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

All right. Hello, and welcome. My name is Michael Schmidt. I'm a senior biotech analyst with Guggenheim Securities, and it's my great pleasure to welcome Michael Morrissey, President and CEO of Exelixis. Welcome, Michael, and thanks for joining us again this year.

Great to see you again virtually. Looking forward to doing this live, hopefully, next year.

Yes, we'll be ready.

So looking forward to it as well. So Michael, let's just jump right into questions and skip over the slide presentation. Cabo, as you all know, has generated over $1 billion in net sales in 2021 and you've provided guidance recently for 2022 between $1.3 billion and $1.4 billion roughly. As we think about the product today, what are the primary growth drivers as we look into 2022? And how are you thinking about the next legs of growth going forward?

Yes, for sure. It's great to be here. Thanks again for the invite, the opportunity to chat. We always have a good conversation. So I'm really pleased to be able to connect with you again. Before I begin, I'll just remind everybody, I'll be making forward-looking statements today. So please see our SEC filings for a description of the risks that we face in our business. So yes, cabo, again, billion dollar franchise in the U.S. first time in 2021, certainly very pleased with that performance. We launched cabo based on the 9ER data after approval in late January of 2021, saw a significant growth across all the key performance indices for the year. NRx and TRx were up 40% to 50% year-over-year for Q4, maybe even more impressive is the share points. We gained about 5 share points as well going from Q1 to Q4. And as you know, you have to fight really hard normally to get a single share point. So to gain that much and 4 quarters is just reflective of, I think, the quality of the data across all the important efficacy, safety, tolerability and quality of life parameters that we saw in 9ER. So we've had 5 consecutive quarters of growth. And certainly, obviously, that's hopefully we'll maintain that trend going into '22 as we expect as, again, gave guidance for $1.2325 billion (sic) [ $1.325 billion ] to $1.425 billion in net product revenue for the fiscal year 2022. So what's driving that is, essentially, we know cancer and certainly the main focus of our commercial efforts right now. As you know, we had a very long duration of progression-free survival as well as duration of treatment in the 9ER study that was on top of the survival data and the quality of life data. So we expect to see stacking of patients that came on last year going into this year as well as the continued strong new patient growth in terms of more patients coming on with the regimen. So the vast majority of that growth is really related to the 9ER continued launch and success there. I can tell you, I can say there's really no additional -- we have some volume for second line liver, certainly important volume projections for second-line renal where single-agent cabo is -- maintains its pole position as the leading agent in second-line RCC. A little bit of thyroid. And again, the DTC launch has gone really well, but there's no projected, at least, budgeted growth for say, new trials reading out, say, 312, 313, et cetera. So we see this as a very conservative guidance, but strong growth, right, as we projected as early as the beginning of last year.

Okay. So just to confirm, the guidance does not include any additional label expansion opportunities, is that correct?

Not for '22. That's correct.

All right, super. And then perhaps just talking about some of those opportunities in the midterm to expand further, perhaps starting with COSMIC-313, which is the triple combo in first-line RCC. Remind us, first of all, the timing of the data readout. And then safety is perhaps the key focus when you think about adding a TKI to checkpoint inhibitors. And the question here is, I guess, what data gives you confidence in the tolerability of the 3 drug combination?

Yes. So again, COSMIC-313 is looking at the triplet cabo/nivo/ipi using a contemporaneous control of nivo/ipi. So I think this is the first trial whether that's gone beyond SUTENT as the control arm. So certainly excited about that in the first triplet-focused pivotal trial in RCC. So again, I feel really proud and the team is super proud to be on the cutting edge of raising the bar for standard of care. You look at the 214 data, again, ipi/nivo is one of the mainstays in the frontline RCC setting for poor and intermediate risk patients. The question is, how can you improve upon that? Look at the 214 data in detail. The primary progression rate there in terms of PD as a best response was about 25%. PFS was in the 11% or so month range. Certainly, the big benefit of that trial is a long-term follow-up where you see this tail on survival on the Kaplan-Meier at about 35 or so percent. So you get these long-term benefit for patients, for a subset of those patients. And the question is, adding cabo on top of that, can you right shift the PFS curve? Can you raise the tail? Can you potentially right shift the overall survival curve because you -- cabo has the ability I've seen in METEOR and 9ER to really bring benefit to most patients in terms of either stable disease or a response. So a lot of key questions. Obviously, we do pivotal trials for a reason, and that's to look at all the data in a global randomized fashion. So we'll see that. Tolerability is always important, and this is the best way to ask those questions around doing a large, randomized pivotal trial that enrolls 800 or so patients. So we'll get a very good -- a very good sense of how that looks when that reads out. But look, we're in the p-value business. That's everything we do up to a pivotal trial is focused on making sure we can maximize the probability of success and getting the right data that can then enable an approval and then a launch. I think we've shown pretty convincingly that as our data is differentiating in the pivotal trial space, we've been very effective as a team, as a commercial organization, medical affairs, the entire team, to be able to then educate doctors and get our drugs, our drug or a combination with other drugs in the hands of patients who need better therapy. So it's all about the key values, and that's why we're running the trial, right, is to get the data in a very clear fashion and, if it looks good, then go forward.

