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

All right. Thank you, and welcome back to the 40th Annual JPMorgan Healthcare Conference. My name is Matt Bannon. I'm a healthcare banker here at JPM. I'm really excited to introduce our next presenting company, Exelixis. And on behalf of Exelixis, we have President and CEO, Michael Morrissey. Mike, I'll turn it over to you.

Fantastic and thanks, Matthew, and thanks to the entire JPMorgan team for the invite and the opportunity to tell you about Exelixis and how we're looking at 2022 and beyond. I was just talking to Chris Senner, our CFO, about doing this live back in 2020, and that seems like a lifetime ago and I'm really hopeful that we'll be doing this live again in 2023. So -- but here we are, we're virtual. We're in Alameda. And I'll walk you through the deck that we've got and be happy to answer some questions. First slide, the title, I think, to a certain degree, says it all. We are really in the process of moving to become a global multiproduct oncology company. We have the good fortune of having a great franchise molecule in hand with cabozantinib and obviously, using the opportunity that, that molecule provides and all the great work we've done in the past and helping thousands and thousands of patients every day to be able to move to a broader impact for patients across tumor types, across modalities in a way that we think we can build the business going forward. So before I begin, a little housekeeping, 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. We'll also be making comments about preliminary financial results for the quarter, the fourth quarter of 2021 and the full year of 2021. We will have -- again, these results are unaudited, and we will be having a full update on our Q4 call on February 17, 2022. So be aware of that. So let me start on Slide 4, and I think this slide sums up where we are, where we're going, what we aspire to be. We've been building the company really since 2016 based on the foundation of the growing impact and revenues of cabozantinib. Certainly, 2022, I think I can say confidently that we really are on the path to becoming a global multi-product oncology enterprise. We have a diverse and expanding pipeline of molecules on the market with cabozantinib in the clinic with a variety of molecules that we've made over the last few years and certainly a very rich pipeline of compounds from our discovery group and its collaborations and internal efforts over the last few years. Clearly, CABOMETYX and certainly, its commercial success is the driver for growth. We had a very strong year in 2021. Net product revenues were $1.08 billion based on the U.S. commercial markets. Very pleased with that. This is the first year that we've crossed that $1 billion level in the U.S., certainly very thrilled based upon the first-line RCC combination launch between cabo and nivolumab, driving a lot of that growth. And again, we've really built the development plan and the pipeline around cabo to be able to maximize potential value for patients. We expect up to 3 new pivotal trials to read out this year that if successful, could create the opportunity for significant label expansion. Now again, cabo is the main commercial driver. It's the main story for us over the last 4 or 5 years. I can tell you that going back to 2010, 2011 when I took over as CEO and started to really focus down on how to build this business. The idea that we might be a single product company one day, that wasn't a strategy that was purely a tactic for us to be able to move the company forward based upon revenues from a molecule that we thought could be successful, both from a clinical, regulatory and commercial perspective and then use the revenues, use the free cash that we can generate with that molecule to then build a sustainable pipeline of molecules, first-in-class, best-in-class molecules, in the oncology setting to be able to then help more patients with cancer and build the business to the benefit of shareholders and patients alike. And that's really, I think, what's happened over the last 4 or 5 years. As many of you know, we kind of paused our discovery efforts while we were navigating some of the early cabo trials in the 2017, 2018 time frame. We reestablished our discovery efforts, broadened that approach, and I think have had a lot of success in that time frame with building a pipeline of clinical assets, but also having a very deep bench of molecules now in discovery that are moving toward development candidate status and will provide the fuel for the future. So in terms of clinical milestones beyond cabo this year, certainly XL092, our next-generation oral TKI is next up, generating some really interesting data there. We'll talk more about that later. We hope to plan to launch the pivotal trial program for XL092 this year. We have a lot of, I think, momentum to expand the clinical programs for XL092. For XL102, our selective oral irreversible CDK7 inhibitor, that's in the clinic. And then our first biologic XB002 tissue factor ADC, which we think has already been able to show some differentiating activity and properties in the clinic that we're really excited about to be able to move this into full development after a very short time already in the clinic. So we're very excited about all 3 of these. We think