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

Hello, everyone, and welcome to Oppenheimer's 32nd Annual Healthcare Conference. I'm Jay Olson, 1 of the biotech analysts at Oppenheimer, and I want to thank you for joining us here today. It's my pleasure to welcome Exelixis to our conference, and it's an honor to introduce Michael Morrissey, President and CEO. Thank you so much, Michael, for joining us here today. It's really a pleasure to catch up with you. I want to remind our audience that if they have any questions during the discussion, they can please feel free to submit them using the Q&A function. And with that, we'll go ahead and get started. I thought maybe we could open up with a focus on cabo. It's a great year...

Sounds good.

It was a great year, and congrats on all the progress you made with cabo [indiscernible] uptake. Cabo plus nivo in the first-line setting throughout the year last year. And -- let's see, I think last time we spoke, you mentioned a $1.5 billion runway exiting 2022 cabo sales in the U.S. and RCC. Can you just maybe update us on that and how you're thinking about that today?

Yes, for sure. So again, thanks for the invite. Great to be here, as I mentioned before we went live. Looking forward to 2023 and doing this live with you. Hope this is 1 of the last Zooms I do for these health care banking meetings, but yes, it's been a long couple of years. But hey, before I begin, I'll just remind everybody that 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 -- so yes, 2021 was a big year for us. You think about where we -- all the buildup. Even going back to 2019 around 9ER and the data, and the competition, and the gloom and doom in terms of how does little old cabo and this tiny Exelixis compete with all the big boys, and we fast forward a couple of years, and we did really well. Because the -- our focus as a company is really around raising the bar for standard of care with patients with cancer. That's all we focus on. It's all we think about it, That's all we do. And that spans everybody in R&D and any G&A function and sales. Our job is to help patients, right, and to bring them better therapies. And things like 9ER, where there was all this -- all the rhetoric, all the noise behind kind of going into it. And the reality was we had -- we generated great data. The decision to go with the 40-milligram starting dose of cabo really gave us much more optionality in terms of better tolerability, seeing quality of life benefit, compared to sunitinib. So all those things combined drove us, I think, in a very, very productive way upon launch back in January of '21. And we had just a great year in terms of building that frontline business, right? And as you would imagine, it's so gratifying to help -- see all these patients who are benefiting from that combination. So yes, so we had a -- we have a goal of having the $1.5 billion a year run rate by the end of this year, and I think we're on track for that. Certainly, our guidance that we gave back in January supports that. And really pleased with what's happening in Q1. And obviously, I'm not going to go into details there, but we had a strong fourth quarter, and that momentum continues as we go throughout the early part of 2022. So we're just very grateful and hungry still to be able to do more for these patients and all patients, right? So 313 should read out in the first half of this year. We're excited about the CONTACT programs. So it's -- the early pipeline is looking really encouraging. So the level of investment that we're making on 092, 002, 102 and a whole suite of early-stage assets in the preclinical setting is really exciting. So we're a 1 product company now, and that was by design. You have to start with 1, but that was never a strategy. And I think as we talked about going back to even '15, 2016, the idea was to take the cash we could generate with cabo and invest it wisely in building a pipeline, and we're doing that right now. And I'm just super excited to have all these different molecules at various stages of either optimization preclinically or characterization and now in the clinic too. So lots to do, but it's going to be a great year for sure.

Thanks, Mike. Well, we really appreciate the patient focusing you certainly have achieved your goal of raising the bar for the standard of care. And I think the 9ER data really speaks for itself, and I know it's been very well appreciated by the oncology community. I guess 1 of the things we hear from investors is that the first-line RCC market is getting crowded. So can you maybe just talk about how much more runway you have ahead for cabo plus nivo growth in the first-line RCC setting? And maybe just a little bit about how that setting has -- that marketplace has evolved in recent years? And how do you think it will accelerate as we recover from the COVID pandemic?

