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

Hi, everyone. I'm Jennifer Kim, a large-cap and biopharma analyst here at Cantor. Thank you for joining us today for our virtual fireside chat with Exelixis. Exelixis is an oncology-focused biotech company with 4 commercial products, including their flagship product, cabozantinib, and a novel pipeline of cancer therapies. Today, we're very excited to have with us the President and CEO, Michael Morrissey, to discuss the company's pipeline and the market opportunity for its products. Michael, thanks so much for taking the time today.

You bet. Great to be here. Thanks for that great intro, and happy to have some time with you today. Before I begin, I'll just remind everybody that I'll be making forward-looking statements. So please see our SEC filings for a description of the risks that we face in our business.

Great. Maybe to get started, for investors that are newer to the story and not fully up to date, do you want to give a brief overview and introduction of the company?

Sure. Well, you did a good job to get it going. So I'll provide some additional color commentary. Look, we're a commercial-stage oncology-focused company located here in Alameda, California. We've got a pretty large footprint in the U.S., with our sales and marketing organization as well. So as you mentioned, cabozantinib is the main driver of our business right now in terms of it's -- it's been launched and done well in cancer, in liver cancer, as well as in thyroid cancer, with a new approval recently in differentiated thyroid cancer. We're a company that has certainly grown up over the last 25-or-plus -- or-so years relative to where we are as an organization. We have a strong history of drug discovery and development, and certainly, since cabo was approved in 2016 for second-line RCC, have really used that as a catalyst to build our business going forward in terms of vertically integrating all aspects of the commercial setting as well. So we're excited about that. Obviously, our main focus right now is building a diversified pipeline of compounds. Next-gen cabo, XL092, is in Phase Ib trials and looking to start pivotal trials later this year, as well as a couple of really interesting early-stage assets, XB002, our first ADC molecule that is in the clinic and XL102, which is the CDK7 inhibitor. So we've got a lot going on. Very excited about where we're at as a company, and momentum building, I think, to end 2021 strong and moving to 2022.

Great. Fantastic. All good things. So let's stick to cabo for a moment. Where are you currently in terms of, I guess, one focus is front line share in renal cell carcinoma with the cabo/nivo combo? And how do you see that evolving across the academic versus the community settings?

Yes, it's a good question. So cabo/nivo was approved back at the end of January 2021, really strong data that we've talked about pretty extensively this year as well as last year. Top line data in April of 2020, kind of beginning of COVID, so lots of moving pieces there, but really pleased with the performance of the team from a clinical, regulatory and commercial point of view to be able to move into this area and really compete very well, bring new offering to patients and their prescribers relative to what we think is potentially best-in-class data in terms of the totality of that data. So, we had second quarter earnings. I'll focus on that as the last data point. We were in the high 20% range for new patient starts. If you look at the BrandImpact Rx data, which I think is pretty compelling when you think that we launched at the end of January and within 4 or 5 months, we're already kind of in the middle of what is a very, very competitive space. So I think it just speaks to the great efficacy in terms of PFS, response rate and certainly very importantly, overall survival. We took that approach early on, and this goes back to work we did with Andrea Apolo back in the Phase Ib setting. And we're really asking the question, could we take a little bit off the top with the cabo dose, maintain good efficacy, improve tolerability and potentially impact quality of life relative to having the 40-milligram starting dose as a combination dose relative to, say, the 60 mg dose that we normally use in terms of the single-agent activity. And that really, I think, paid off well. The efficacy parameters were outstanding. And to have quality of life here relative to sunitinib, I think, was a big bonus out of the trial and certainly helps us differentiate from the competition. So it's a very congested space right now, obviously, but we're holding our own, I think, really well. And I think, done very well. We had a lot of uptake with the academics literally from day 1. So that's not a big surprise. But as we talked about on the Q2 call, we've had good growth in the community segment as well. So we're seeing good uptake. Data speaks for itself and having a great team to support that makes that process sort of really very productive.

Okay. Great. And you've talked about a goal of, I think, a $1.5 billion run rate in the U.S. by the end of 2022. Could you walk us through what assumptions go into that? What's baked in, in terms of market share growth across the different lines, duration of treatment, et cetera?