we've got a lot of momentum. They're great tool compounds to be able to test a variety of clinical hypotheses. Lots of work to optimizing these molecules and we think that could pay off in the future as we have the opportunity to advance these molecules. The discovery efforts and network has really made a lot of progress over the last few years. As we sit here today, we have 10 -- really 10-plus programs that are advancing through a variety of internal as well as collaborative efforts marching their way towards development candidate status. This year or next year, we hope to have up to 5 new development candidates or DCs across both small molecule and biologic platforms. This year and -- as I'll show you in a few minutes, we have through the BD efforts as well as a lot of input from clinical discovery, commercial finance have built a very strong network of collaborations to help us generate a variety of really important new and novel biologics focusing on antibody drug conjugates, ADCs and other bio therapeutics as well. So lots of momentum there. We spent some years and years being a small molecule shop, and we understand the value and the importance of having a deep, broad pipeline with a variety of different modalities in place. And certainly, that's been the case. And as you'll see, I think we've had a lot of success there so far. So we have big ambitions. I think you'll see some of those come into play this year. The first is we want to be a significant player on the global scene from a discovery, development and commercial framework. This year is our first really move outside of California, back to the East Coast, as we announced previously with the appointment of Dr. Vicki Goodman to be our new CMO, or we have plans to build out in East Coast function in the Philadelphia area that will allow us to really tap into the biopharma talent on the East Coast and also start building towards a global footprint as well as now in the first half of this year, complete our new facilities here, a brand-new building, a couple of hundred thousand square feet of space, that will support our expanding pipeline and organization to drive value creation to the benefit of patients and shareholders. So lots going on right now. We're really thrilled to be starting the new year with a lot of momentum across the pipeline, across the organization. Certainly, cabo drives a lot of that, and we feel like we've got a really good sense of how to be agile and deep at the same time, looking to maximize the value that we can generate going forward. So I'll turn to Slide 5 and give you a snapshot of the network of both commercial partnerships and clinical and pipeline collaborations that we've built over the years to really focus on driving growth across the entire enterprise. I won't go through these step by step. I think we've talked about them in some [ Shaman ] reform over the last probably the last 4 or 5 years across the board. Certainly, the pipeline collaborations are the most recent and certainly driving a lot of interest and momentum on the discovery side. The clinical collaborations, especially now in the 092 arena are very, very important from the standpoint of building out that development plan. And our commercial partners across the board, certainly with cabozantinib with Ipsen and Takeda, really, again, strong network to be able to make cabozantinib available across the globe to patients that can benefit potentially from that molecule, either a single agent or in combination. So again, we're thrilled to be working with these various groups. It's really a who's who of biopharma. And obviously, we're all working together to bring benefit to patients as we go forward. Moving to Slide 6. Just a couple of words briefly on the CABOMETYX commercial momentum that we have built, certainly saw extremely strong performance in 2021 and taking that momentum forward into this year. '21 was a year of launching off the CheckMate 9ER first line RCC trial that we were approved in January of last year. Really outstanding efforts. Great data, great team. Great focus in terms of what that data can do for patients. We saw really significant growth. If you look at Q4 '21 versus Q4 '20, you saw about a 50% growth in total scripts. About a 40% growth quarter-over-quarter in terms of 2020 versus '21 in terms of new scripts. So just outstanding performance there relative to -- what's arguably a very competitive marketplace where we have data that is really, I think, seemed to be best-in-class in terms of clinical benefit, certainly radiographic benefit and then quality of life. What's -- what I find to be interesting and certainly compelling is the market share growth that we've seen in this time frame as well. If you look at just the 2021 time frame. We've seen TRx grow about 5%, NRx about 4%. So share points from a market -- our market share perspective are hard to come by. And when you see 4% growth, 5% growth. It really, I think, reinforces the idea that this is a tool that physicians are using to be able to help their patients with predominantly in the case of cabo with kidney cancer. So we're thrilled about that. So key milestones from the commercial point of view, obviously, we're getting really around the regulatory approval for CheckMate 9ER and the first line RCC setting in COSMIC-311 with differentiated thyroid