and putting them together, ask some very important fundamental questions. So if that works, and you really can't define standard of care, then you really have an opportunity to help a much broader array of patients. Look at the CheckMate 214 data, some parts of that, some subpopulations worked really, really well. PD-1 positives, for example. PD-1 negatives, not so much. And the PD-1 positives, even though that was a real minority of the patient population, the data was so good in that population and dragged the entire population over more, right, in terms of having the ITT population be significant for survival, and et cetera. So look, we think cabo could have impact there. Obviously, we have to run the experiment. We have to get the data and look at the final analysis and understand that. So I don't want to get ahead of that. But we're looking at a readout end of this year, early next year based on current event rates, and we're really excited about that because it really plays to the heart of what we try to do every single day. And that's raised -- they raise the bar for patients. And if we're successful, certainly use that to help build the company going forward.

So Mike, you've now -- you've got cabo back on a very clear road track. You've got 092, and the sort of expansion and footprint expansion opportunities there, I think, are very clear. You also have a couple of INDs coming. 2020 was a year that you really did restock the pipeline, you've got a tissue factor ADC and then your CDK7 that you in-licensed last year. I guess behind 092, as we're looking at your pipeline, which one of your new children here do you help the most? What are you most excited about?

Well, like my real kids, I like them all. I love them all. They always challenge me at different times, which is -- I'm always grateful for that. It's not -- never at the same time. So look, they're all really exciting. We -- I'm just so pleased and grateful that we're back in the discovery game. We pivoted away from discovery for a 5 or 6-year period to really double down on cabo to make that work and to build a sustainable business where we have cash flows that we can use then to reinvest in the business, the early pipeline to build this diversified offering of drugs in the future. So I'm a discovery guy at heart, and it's just great for me to see all these new ideas, new molecules, biologics and small molecules, kinase inhibitors and ADCs moving forward. I'm really excited about XB002. There's certainly a high degree of clinical POC with the first-gen molecule, but we think we can improve upon that. And we think we've got a molecule in 002 that's got a better binder or a better warhead. Preclinically, it looks really promising. So now we just need to get the clinical data to kind of realign expectations that we do the right work in terms of having that be designed correctly and are we going to see promising data clinically or not. So but that's -- look, that's the game we're in. And I don't want to [ overstate ] and overhype early experiences in the clinic. This is a really, really tough business, but we've got the team, we've got the mindset, and we have the culture from the last decade of the ups and downs of biotech to be able to really navigate all this work in a very efficient, focused fashion. That's what I see as our big advantage. We've done this now. We've got 9, 10 pivotal trials either read out or going or about to read out. We've -- from a clinic -- from a discovery, clinical regulatory commercial perspective, we've done this now with cabo really, really well. And now I think we can apply those learnings and those efficiencies and that mindset to a broad pipeline of assets that are going to hopefully move forward rapidly. So super excited. Certainly, having the Q1 numbers that we had kind of put the stake in the ground for us from the standpoint of having that strong position financially. Q1 was, I think, underwhelming for most oncology companies, large and small. In terms of kind of meeting consensus, we crushed it. And I'm hoping we will continue that going forward throughout the year. So stay tuned.

Excellent. Well, that's a perfect place as any -- to leave it. Mike, thank you so much for taking the time today and talking to us and bearing with us through some technical difficulties. And thank you, everyone, for tuning in today. It's been a real treat.

Kennen, all the best. See you soon, okay?

Thank you. Talk to you soon.

Thanks. Bye.