That makes, of course, a lot of sense. And something we talk about with MSS where there is -- where we do get question is really on the incremental additional opportunity of the triplet in first line over how cabo is used at the moment. Just wanted to get your thoughts on that.

Yes. So we've done pretty extensive market research there. And again, it's all data dependent, and you run different scenarios with different [ TPPs ] and different data cuts, if you will, or use of the data to understand how that might play out. Certainly, good data allows us to capture more share. You can, I think -- simply put, you can envision a scenario where the triplet to adding cabo to nivo/ipi allows us to move some of the nivo/ipi doublet to the triplet in a way that helps us gain market share without losing a lot of frontline share that we're getting with cabo and nivo by itself. So again, it's all going to come back to the details with the data. But I think the opportunity there is bringing more benefit to patients on a global level. And if we can navigate that well, if the data is supportive of that approach, then we'll certainly be moving in that direction very quickly. But look, we're looking to gain market share. We gained 5 market share points last year and certainly hope to do more of that going forward in the renal space with trials like 313 and CONTACT-03, et cetera.

Yes. And even without market share, you think you'd gain in duration of therapy on its own if -- even if there is overlap, I suppose, yes.

Well, yes. And I think if you think about it from a standpoint of the CheckMate 214 regimen, I mean, again, it's ipi/nivo for the first 4 cycles and then maintenance nivo. So if you could layer cabo on top of nivo in that maintenance phase, and we get the kind of data that, say, we've seen so far in, say, 9ER, you can play some of those math games I think pretty effectively and make -- have it make sense from the standpoint of that long duration of therapy going forward.

Super. And then perhaps switching over to actually COSMIC-312, which is your liver cancer study where you have reported PFS last year. It hit the PFS endpoint, missed on OS. You did say you plan on filing pending final data in the near term. So I guess assuming that the study does not hit on OS at the final analysis, which I think is probably a fair assumption based on the data so far, how should we think about the additional opportunity in first-line HCC for cabo if approved?

Yes. So again, we were very upfront about this going back as far as last June when the top line data came out that we did not pass the threshold for significance for overall survival, and we were very clear that we didn't think that would be the case going forward. You saw the data in November, has a ratio of 0.9 for OS. So no decrement, but we certainly had some incremental movement, if you will, to pass that line, which is unlikely. So again, the question is, are patients with at risk for bleeding in terms of having either gastric or esophageal varices, would a potential cabo/atezo combination be appropriate there? Certainly. And that's been the feedback from a variety of KOLs. That's changed a little bit in the last few months with the HIMALAYA data reading out positive looking at the AZ CTLA-4 PD-L1 combination, which showed survival benefits. So look, it was always going to be a small, relatively small indication if we didn't have survival. The comments I made before are appropriate here. Survival is -- having survival in your label, especially when the competition has that, is really necessary to have a big win. We didn't have that here. We've been very clear about that. So if we're -- if we have the appropriate survival signal to be able to file, if you assume that gets approved, it's going to be a relatively small incremental uptick in terms of demand. And that's understandable based upon what's happening with the competition. We're not stopping. We're not losing interest in HCC. The unmet medical need here is just huge, right? Even with the benefit you see with, say, IMbrave or with HIMALAYA on the survival side. There's still a lot more work to be done. We think 092 would be a great partner with various IO, either doublets or triplets, et cetera. So we're certainly kind of circling the wagons, trying to understand how we can maneuver here going forward with what we think is a better next-gen molecule. And we'll be back in due course. So stay tuned there.

Okay. Super. And then last cabo question. CONTACT-01 is another Phase III that you guided earlier this year that where we may see top line data this year in second line or later lung cancer. I don't think it's an indication where a lot of investors are focused on. But how should we think about the -- perhaps the -- we've seen data Phase I be there from the 021 study for the combination before, I guess, what is the efficacy benchmark in the post checkpoint lung cancer population for a chemo? And again, how would this fit into the bigger treatment landscape if successful in lung cancer?