cancer. Certainly, both are very important drivers for growth. The duration of therapy we're seeing with CheckMate 9ER in the first-line setting can certainly be expected to provide future growth as with a PFS of 17, 18 or so months, you can start to see patients stacking year-over-year, which is, I think, pretty important. And to date, we've seen no real significant impact from competition on cabo market share, even some of the more recent entries in this market. So data speaks for itself. But bottom line, certainly, we've been very pleased over the last 5 quarters, we've seen the last 5 consecutive quarters. We've seen growth in both TRx and NRx in terms of market share. So again, proven performance. A lot of interest in this combination in the clinical community, and it's driving a lot of our growth and our ability to reinforce our plans as we move forward. Slide 7 has our preliminary unaudited, both full year and Q4 2021 results. Net product revenue, I'll focus on that. We achieved about $300 million in net product revenue in the fourth quarter. Again, full year was approximately $1.08 billion. I won't reiterate the rest of the numbers. The R&D expenses for Q4 were a little high based upon the transaction we did to amend the iconic agreements for XB002, that was a $55 million expense in the quarter. The table does not include fourth quarter or full year total revenues as we're waiting for our partners to provide final confirmation of their 2021 cabozantinib net product sales performance. And obviously, we'll have those numbers in time for the Q4 call in February. So stay tuned for that. And then for 2022, financial guidance, again, we're projecting net product revenues in the U.S. for between $1.325 billion and $1.425 billion with the appropriate cost of goods and other expenses shown here at the bottom. We do expect to see some R&D growth in expenses, which makes sense as the pipeline continues to mature and advance and certainly is in line with our long-term guidance that we will grow the R&D expenses as net product revenues continue to grow. So all in keeping with the plans in place to be able to build a multi-compound global business for the future. Okay. Next slide, Slide 9. A list of accomplishments here. I won't go through these line by line. I think I've covered most of them already. Obviously, we had a lot of success from a regulatory point of view to approvals, commercial, you saw the numbers over the last few slides. Very pleased to have 45% year-over-year. Net product revenue growth, again, driven by the first-line RCC launch. The pipeline continues to progress. We had 3 Phase III -- 3 Phase III trials, complete enrollment. We initiated 2 new molecules, both have gone, I think, very well in generating interesting early data. Our collaboration agreements for XL092 continues to expand. And on the discovery side across both internal efforts and through our collaborations, making a lot of progress, where we're adding platforms, capabilities, targets, and in some cases, molecules that we can use to drive the process forward. So across the board, I think the team had a great year in 2021. And it really sets us up with great momentum to take the company forward into 2022 and beyond. So let's talk about the cabo franchise, obviously, on Slide 11. We've always talked about cabo as a franchise molecule. And I think this slide really sums up kind of what we've done and what we're doing. As I've said in the past, we're really in the business of generating p-values. And it's very satisfying for me to both look back as well as look forward to seeing the work that the development team has done is doing and hopes to accomplish as we go forward across not just the cabo development plan, but across a whole range of different molecules that are now in our pipeline. But clearly, this is one area that we've excelled at. We have a lot more to do, and that's going to be incumbent upon the team here in Alameda as well as the new team in [ Exel ] East to be able to grow and work together and really continue to excel for patients as we develop this pipeline and advance it as quickly and as carefully as possible. So I'll just run through some of the high-level summaries, obviously, the COSMIC program on Slide 12. Multiple readouts are expected for 2022. Top line results for COSMIC 313, that's the first-line RCC's study and intermediate and poor-risk RCC patients looking at the triplet: cabo, nivo, ipi versus nivo/ipi. We expect top line results in the first half of '22. The 312 trial, as we've talked about previously, we expect the final OS analysis early this year. And then the large Phase Ib basket trial that's generating and has generated just an enormous amount of really, really important information across 24 different cohorts. We certainly expect to publish a lot of this data this year, use this data to be able to guide the 092 development plan. And in fact, the data from the CRC cohort that will be presented at ASCO GI, along with some work that was done with cabo, with durva and an IST is really a driver to inform the first pivotal trial with XL092. So really thrilled to have the opportunity to have these trials coalesce individually, but also across the platform in a way that we think can -- again, if the data looks good, it can drive a lot of value here. One step behind them