Yes. So we haven't shared that data for purely competitive reasons. The math is pretty straightforward. We did about $750 million in 2020 in the U.S. for a predominantly second-line market share. So doing that math going forward, I think, is pretty straightforward in terms of what we're hoping to do. Our duration of therapy is approximately double as a combination versus a single agent. So you can work backwards to get there. We haven't put it out there for purely competitive reasons. But I think the math is pretty trivial.

Okay. And then in the near term, what kind of seasonality effects are typically seen with something like cabo? Is there anything we should keep in mind in terms of potential pushes and pulls that could impact the top line?

Yes. I certainly don't want to speculate on that at the end of Q3. Yes, it's a fair question. We'll certainly speak to the details of the quarter on the Q3 call, end of October, early November, so stay tuned.

Okay. Fair enough. Sticking with RCC, you have the ongoing COSMIC-313 trial for the triple combo, cabo/nivo/ipi, in the first-line setting. What are you looking to prove this -- from this trial? And what is the opportunity there?

Yes. It's a really -- I think it's certainly a very important trial and one that we're really excited about. But it really underscores, I think, what we're trying to do across the portfolio of trials with cabo with 092, with 002, all the early stage compounds. Look, our job is to essentially raise the bar on standard of care. Oncology is the most heavily invested therapeutic area in all of biopharma, certainly the most competitive across the board, whether you're big pharma or you're a new-co. I mean, everybody just pass into oncology. So what that means, and I think this has been seen pretty effectively across the last 3 or 4 years in terms of the continuum of good clinical data leading to regulatory success, leading to some level of commercial success. And there's been a lot of examples, big pharma, small biopharma, where you pass the first 2. You have good-enough data to get people excited, you can file off that, you get approved, but then the commercial uptake is sometimes low to modest, right? Cabo is one of the exceptions because we're in a good population that needs better therapies. And we delivered that differentiating clinical data that allows us to then be able to go out and say, "Hey, we're different." Cabo is different, either by itself or in combination with whatever agent we're looking at, right? So -- but that is the goal here with 313. We're asking the question, "Can we take the best of IO-IO and the best of IO-TKI, combine them in some manner that allows us to really move the bar up for patients with kidney cancer?" Because that's the only way you're going to be able to compete commercially. So -- and there's different ways of looking at that. You can speculate. You look at the CheckMate 214 data, the primary progressive disease rate was high in the 25%, 30% range. PFS is somewhat short. The real surprising data there is this long-term responders were usually PD-L1-positive patients who kind of raises the tail from a survival point of view. So can you see that by adding cabo on top, and can you actually address some of the less productive components of the efficacy story while either maintaining or improving survival as well? So lots of speculation. I mean, obviously, we have to finish the trial, look at the data. But I'm really proud of the idea that we can do better by patients and constantly ask these really important questions in terms of hypotheses that could raise the bar for them as we go forward. So first of many, and we'll do more of that with the CONTACTs and certainly, with the 092 and 002 programs, but it's the game we're in, and it's one that we, I think, revel in from the standpoint of being successful for patients every single day.

Okay. Great. Maybe looking at some of the other indications. Like you mentioned, cabo, very recently got approval in differentiated thyroid cancer. That was based on COSMIC-311. Can you remind us what the opportunity there is? And how quickly do you believe you can access that?

Well, we launched right away. So it was approved, and we were launch-ready within hours of that. So I think that's, again, kudos to the commercial team for making sure that whether it's off of 9ER or off METEOR or certainly, with 311, that we are ready to go, and we have all of our planning in place so that we can help patients that have the need for better therapies, and that's certainly what the whole goal is. It's a relatively small population. MTC is a rare form of thyroid cancer. DTC is certainly bigger than that, but it's still relatively small. So it's probably $100 million a year opportunity, plus or minus. So we'll see how that goes. But it's a very important unmet medical need in the second-line setting, and it's one that we're excited to be part of, right? And it just reinforces our commitment to patients and doing well by them relative to what they need in terms of certainly large component of unmet medical need that needs to be addressed. So...

All right. Great. And you actually presented the final results from 311 at ESMO recently. Are there any takeaways that you would highlight there?

