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

Good day, ladies and gentlemen, and welcome to the Exelixis Third Quarter 2023 Financial Results Conference Call. My name is Gigi, and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. Please proceed.

Thank you, Gigi, and thank you all for joining us for the Exelixis Third Quarter 2023 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J. Haley, our Executive Vice President of Commercial; Amy Peterson, our Chief Medical Officer; and Dana Aftab, our Chief Scientific Officer, who will review our progress for the third quarter 2023 ended September 30, 2023. Peter Lamb, our EVP of Scientific Strategy will join us for the Q&A portion of the call. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website for an explanation of our reasons for using such non-GAAP measures as well as tables deriving these measures from our GAAP results. During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding discovery, product development, regulatory, commercial, financial and strategic matters. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the SEC, which under the heading Risk Factors, identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including, without limitation, risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners and the level of costs associated with the discovery, product development, business development and commercialization activities. And with that, I will turn the call over to Mike.

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a strong and very active third quarter across all components of our business. We're excited to see the cabozantinib franchise continue to grow, both in size and potential scope while we advanced a range of discovery and development programs to build the Exelixis' pipeline of the future. Our singular goal is to improve the standard of care for patients with cancer. . Key highlights for the third quarter will include: first, strong performance of the cabozantinib business with continued growth in demand and revenue in the U.S. CABOMETYX maintained its status as the leading TKI for RCC. Third quarter of 2023, cabo franchise net product revenues were approximately $426 million and approximately $586 million in the U.S. and globally, respectively. Christian P. J. will update our progress in the quarter and provide additional commentary on our financial and commercial activities. Second, EXEL top priority in R&D is to deliver a pipeline of clinically and commercially differentiated medicines for large populations of cancer patients with high unmet medical needs. We'll highlight our integrated strategy, spanning discovery, development and commercialization activities that build on past and recent cabozantinib's at our upcoming R&D investor event on December 12 in New York City. Amy and Dana will highlight our third quarter progress at a high level today, and I'm excited to have them join me and P.J. as we dive into the details in December. Our upcoming R&D day is the first we've had in many years, and we look forward to the opportunity to elaborate more broadly on our strategy to propel the organization forward and serve more patients with cancer, all in our continued efforts to generate sustainable long-term value for shareholders. Third, business development activities remain a priority as we continue to see opportunities to access clinical assets, potential to generate differentiated clinical data in solid tumor indications. In September, Exelixis Insilico announced an exclusive license agreement granting Exelixis global rights to develop and commercialize XL309, a potential best-in-class small molecule inhibitor of USP1, which has emerged as an important target for synthetic lethality in the context of BRCA-mutated tumors. Fourth and finally, the second MSN trial took place last week at the U.S. District Court in Delaware. The case is now submitted, and we don't want to get ahead of the court by commenting or speculating on any components of the trial for a potential ruling, either today or in the future. We feel very confident in the case we presented last week and the overall strength of our cabozantinib patent state. So with that, please see our press release issued an hour ago for our third quarter financial results and an extensive list of the key corporate highlights achieved in the quarter. I'll now turn the call over to Chris.

Thanks, Mike. For the third quarter of 2023, the company reported total revenues of approximately $472 million, which included cabozantinib franchise net product revenues of $426.5 million. CABOMETYX net product revenues were $422.2 million and included approximately $14 million in clinical trial sales. As a reminder, clinical trial sales have historically been choppy between quarters, and we expect this to continue in future quarters. Gross to net for the cabozantinib franchise in the third quarter of 2023 was 27.8%, which increased slightly when compared to the second quarter of 2023. Based on our gross to net in the first 9 months of 2023, we are estimating gross to net will be between 28% and 29% for the full year 2023. Our CABOMETYX trade inventory increased by approximately 400 units when compared to the second quarter of 2023. Total revenues also included approximately $45 million in collaboration revenues, including approximately $38 million of royalties earned from [indiscernible] on their sales of cabozantinib in their respective territories. Our total operating expenses for the third quarter of 2023 were approximately $490 million compared to $392 million in the second quarter of 2023. The increase in total operating expenses sequentially was primarily driven by higher R&D expense in the third quarter of 2023, which was primarily related to the $80 million upfront payment associated with in-licensing of XL309. Our SG&A expense declined in Q3 2023 when compared to Q2 2023. This decline was attributable to lower proxy advisory fees, partially offset by higher stock-based compensation expense. Provision for income taxes for the third quarter of 2023 was approximately $4.8 million, compared to a provision for income taxes of approximately $19.2 million for the second quarter of 2023. The company reported GAAP net income of approximately $1 million or $0.00 per share on a fully diluted basis for the third quarter 2023. Third quarter net income and EPS were impacted by the increase in R&D expense, primarily related to the $80 million upfront payment to Insilico. The company also reported non-GAAP net income of approximately $32 million or $0.10 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $31 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the quarter ended September 30, 2023, was approximately $1.9 billion. This increased the level of cash investments supported our ongoing cash flow from operations provides Exelixis with the flexibility to invest in internal discovery activities to pursue external business development opportunities to expand our pipeline and allows us to return capital to our shareholders through the $550 million share repurchase program we announced in March of this year. During the third quarter of 2023, we repurchased approximately $218 million of Exelixis shares at an average price of $21.08. Since the commencement of this program for the share repurchase program, we have repurchased approximately $345 million of Exelixis shares at an average price of $20.35. We remain committed to fully executing on the $550 million share repurchase program this year. Finally turning to our financial guidance for the full year 2023. Given where we are in the year, we are tightening our revenue guidance, and we are increasing our R&D and SG&A expense guidance. The increase in the R&D expense guidance is to reflect the Insilico deal we announced in September. Please see Slide 14 of our Q3 earnings presentation for further detail. I'll now turn the call over to P.J.