Yes. Those are all great questions. I'm not sure my crystal ball is any better than yours is relative to how that's evolving. And it's somewhat seasonal and somewhat and cyclic all those different factors kind of drive the [ year bars ], if you will, quarter-to-quarter and certainly COVID year-over-year makes that a pretty dynamic process. So I don't want to speculate too much, except to say that we have great data. We have a great team. We're constantly -- whether it's remotely, virtually or now more and more in person, as Omicron is really kind of waning, doing direct person-to-person promotion and education. It's really satisfying. Obviously, I think the statement would be obvious is that old data can get stale, and it's always incumbent upon us and everyone else to generate new data, which is why things like 313 and CONTACT-03 are so important. Because new data, again, if you're successful in raising the bar, right, for standard of care, can drive growth dramatically. And that's how you go from plateau to plateau to plateau. So that's -- we're in the business of P values. We're in the business of clinical -- of pivotal trials. A lot of companies that are where we were at in 2014, 2015 or who aspire to be like us, they sometimes -- they're a little bit nervous about taking the plunge into pivotal trials, because it can be such a binary event, and it takes money and takes a certain degree of intestinal fortitude. We're all over that. That's what we do, and that's what's required. It's almost table stakes to be able to get in there and help patients and if you're successful -- and it's a high-risk business, right? Everybody should understand them and probably does. But that's the only way you're going to drive top line growth is taking those -- placing those bets, running the right trials, getting the right data to be able to move the needle. So we're in that to win it, and we're in that with cabo, with 092, with 002. That mindset, that singular focus on raising the bar for patients with standard -- with better standard of care options is what drives us every single day. So it's exciting. Luckily for us, we have the business now, the cabo revenues, the free cash flow, the growing cash flows and growing cash position to be able to do a lot there and have the optionality, which is super important. So I like where we're sitting right now and we're hungry and we have a sense of urgency and focus that I think really makes us different than most companies.

Okay. Great. Maybe just 1 last question on cabo plus nivo in first-line RCC, and then we'll talk about some of the other exciting opportunities you mentioned. But any feedback from physicians in terms of how cabo plus nivo compares to other combination regimens in the first-line RCC?

Yes. We get a lot of feedback from KOLs, one-offs. Do we do a lot of market research in terms of the profile? It's really interesting to see how that's evolving. I mean cabo -- when 9ER was approved or cabo/nivo was approved, the 9ER study and was launched. I mean, cabo wasn't a new drug, right? I mean the cabo has been around for 4 or 5 years before then, standard of care for second line. A lot of people were back, in fact, if you go back to July of 2015 when both the METEOR and the CheckMate 215 trials read out on the same day, beg the question -- ask the question, well, can you combine these and see what happens. So there's been this growing, I think, groundswell of interest in that combination for the last 4 or 5 years to begin with anyway. And the fact that we, again, made the right tactical move to take a little bit off the top activity wise, but make it easier for patients to tolerate the drug and that combination, keep them on drug for a long time. And have the quality of life benefits that we did is really exemplary for that combination. And we get that feedback a lot from physicians, whether it be a one-off discussion or with market research. They like the combination, because it's so well tolerated. And the patients feel good, right? And that's -- I think that's a really important part of the process, right, from the standpoint of certainly, having scans continue to look good, it's great, but quality of life is super important, right? It's super important for the patient experience. And we really focused on that in terms of how we think about clinical trials and certainly then having that as a way to talk about the drug too.

Excellent. That's super helpful. And then another area of opportunity is in DTC. Congrats on the new label for cabo in DTC last year. I think you mentioned the initial uptake is beyond your expectations and you've gotten positive feedback. Can you just remind us about the market opportunity in DTC? And does it make sense to advance cabo or maybe 092 into an earlier setting?