Yes. It's very consistent with the early data set. We had the final view in terms of PFS and OS. Hazard ratios of 0.2 for PFS aren't seen very often, and that certainly was, I think, pretty compelling relative to a population who had already progressed on a single TKI before. So again, we're excited about that. Great opportunity to be able to go out and talk to physicians about that relative to the overall offering, of what's in the label for -- with kidney cancer or liver cancer as well as with MTC. So it's a great place to be, for sure.

Okay. Great. And then sticking to ESMO, you also presented cohort 6 data in prostate cancer. What sort of key takeaways would you highlight there?

Yes. It's -- I think it's a really interesting story from the standpoint of how cohort 6 looked in terms of this high-risk population network. I think, really excited to be able to profile in the CONTACT-02 study. You look at PFS, response rate, all the efficacy parameters, even overall survival, with all the caveats that it's a non-randomized cohort. It's really important to kind of benchmark that relative to other contemporaneous studies that have been run recently where a second NHT has been used as a comparator arm with the PROfound study with IMbassador250 with VISION. So you look at the data there, with all the caveats of looking at kind of cross trial, looking at some of these control arms, I think the data stacks up really well. So we're excited about CONTACT-02. It's always been in the mix relative to either being a stand-alone pivotal trial or a confirmatory trial if we got traction with the Subpart H approach from cohort 6. So that's moving forward aggressively. And again, we're excited to be in the prostate cancer game, and we think the data is pretty compelling.

Okay. Great. And can you remind us of the latest updates regarding the development plans around that indication? And what are you looking to show in future data updates?

For what?

For cohort 6, pursuing that indication? And then also, I guess, COSMIC-312?

Yes. So the CONTACT program is broad in terms of CONTACT-01 is looking at second-line non-small cell lung cancer post an initial IO or IO-chemo combination. Again, all the CONTACTs look at cabo plus atezolizumab. Those are studies that we're co-sponsoring or co-funding with Roche. So CONTACT-01 is in lung. CONTACT-02 is in prostate, again, first-, second-line prostate post a single NHT, followed by CONTACT-03, which is in second-line renal post an IO container regimen. So it's, I think, a very important next wave of pivotal trials that, along with 313, would then conclude the cabo pivotal trial efforts as we transition over to XL092, the next-gen cabo that we think is probably a better molecule from its overall clinical friendly half-life, being about a day or so, that we think we can get a lot of traction on going forward.

Okay. That actually brings me nicely to my next question, which is XL092.

Good segue.

Yes. So you made a lot of progress there. Are you still on track to roll out a pivotal trial on that this year? And can you remind us what the big questions and strategic considerations you're thinking about as you bring that candidate forward?

Yes. So that's the goal for 2021. 092 really plays off the momentum we have with cabo. And I think, as I've talked about before, we've seen broad any tumor activity with cabo, either by itself or in combination with other agents across 20-plus different tumor types, RECIST 1.1-level responses. So -- and we've only studied them, a fraction of those, in terms of late-stage development. So the opportunity is to pick up on the momentum and the insights from cabo and apply those to XL092, which has a shorter clinical half-life, much easier to dose-adjust, and literally, every VEGFR targeting TKI will need to be dose-adjusted in some shape, manner or form. So we've learned a lot with cabo in terms of efficacy, in terms of dosing, in terms of how to maneuver in combination. So we can take all those learnings, a decade or more of clinical work, and apply that with XL092. So lots of white space across the board. We have 3, maybe even 4 clinical collaborations with various biopharmas looking at 092 combinations with various IOs. It wouldn't surprise me if we see more of those coming out as well because I think the 092 opportunity where it's easier to dose-adjust, it may have some level of differential, I would say, safety activity based upon -- it's a different molecule. It partitions differently into tissues, and we've seen that with various protein-binding activities so far. So it's a really -- I think, a really exciting opportunity, and one that we're hitting hard across the board to be able to take the momentum from cabo and then apply that in a much broader sphere in terms of novel -- either novel doublets or triplets going forward across the continuum of indications. So a lot to do there, team is really cranking and certainly very excited about where that's going, while we're developing the next-generation of molecules, these small molecules or biologics that would allow us to build this diversified portfolio of compounds.

Okay. Great. And with cabo and XL092 and your ongoing R&D efforts, can you sort of break down what your vision for the company is over the next 3 to 5 years? And what gets you most excited?