is the contact program. These are different trials that are done, a combination of cabo with atezolizumab, the PD-L1 inhibitor from Roche/Genentech. We have 3 trials on this slide, Slide 13. Contact 1 in patients who have either refractory or resistant to PD-1 inhibitors in non-small cell lung cancer. In contact 3, looking at a second-line RCC indication are fully enrolled, and we would expect to have readouts in the second half of this year. And then contact 02 is maybe a half step behind where we expect to complete enrollment and then look for top line results in early '23. So again, it's the cabo engine that is driving a lot of interest, certainly a lot of momentum from a commercial, regulatory and late-stage development perspective. We're going beyond that. And again, the whole goal has been to build this broad pipeline of molecules that we can advance either as small molecules or biotherapeutics to be able to develop -- move into pivotal trials, if successful, file, get approval and then globally commercialized. That's the goal. That's the aspiration for the company as we go forward. This is a snapshot on Slide 15 of our pipeline. Again, I won't go through this line by line. You can see the top molecules 092, 002, 102, the newest addition to the clinical [ cadre ] XL114. These are molecules that all have active INDs. 114 will be in the clinic shortly. Behind that, we have a range of either a new DC XB010. It's our first internal ADC that was discovered here using, again, a network, a suite of collaborators to basically find individual pieces and then put those together for us in a way that we can move forward. And then a variety of different collaborations and internal programs across both biologics and small molecule platforms key targets, key pathways that we're really excited about. So -- and that really -- I think about the history of Exelixis. We've been in business now for 27 years or so. It's our ability to really mine biology and understand the impact of biologically from -- impact of biology and pathways and networks to be able to pull out really important considerations that we think can drive -- either that drive tumor agenesis or some aspect of dysfunction in the tumor microenvironment and then be able to drug that effectively with really any kind of modality in a very modality agnostic sort of way. So and you're seeing this now come to fruition with a lot of molecules either in the clinic or moving in that direction in real time, right? So I'll talk about XL092. Again, this is our next-gen multi-targeted TKI. I'm on Slide 16 now. So this is kind of an encapsulation of some of the data that we talked about previously. It's a next-gen cabo, if you will, we think, with an overall better profile. We've shortened the half-life significantly. I talked about that previously publicly, kept the target inhibition profile the same to be able to, if you will, phenocopy the actual activity of cabo but just make it more user friendly from the clinical point of view. Early data suggests that we might have an improved safety profile. So we certainly want to follow up on that. And that's obviously very important from the standpoint of how we're going to navigate the full development of this molecule in the standpoint of combination approaches. So very, very interesting molecule for us. Obviously, we're using a lot of information that we've generated with cabo that we haven't been able to really exploit over the years as we focused on some of the early indications. But this is now an area where we can really combine and conquer from the standpoint of using all the knowledge, all the momentum from cabo and be able to transfer that to 092 with a great degree of confidence and then expand, if you will, in a multidimensional way the therapeutic opportunity. Slide that we've shown before, just to give you a sense of the depth and breadth of the full development plan as we see for cabo, looking at a variety of different combination opportunities, different tumor types, different -- really different approaches in terms of moving up in lines of therapy. So again, very ambitious program here, we'll kick that off this year with the STELLAR-303 trial, which is outlined at a high -- I'm sorry, first, we'll talk about some of the early Phase I and Phase II designs, looking at combination cohorts. We talked about this before, so I won't belabor the point too much, but the whole goal is to move into pivotal trials as quickly as possible with the CRC indication first, right, in microsatellite stable disease in the first half of this year. So if we move to Slide 20. Here's a high-level snapshot of what that looks like. Primary endpoint will be overall survival in the ITT population, which will be the RAS wild-type subpopulation, enroll about 600 patients. Again, we'll have data at ASCO GI in a few weeks, looking at both the cabo/atezo combination in this population as well as a cabo/durva combination in this population from an IST that's been wrapped up recently that both, I think, provides some pretty compelling information about why we think this is important. So stay tuned for that. We'll press release that and get those slides and posters out, so you can take a look at it. But this will be the first of hopefully, many of that will be launching several this year is the plan and then many more