Yes. So I mean the opportunity is sizable. The unmet medical need is substantial based upon patients coming off either PD-L1 as a single agent, PD-L1, chemo combinations, IO/IO combinations in that space. There's really no contemporaneous new approach for patients who are either resistant or refractory to IO in the frontline setting. So you've got a real bolus of patients that numbers are large globally in the U.S., et cetera. So the question is, what can we and others do in this -- in the case of Contact-01 Exelixis? How can our offerings potentially help patients who are coming -- basically progressing or completely refractory to an upfront IO treatment? So the numbers are staggering in terms of the opportunity. It's all going to come down to the data. There's really not a lot of a contemporaneous data for docetaxel in this setting. Again, it's -- we're prime time in terms of how that's evolving. So this will be one of the first trials if it reads out in the first half of the year to be able to provide that benchmark where this is what chemo does after the frontline, either IO or IO, chemo combination, and then we'll certainly have our experimental arm as well, so. But again, the regimen we've had data on in terms of response rates and PFS, for cabo/atezo, again, with all the caveats of a single-arm, non-randomized study, we understand that data pretty well. So again, we're in the p-value game, and we can put this on to get us the events we need to then move forward with top line results.

Okay. Super. And then in the last few minutes, perhaps shifting over to the pipeline, which is an area that we're -- I think that has been underappreciated by folks. It sounds like 2022 will be where we will get a number of data readouts. There is XL092, then there's your ADC portfolio and some other new small molecule drugs in development. So a lot happening. Perhaps just on XL092 first. We did see some -- we actually did not see 092 data just yet, but there was data in colorectal cancer by extension from cabo, yet again, that triggered your decision to initiate a Phase III there. Just help us understand XL092 really, how we should think about the opportunity above and beyond where you already are with cabo medics.

Yes, for sure. So again, the cabo story has been focused in early sensitive indications. We've had some false starts and things like prostate cancer, but certainly in renal, liver, thyroid, we've built a franchise that is very successful. At the same time, not being able to pursue a wide variety of indications where we have bona fide, RECIST 1.1 responses with either cabo or cabo-based combination. So there's lots of, I think, low-hanging fruit where a better next-gen molecule, shorter half-life, more clinically user-friendly, potentially better tolerability can be used coupled with a variety of IO strategies to be able to really pursue a broad kind of interrogation of the landscape around novel tumor types, novel combinations and novel lines of therapies. And that's the goal here, right? So taking the learnings from cabo taking the momentum that we have, both cabo clinically but also commercially, to then embark on this really large program for 092. So -- and you saw some of the -- I think, generically, some of the thinking around we have, we have this really, I would say, encouraging data in third-line CRC, MSS, CRC where, again, the unmet medical need is very large. Regorafenib is -- has been approved or in that space for a while now with pretty -- data that leads a lot to be, I think, built upon and certainly improved upon. So the data we had at ASCO-GI a few weeks ago showed response rates in the 25% to 50% range across 2 different studies with 2 different IO partners. Good PFS, even an OS signal that was kind of compelling with all the caveats of a single-arm study, a late-line patient population. So what does that mean? But we're certainly seeing very good tumor activity, antitumor activity in this RAS wild-type population, which is a very large substantial population when you look at the overall kind of genetic framework for mutant RAS versus biotype RAS. So that -- but that's -- again, I think it's a very good example of how we're approaching -- generating historical data with cabo and then being able to slot 092 in there and rapidly go forward. So we'll start 303, hopefully, in the first half of the year. And hopefully have a few more going this year and then a whole wave after that. But there's a lot of real stages and a lot of really interesting combinations that we want to pursue here, for sure.

All right. Looking forward to additional updates then for 092 this year. Question on your ADC portfolio, I shall say at this point, you did recently announced that you amended your agreement with Iconic around your tissue factor ADC XB002. Can you speak about your focus moving forward around this particular program and also within ADCs more broadly?