Yes. It's a great question, and one that we talk about a lot. Being a one-compound company is always a challenge. Good news is that, you've got a compound like cabo that has had $1 billion in global revenue over the last couple of years, and we're certainly on our way this year with the first-line launch that easily extend that further. I won't give a number globally, but it's a big number. Our revised guidance was in the $1.05 billion to $1.1 billion range for the U.S. alone. So it's a big number. And that's -- you add the success ex U.S. globally, that is growing. So the good news is that we have a franchise molecule in place today. The challenge is how do we build around that, how do we use the cash position that we've built, the cash flows that we've got to be able to expedite that. And I think the team has done a great job with internal discovery, as well as business development to really put together a really exciting portfolio of assets and compounds across different modalities that allow us to really be excited about what's coming out now -- coming out of discovery and into development. And certainly, molecules like XB002, the next-gen tissue factor ADC that looks really -- I think, really promising in terms of having an optimized binder and an optimized linker warhead based upon some of the first generation data could be really exciting. Our CDK7 inhibitor, XL102, is one that is looking really encouraging, and I think some of the emerging data we're seeing clinically shows that we're engaging the target pretty well. So the question is, where do we target that across different indications, say, breast cancer, prostate cancer, et cetera, but gaining traction there. And we have a third IND that is in with the FDA. We'll talk more about that once we get the go ahead. So lots of moving pieces. The discovery operation in collaboration with BD, on the biologics side. We have, I think, built a very strong network of collaborators on the ADC side in terms of novel binders with the Invenra collaboration, have done a host of different really options in terms of linker warheads where we could mix and match, merge and purge based upon what the tumor calls for in the binders that we've got. So playing this a la carte game in terms of being able to, say, for tumor X, it's more sensitive to these kinds of warheads. So what's the best place to bind? What's the best warhead? To be able to play that, I think, out overall approach is really a very strong way go. So I see that growing in time. And within, I would say, a reasonable short period of time, we'll have, I think, a full complement of ADCs that are moving either towards or into the clinic that can provide, hopefully, patients a lot of better options. On the BD side, we continue to be, I think, very aggressive looking for opportunities. We focused on a lot of early-stage deals that are back-end loaded that really allow us to pay for success while not putting a lot of money upfront. We're looking at a lot of early -- a lot of mid- to late-stage assets as well. Obviously, the conviction there has to be on, is that investment going to be able to pay off in terms of having differentiating clinical data as well as then the conviction in the marketplace if that's successful? So lots of moving pieces there, and we'll see what gets done and what doesn't. But I'm pleased with the overall approach. I think the process of having -- the strategy we had, it was really a tactic back in 2015, 2016 to run using cabo to drive cash flow and to drive the growth of the company, and then this expansion of the pipeline has worked well, and we've got to keep that going and stay focused on making sure we're successful every nickel day.

Yes. Can I ask, how would you describe your level of appetite for additional BD relative to prioritization of what you have now? Like, can we see more BD deals in, like, the near term? What's the level of urgency?

Yes. So certainly, you're going to see more BD deals. There's a whole -- a whole queue lined up. Most of them are these earlier-stage deals that allow us to tap into technologies and biology that we like a lot. And again, pay for success -- pay a little bit of money upfront, and that little bit is growing over time as we have more conviction with some of these newer technologies and newer target pathways. So yes, there's a whole queue there, and I think you'll see that both on the small molecule side as well as on the biologics side. The later-stage assets, we'll see. It's -- there's certainly valuations and the overall gestalt around the kind of the biotech kind of white hot space has cooled over the last 7 or 8 months. But people still have, I would say, within the early stage biopharma area, they still have a long cash runway. People went back to the bank, if you will, and recharged their cash position. So there's lots of optionality there, but we don't want to overpay. We're not going to move out of our disciplined approach around where we're pragmatic and ask the key clinical commercial financial questions around value and what that means. So -- but look, we're in the game to win every single day. And we've got a strong internal discovery effort, and we've complemented that with a lot of great deals, and that will continue for sure.

Okay. Great. That does it for the questions I have for you today. We're going to respond to questions from the audience via e-mail. But in the meantime, Michael, thanks again so much for your time and participation.

You bet. All right. Thanks, Jennifer. Good to see us. Okay.

Thanks. Take care.