after that. So moving to XB002 on Slide 21, this is our first biologic that's in the clinic. This is a molecule that we were able to partner with from Iconic Therapeutics. And again, we've recently amended that agreement that really creates the opportunity for us to completely not only own the asset, but also the antibodies that have complete degrees of freedom to operate with making new ADCs off the original tissue factor binding antibody as well as others that they generated. So tissue factor is a very -- I think, a very attractive target for oncology. Its -- biology is somewhat complicated. It's normally involved in mediating coagulation. So it's probably wise to be able to find binders that really bind to the target without inhibiting the interaction between tissue factor and Factor VII, which is where the castigate -- where the coagulation castigate actually starts. We have that in the binder and the monoclonal antibody that we got from Iconic. That's different from the first-generation molecule that was recently approved. That molecule shows a fair amount of bleeding. To date, we haven't seen any either preclinically or clinically. We have to say, we've been really pleased, the overall improved kind of package of this ADC certainly shows very good therapeutic index in the preclinical setter -- in the preclinical setting. The binder is, again, non-competitive with Factor VII. So preclinically, we don't see any bleeding. We have a next-generation linker and payload, which has a, I would say, market improved stability as well as potency as any tumor agent. So the preclinical package looks really encouraging. The clinical experience to date has been, I think, exceeded expectations, certainly for me. We're seeing excellent stability of the intact ADC and very low free payload concentrations. So that is a very, I think, important differentiator relative to what's out there right now and kind of what you want to be able to see with any ADC, want to have an intact molecule that has good stability in plasma, good stability in humans. And then when it gets to the tumor liberates the toxin upon binding internalization and gives potentially good efficacy. Early safety data are very encouraging as well. We've seen no bleeding events to date at very good exposures. So early days. Certainly, it's been very pleased to see the progress here over the relatively short period of time. This has prompted these results and the progress that we've made have prompted us to really fast track this overall program in-house. We've got cohort expansions shown here that cover a wide variety of different tumor types as a single agent or combination. And we're looking forward to moving this forward as quickly as possible into full development. And we're pleased to plan on having the first clinical update sometime this year. So stay tuned for that. But a lot of progress here, lots of potential upside as well. So we're really going to push this hard as we go forward. And then XL102, which is a covalent orally-bioavailable inhibitor of CDK7. Again, this is a potentially best-in-class molecule. It's a covalent inhibitor. We're seeing very good selectivity, the early clinical experience and again, reasonably, I would say, low doses shows near complete target -- target engagement in PBMCs. So good signs of early differentiation and pharmacodynamics, which again gives us confidence that we've got the right probe to now start answering or addressing some of the key questions in the clinic or around the biology. So stay tuned for that. And again, we plan to have an early update this year as well. And then finally, XL114, our new molecule for the clinic is an inhibitor of MALT1 activation. Our first [ keen ] directed product that we're really excited about, very novel molecular, very novel approach. The IND is active, and we'll start Phase I shortly. So I know I'm running out of time here, so I want to just quickly move into discovery. I'm on Slide 25. I think this has been the, I would say, the biggest advance over the last 12 to 18 months. We've started from scratch basically into 2017, 2018 time frame, built the group -- rebuilt the group, built a network of collaborations, added lab space. We've had 4 IND candidates come into play over the last few years, where we sit today is we have 10 really plus advanced discovery programs internally through internal and collaborative efforts across small molecules and biologics. We expect to have up to 5 new development candidates this year moving into preclinical. It's just a tremendous effort and progress to date that I think is really driving both our excitement about what we have to offer, but also the need to make sure that we have enough capacity and the right level of staff and the development organization to be able to plan for success and which is what's driving the growth both here and Alameda, but also on the East Coast from a development point of view. We need the depth and breadth of the team to be able to really push this pipeline forward, while we're doing full development with cabo and 092 and potentially XB002 in the short term. So lots of moving pieces, but great momentum and great challenge and opportunity to be able to build the team, grow the team as we have ambitions to be this global player from a multiproduct perspective. And then I'll just wrap