Yes. DTC is a relatively small population. There's a handful of thousands of patients kind of entering the funnel every year. Those that are RAI-refractory are the ones, who have metastatic disease, are the ones that we focus on with small molecules. And again, cabo is the mainstay now for second line. Yes, we've talked about that. The question is how we navigate that in terms of doublets. There's some pretty -- I think, some pretty interesting data emerging around TKI/IO combinations in that space. The question is what's the best place for us to move relative to the bigger populations and the biggest franchise opportunity, right? I think we've really strategically focused on making sure that we're in that space to be able to help as many patients as possible and renal, liver, prostate, lung. Those are important parts of that. DTC is certainly interesting, and we've got a lot of ideas there. The question is how that kind of fits into our priorities and our execution plan. So time will tell. Certainly, 092 would be the possible 1 to really look at that carefully with. But too early to comment on right now in terms of actual details.

Okay. Makes sense. And then I guess in terms of the -- you mentioned the COSMIC-313 triplet study coming up in first-line RCC. Can you just remind us what sort of data we'll be seeing there? Will it include OS results? And how would you like to set expectations for that readout?

So again, the primary endpoint is PFS for the triplet versus the doublet. -- with any PFS primary endpoint trial, you always look at survival to make sure that there's no decrement. So that would be the case here as well. Setting expectations, I'm going to pass on that one. Data will speak for itself and will be out soon enough. I wouldn't want to speculate -- it's an important trial for us. Again, we're on the leading edge of looking at a triplet -- first triplet in RCC. So the fact that, again, a little old Exelixis is doing that, I think is notable, but it just reinforces what our goal is and what our mission is, right? So -- but we're excited about that. We have a great clinical partner with BMS and that's been a very, very productive relationship for literally decades and now over the last few years with cabo and their ICI assets. So yes, excited to get that going forward. But then we've got all the contacts that we'll read out this year -- later this year and next year, too. So again, it's the portfolio franchise approach around cabo. -- key values speak for themselves and arguably, we're in the p-value business and that's what we're -- what we aspire to do with cabo and more of the better and certainly other molecules in the pipeline going forward, too.

Okay. Sounds reasonable. I guess maybe are there any particular performance aspects where you think the current first-line RCC treatments can be improved upon with either triplet, for example, depth of response, duration of response or maybe safety?

Yes. I think -- it's not to be too passe, but I think everybody has to look at the totality of data, right? Every regimen can be improved upon, unless you're curing 100% of patients with a given tumor type, which rarely happens, right? You can improve upon that. So in this case, is there a primary progressive disease? Is it PFS? Can you raise the tail on OS? Can you have a longer duration of disease-free interval, blah, blah, blah. So there's -- it's everything, right? So -- but I think it's the totality of data that we're focused on. So I hesitate to speculate on that now, because I want to see the data. I'd rather talk about real data than speculate on what might happen. And it's around the corner. So stay tuned.

Okay. All right. Well, so maybe 1 other try a slightly different angle in terms of read-across. Will you be looking for any read-across from COSMIC-313 for the triplet regimen to other potential tumor indications?

That's -- we all do it. It's always done with a long list of caveats. So it's human nature to do that. What it means statistically or what it means from a, I would say, confidence interval perspective is always highly variable, and you got to be careful with that. So -- but I think my own personal view is that triplets -- doublets are common, triplets are less common, but they're going to be really important moving forward. So -- and we're thinking about that really broadly, and I would say exhaustively with 092 in terms of, can we take a molecule like 092, which I view as kind of a better next-gen cabo, shorter half-life, maybe differential activity in terms of tolerability and/or safety. Similar activity profile based upon how it was designed, et cetera. So the question is, is that a molecule that we can think about broadly engaging in triplets with other checkpoint type combinations, checkpoint chemo, 092 combination, et cetera. But that's always -- again, I'll say it again, it's always about asking the question, if we can -- we have the basic science and we have early clinical data, which is supportive, does it make sense to pursue a pivotal trial that would allow us to really ask the question about [ reaching that ] standard of care box. Because if that's successful, that's how you help more patients. That's how you grow your business.