Absolutely. So I'll start with the latter part of your question first. We've had a lot of expertise, really a deep bench on just understanding the tumor biology and the important networks and pathways that are operational in the tumor microenvironment. And that's been a driver for us and one of our, I would say, our strengths within R&D for literally decades now. So to be able to broaden the repertoire of tools and probes that we use to be able to interrogate that away from just small molecules to a breadth of biological approaches has always made a lot of sense to us. And with the financial kind of strength we have right now, with the kind of the breadth and manufacturing opportunities and just the new modalities that have come online over the last few years, perfect time to do that, right? So ADCs is maybe the best of -- best example of where you have biology and chemistry kind of coming together in one. They're linked, if you will, between the binder, your antibody with a small molecule anticancer compound. We like that approach a lot. Obviously, there's been a lot of success there. Recently, the example with XB002 is really, I think, exemplary in terms of having potentially a best-in-class molecule where we've got what we think is a better binder in terms of tissue factor. It doesn't compete with Factor VII. So the bleeding risk, at least, preclinically, was shown to be very low, and we've been able to recapitulate that in the clinic so far as well as then having a better kind of next-gen linker payload that we think at least in side-by-side studies preclinically looks better. So we've got a molecule that's highly optimized. We like the target a lot. It's highly expressed and internalized in a variety of different tumor types. We think we can go beyond the kind of the exposure and dosing challenges that some of the first-generation molecules have had in the past. So it's all out there for us to be able to move very quickly. And certainly what drove us to throw a little bit more money at Iconic to be able to kind of dot the Is and cross the Ts on the agreement that we had initially and basically kind of capture all the rights that we wanted for XB002, for the antibody and for [indiscernible] of antibodies that it came from was based upon the early clinical data that we're seeing and the momentum that we have to be able to make other, if you will, other ADCs based upon that antibody, consider other ADCs with other antibodies, but really build a franchise as we have with cabo around 002. but it's All based on data. and our aspiration to be a multiproduct company with a diversified offering of products. And certainly, XB002 is really moving very quickly to the point where we hope to be able to look at combination cohorts, expansion cohorts and potentially full development in the near term.

Okay. Super. And that's one where you did say you plan to disclosing initial Phase I data this year. Just help us understand what investor expectation should be there.

Yes. It's early to set expectations right now. So stay tuned. It's the middle of February. So I think we'll have more to say about that as time goes on with the details around what we'll present and when and where, but we're committed to presenting more data on 092, 002 and 102 this year. So stay tuned.

Yes. And then perhaps a quick question on your CDK7 inhibitor, which is the other one that is in Phase I, we will get data this year as you said recently. I guess -- where is the opportunity here, perhaps relative to other CDK inhibitors? Is this primarily a breast cancer agent? Are there other opportunities? And yes, let's just keep like that.

So it's still early, and I think this is an example where the biology needs to be interrogated with arguably better probes. And I think we have one of those with 102. Certainly, CDK7 is implicated across a variety of different tumor types and different approaches relative to breast -- ER-positive breast cancer, prostate cancer, other examples based upon the MOA of CDK7 as a CDK activating kinase and its ability to phosphorylate either ER directly or transcription factors that are downstream from AR. So it could do a lot of different things. And I think part of the challenge is having the right tool to ask the right questions and the right species, which is, of course, man, right? So we think we've got that with 102. We're seeing encouraging kind of properties and characteristics right now and certainly going to fast-track that to be able to get into combination approaches as soon as possible to be able to ask some of those questions. But so far, we've seen really promising overall data in the clinic, and that's going to drive the next -- the next wave of trials that we do and cohorts that we expand going forward. So again, stay tuned.

Okay. And then lastly, I mean, you do have a significant cash balance that's very stable if not growing. How do you think about capital allocation moving forward? I think in the past, you talked a lot about licensing, which you have done and now spending more internally, obviously. How should we think about that longer term?

Yes. So we've been very disciplined about putting our cash to work, to be able to, not only invest in the internal pipeline around cabo 092, et cetera, but then bringing in either platforms and/or compounds that allow us to kind of refocus our discovery efforts and complement what we're doing internally. So that will continue. We've done a lot of these smaller -- small-ish kind of late-stage back-end-loaded deals, which made a lot of sense for us based upon how we operate as kind of a discovery and early development organization to be able to have a series of options in terms of both small molecules and biologics that we can then pursue. We certainly are looking at mid- and late-stage assets and companies that have either a platform and/or compounds that we think might be useful to us and useful to, again, move the needle for our patients and shareholders. But again, for us, it's all about conviction in the platform, conviction in the data and, ultimately, the commercial opportunity, right? There are so many examples in the last few years even where launches by either biotechs or big pharmas in the oncology space have kind of whipped because of just -- the data is not all that differentiating or the populations are so small that you just can't get enough traction in terms of top line growth. So we have to have the conviction commercially that if we do all this work, make these investments, et cetera, we can have another molecule like cabo and build our franchise, build our company on the back of 1 blockbuster after another. So we have big ambitions and certainly looking to do that on a very broad scale going forward, but we've got the conviction in our ability to navigate all those different things. And we've got the cash flows and the cabo franchise to be able to drive that with the momentum of a very, very healthy franchise that's growing, right?

Okay. Super. Well, thanks. With that, unfortunately, we need to wrap up, Michael. I really appreciate all your commentary and insights. Thank you for joining us again this year, and thanks, everyone else, for tuning in. Thank you.

Thanks, Mike.