up quickly with XB010, our newest development candidate, again, first custom ADC that was generated through our network of collaborations, great target, one -- certainly a target that has been really, I think, viewed as being an important address for binders over the last few years, collaborating with Catalent on their smart tag approach to be able to have a novel linker warhead with, again, enhanced stability. Preclinical data looks really, really encouraging. It's highly efficacious. Great tolerability and great stability with, again, a therapeutic index, which is very compelling, again, preclinically. So a lot of work to do here, but this will be the next molecule that we have to move forward. So -- all right. And then a whole list on Slide 27, I know I'm getting short on time. So I just highlight just the depth and breadth of targets, modalities, collaborations and the approach that we've got. If people are interested, I'd be happy to go into detail on this or get Peter Lamb and Vicki Goodman involved and they can talk more about this much more -- much more eloquently than I can. But certainly, a lot of very important targets and great efforts across different modalities that, again, we have the hope can drive value as we go forward. So I will wrap up here quickly. Again, it's been a very busy couple of years, lot of excitement for where we're at in 2022. Again, global ambitions for a diversified, sustainable pipeline that can build value for patients as we go forward. Certainly CABOMETYX and the success to date is the -- is really the modality, which provides the fuel to drive that growth, and we certainly have a lot going on there, both clinically from a regulatory point of view as well as commercially to keep that going. The pipeline, 092, 002, 102, a lot of excitement there across the board and this discovery engine that's driving a lot of innovation and a lot of value as we go forward. So -- and then on Slide 29, a checklist of different milestones for the year that you can track our progress and we'll, as in past years, update this as we go forward. So I think I am close to running out of time, so I will stop there, hand it back to Matthew, if he has any questions?

Yes. Thanks, Michael. That was -- there's a lot going on. I'd be excited to watch and unfold. Yes, we've got a couple of minutes for questions. [Operator Instructions] And we've got 1 here on 002 and they're asking a differentiation between what's approved. You talked about that a little bit. Maybe you can just comment a bit more. And then given TF expression is an eye, do you expect the ocular tox will be similar?

Yes. So I don't want to get too much into the details right now in terms of the tox. A question for that person who asked the question back to him is just what really drives tox there? Is that the ADC or the free payload that is potentially liberated. We're really, I think, very encouraged by the stability and by the overall PK that we're seeing with 002 relative to the intact ADC versus the liberated payload. We're seeing what we would view as differentiating data there relative to what's out there right now. So that seems to be dose linear across cohorts so it seems to be a property of the molecule. Also, I think some of the comments that I made earlier about the fact that we haven't seen any [indiscernible] to date reinforces the idea that having a noncompetitive binder is probably a good thing from the standpoint of moving forward. So look, the whole goal here is to really ask the question, can we push the dose? And how high can we push the dose from the standpoint of sensitive tumors, either as a single agent or in combination and then trying to explore other tumor types, which haven't been shown to be sensitive to date. So potentially better probe to do that. And I think we're encouraged by the early data, and you've seen an expansion of the program. You've seen the Iconic amendment reinforcing that as we go forward. So I think one thing we do well is we mine the data pretty quickly, and then we move quickly based on that data to be able to maximize the value. And I think we did that with cabo and I think this is another example where we're doing that now. So it's early, but certainly encouraging.

And then you said we might expect data at ESMO later this year.

I didn't say where or when, but we expect to have data for 092, 002 and 102 sometime this year. Details TBD.

Got it. I think we've got time for one more question. I don't see any more on the portal. So I was just curious on STELLAR-303's trial design. Maybe if you could talk about stats plan a little bit. It looks like 600 patients, very strongly powered, would you consider -- I'm assuming there's some sort of interim analysis built in after a certain number of events. Is accelerated approval something you'd go for here?

Yes. I think we're looking at it, and we'll provide more details when we launch that trial in terms of the kind of high-level SAP. I think what's -- with the survival endpoint with the trial sides like this, we're really looking for a signal that is robust from a survival point of view, that could lead to full approval. That's the goal.

Understood. Well, thanks so much, Michael, for participating in the conference and giving us an overview of Exelixis, and thanks, everyone, for joining.

Okay. Thanks, Matthew.