Okay. That's helpful. And then you did have some news yesterday on COSMIC-312 in first-line hepatocellular carcinoma. Can you maybe elaborate a little bit on the decision not to file an sNDA and was that based on, I guess, your discussion with the FDA? Or is that more a result of your assessment of the evolving treatment landscape?

Yes. So I don't think it should be a big surprise to anybody. We were very clear back in June when we had the top line press release without actual survival hazard ratio data that it was unlikely to pass a statistical threshold. We have the data in November, where the hazard ratio was 0.9 for OS, looking at the cabo/atezo arm versus sorafenib. Over time, those things really get better. Sometimes they do. But normally, you see some erosion in the hazard ratio as you get more events, and we saw that here as well. So from our point of view, we really had to ask the question, was there any unmet medical need in frontline HCC that the cabo-atezo combination with PFS alone, no decrement in survival. So one can make the argument that it was at least worth considering. But is there unmet medical need in that frontline population, that combination could address with PFS alone. And before HIMALAYA read out, where you had, again, a checkpoint, checkpoint inhibitor combination with no VEGF modulator involved. Before that, it was just IMbrave where you had bev/atezo and the bleeding risk with patients with either esophageal or gastric varices, the 312 opportunity looked attractive. But once HIMALAYA came out and that VEGF component was removed, those patients with varices, not only do they have a non-VEGF option, but there's a survival benefit there. So our analysis was quite simply in this purely based on us. We didn't talk to the agency again based on what data we saw, based on the -- on that landscape in terms of IMbrave and HIMALAYA, that it just made sense to basically call it a day here. And it was a complicated set of outcomes based upon enrolling during COVID and the demographics were a little bit different than what you normally see and blah, blah, blah, but you know what, it doesn't matter, right? We're in the p-value game. P values didn't work out here. It's better to move on and focus our efforts in other places. So -- but again, if the unmet medical need is not there with this -- that data set could really address, then it's okay. It's just -- this is a high-risk, high attrition game. This is 1 that didn't break our way. We've got lots more opportunities in frontline HCC. We're still very committed to that. We think 092 in the, I would say, the opportunity for other doublets and triplets is actually real attractive. So we're not giving up. We're just basically retrenching and thinking about what's next. So all good.

Excellent. Sounds very reasonable. For CONTACT-01 in small cell lung cancer, can you remind us what data we should be looking for here? And maybe talk a little bit about the market opportunity?

So CONTACT-01 primary, that's cabo/atezo versus docetaxel in second, third-line non-small cell lung cancer after a patient has been either refractory or resistant to an I-O therapy. So a very large population of patients kind of as patients progress, and unfortunately, the vast majority of patients in the indication do progress after a checkpoint inhibitor. So it's a very, very important opportunity. Again, a large unmet medical need, lots of patients looking for, I would say, better treatment options than just docetaxel. So survival is the primary endpoint. Plan is simple, discounting events. It's been fully enrolled now for a while. And again, we're hoping to have top line data in the second half of the year.

Okay. Looking forward to that. Maybe we'll shift gears a little bit over to 092 and at ASCO-GI, you had data for cabo in CRC from the COSMIC-021 study. You saw a nice ORR in RAS wild-type patients, but you didn't expand the CRC cohort. So maybe if you could share some thoughts on the internal bar for efficacy? And should we assume that 092 passed the internal efficacy bar?

So I think the way to frame it is that we had 2 data points with cabo checkpoint inhibitors, 1 from 021, 1 from an IST using Durva that were internally consistent. So from our point of view, we had 2 inputs that gave -- I mean, in a relatively small handful of patients, a 25% or 50% response rates, which are probably the same when you look at confidence intervals and blah, blah, blah. So yes, it looks promising to us. The regorafenib wild-type response rate, I think, is like 2% or less. So it's a very different look relative to what we're seeing there, and it makes sense to us that with the large unmet medical need, the large patient population, the lack of other treatment options, it made a lot of sense to us to move forward as quickly as possible. So -- so this is the 1 that we've been tracking closely for the last year or so, and the data has matured nicely. And there's -- again, there's always risk here, and we're comfortable with the safety profile that we've seen so far in that setting with -- in general, with 092. So it makes a lot of sense, and we're looking forward to getting that going ASAP, hopefully in the first half of this year.

Okay. It's exciting.

Yes, agreed. More to come, too.

Yes. All right. So following initiation of the pivotal study in CRC with 092, should we expect to see you initiate additional pivotal studies this year for 092? And how are you going to prioritize the different opportunities?

Yes. So that is, as you would imagine, a big focus for the development team right now is to get the next wave of getting 1 going as the first priority, right. Getting the next wave going is the second. And I'm more interested in asking the question, when do we start the seventh 1 or the tenth 1 as opposed to the second one, right? Because that's all going to happen. So again, it's a franchise perspective. We have a lot of great momentum from cabo doublets, cabo activity in general. So we know where to look, and now we just need to be able to look at the right combinations. And again, thinking about triplets is really important here and generate the right data we need to kind of make us more confident in the approach. So it's still relatively early. Certainly, COVID has been a bit of a complicator here in terms of our ability to move as fast as I would like to see. But with that kind of waxing and waning, and now Vicki Goodman joining, her expertise in small molecules, in checkpoints and combinations is just fantastic. So she's working closely with the team to get that whole effort going. While we advance XB002, XL102, and all the exciting new molecules from discovery [ and Peter Lamb ] [indiscernible]. So a lot's going on there. It's a great time to be us, right, in terms of having this -- just this richness in terms of asset diversity and quality on top of having cash flows that we need to make the whole process run.

Excellent. And maybe just to come back to the triplet regimen discussion for a moment and some of the potential advantages you mentioned for 092 in terms of the longer half-life and potential for improved safety profile. Does that make 092 sort of foundational for a triplet regimen? And would you then sort of prioritize 092 in any future triplet studies?

Well, we are, right? So it's -- first of all, it's got a shorter half-life, not a longer half-life. Number one, just to make sure that we're clear on that. But yes, no, I think that's critical in terms of asking the key questions. What are the other doublets that we want to add 092 on top of, right? The only other -- I mean, there's IO-IO and there's IO-chemo and there's I-O small molecule possibilities. And those are all ones. The question is really in the -- getting in the weeds and figure out the individual components and the pros and cons of how you play that multifactorial game, right? So it's a little bit complicated. But again, I think we're up to the task. And having the momentum we have with 092 right now in terms of understanding how that molecule behaves, how it's actually showing a differential profile to cabo is really important. It's still early, which is fine, but we're in that game of being able to take early data and ask the right questions, design the right next experiments and then move forward aggressively. So that's what we do.

Excellent. Any other potential advantages? I know you've shown some brain activity with cabo. Can you talk about the brain penetration of 092? Is that another area?

I wouldn't want to speculate on anything else right now. I'm trying to keep -- from a competitive point of view, things close to the vest. So as we talk more about that and present data more on that this year, you'll see more of the kind of attributes around 092 and the totality of that data. So stay tuned.

Okay. Okay. Maybe we could catch up with you briefly on XB002, your ADC targeting tissue factor. And TIVDAK was recently approved in second-line cervical cancer. How do you see -- what are the key differentiators between 002 and TIVDAK?

Well, Theoretically, right, we have a different mode of action in terms of how the 002 antibody binds the tissue factor, right? As you know, tissue factor -- that the interaction between tissue factor, Factor VII kind of initiates the coagulation cascade process. You block that, you can have bleeding complications, and they certainly see that with TV. And you look at their label, it's clear -- clearly an issue in some of their published data as well as other stuff. So we design actually, Iconic designed and we licensed an antibody that has noncompetitive motor-binding with tissue factors. So that it doesn't block the tissue Factor [ VII-VIII ] interaction. And we've seen no bleeding to date in the clinic, which is, I think, very reassuring, especially in patients with cancer are often have coagulation and bleeding issues to begin with based upon their disease. So I think that's really important. There's other attributes that I don't want to get into too much detail on. We've seen very, very good PK, very good exposure, very good stability of the intact ADC. And arguably, the less free warhead you have floating around, the better, because that can always drive a lot of talks with any ADC with variable stability. So we're pleased about that. And as you know, as we talked about back in January, we like what we saw in the early clinical data for 2021, and we amended the Iconic contract base where we have rights to make other ADCs off of that antibody, off of that binder, as well as kind of control the stable of ADCs that are related -- or the antibodies that are related to the binder as well. So we've got a lot of additional functionality and optionality. We bought out the milestones and royalties, et cetera, from that too. So it's it was a good time to put some money to work. We have a lot of money right now. So it was a small additional investment that gave us more or less kind of free range of motion with that whole area going forward. So -- you can expect to see more of that as we advance for sure.

Okay. And maybe just real quickly on 102. When should we expect data? And how frequently is CDK7 upregulate as a resistance mechanism?

Yes. So you'll see data on that later this year. Again, it's a great probe molecule, relative to asking some of the fundamental biological questions around that pathway, around that target, around the interaction of that target with CDK4/6, around how it works with both the ER axis and the androgen receptor axis. So we're excited about the basic biology. There's not a lot of proven there, because this is -- it's been really a lack of good tool molecules to be able to ask those questions in an adequate way clinically. So that's our goal here. But CDK7, I think is a pretty hot emerging target, and we've got what we think is a best-in-class molecule ready to start answering some of those questions. So it's very exciting.

All right. We're just about at time, but maybe I could wrap up with a big picture question here. You recently announced plans to expand your business footprint to the East Coast. Can you tell us about any additional plans for future geographic expansion? And longer term, what's your vision for what Exelixis is going to look like in the next 3 to 5 years?

Yes. So going to EXEL East allows us to tap into a whole new talent pool that it's been tough to tap into recently, right? I would say the center of mass for oncology has shifted from across the bay 15 years ago to now New Jersey, if you will, with all the big pharmas really doubling and tripling down in their oncology franchises and kind of therapeutic areas for all the obvious reasons. So to be able to have -- put a stake in the ground in the Philadelphia area is a great way to build talent. And again, our short-term aspirational goal is to double or triple the size of development over the next 2 years, because we have so much, I would say, exciting matter to work on, right? There's just a lot to do. And -- we've got a great team here in Alameda, but we need more, and we need more depth and more experience and great collaboration between the -- those 2 coastal sites. But that's just the start, right? We have global aspirations. We're not looking to partner anymore, right? Cabo, we partnered with Ipsen and Takeda to cover the rest of the world while we kept the U.S. But going forward, we're looking to be a fully vertically integrated global organization. And we do clinical trial work globally. We do regulatory work with our partners globally. So adding on a commercial effort there, while we have to do it well and do it right in a disciplined fashion, makes a lot of sense, right? I love getting royalty checks from Ipsen and Takeda every quarter. But to be quite frank, I wanted all for 092, I want it all for 002, et cetera. So -- and I think we have the organizational energy and aspirations and know-how and just drive to be able to make that work. So it's a stepwise fashion, but that's the future for us, right? Global -- think global, think big and think multi-products with this portfolio that we're building today as we speak.

Excellent. Thank you so much. We'll wrap it up there. It's really been a pleasure catching up with you today and really building an impressive pipeline at Exelixis and it's been a lot of fun to watch. We'll stay tuned for future updates. And thank you for your time today.

All right. Good to see you. Thanks again.

Good to see you, Mike.