Thank you, Chris. The third quarter of 2023 was a strong quarter for cabozantinib franchise. Team continues to execute at a very high level, which has resulted in CABOMETYX continuing to be the #1 prescribed TKI in RCC, and second-line HCC. Additionally, CABOMETYX in combination with nivolumab remains the #1 TKI plus immuno-oncology combination in first-line renal cell carcinoma. In terms of the business, CABOMETYX TRx volume grew 8% year-over-year in Q3 2023 relative to Q3 2022. Furthermore, the business remains strong, both in terms of demand and new patient starts. CABOMETYX continued to perform well in Q3 from both the marketplace and competitive perspective. CABOMETYX has again led the TKI market basket and TRx share at 38%. As we have discussed previously, the first-line RCC market is extremely competitive and Q3 was the fourth full quarter in which CABOMETYX plus nivolumab was the #1 prescribed TKI plus immuno-oncology combination in first-line RCC. Positive physician experience with CABOMETYX plus nivolumab continues to be reinforced as we highlight and promote the 44-month long-term follow-up CheckMate 9ER data with median overall survival for the CABOMETYX plus nivolumab arm, 49.5 months, representing an improvement of 14 months over the comparator arm significant with a hazard ratio of 0.70. These data fortify the leadership position that CABOMETYX has in the RCC marketplace. Looking forward, we are excited about the positive top line results for CONTACT-02 in metastatic castration-resistant prostate cancer as well as the recent data from the CABINET trial in neuroendocrine tumors. Both studies are in patient populations with significant unmet medical need and pending potential regulatory approval will provide the opportunity for continued growth for CABOMETYX in the coming years. At our R&D Day in December, I look forward to further discussing these 2 potential opportunities for the cabozantinib franchise. Additionally, I'm excited to share at our event commercial perspective on our emerging pipeline assets. Our experience with cabo informs our strategy and ambition for zanzalintinib, XB002, XL309 and our pipeline as we focus on bringing drugs to market in areas that will provide significant impact to patients and value to Exelixis. And with that, I'll turn the call over to Amy.

Thanks, P.J. I want to first state how thrilled I am to be here at Exelixis. Our research and clinical pipeline is broad, both in terms of modality and targets representing a variety of development opportunities, which combined with our translational and clinical development capabilities providing exciting and high potential platform for growth. and I'm looking forward to bringing into fruition and sharing progress at our upcoming R&D Day. Today, I will provide a high-level update on our clinical pipeline with the intent of going into much more detail in December. Let's start with our most mature compound, cabozantinib. In late August, we announced positive top line data from not 1, but 2 Phase III studies. CONTACT-02, which evaluated cabozantinib plus atezolizumab in patients with metastatic castration-resistant prostate cancer, or mCRPC, and CABINET, which evaluated cabo in patients with pancreatic or extra-pancreatic neuroendocrine tumors. I'll begin briefly with CONTACT-02. This is a randomized open-label study of cabozantinib plus atezolizumab versus second novel hormonal therapy, or NHT in patients with mCRPC. This study has multiple primary endpoints of both PFS and OS. PFS as determined by blinded independent central radiology review and RECIST 1.1. So for example, progression by PSA only was not considered a PFS event to best inform this endpoint. Eligibility was restricted to patients with measurable disease that is bone-only nonmeasurable disease was not allowed. In August, we issued a press release noting a statistically significant PFS benefit in favor of cabo-atezo and the trend also favoring cabo-atezo in overall survival. No new safety signals were observed and adverse events were on par with what is expected from either cabo or atezo monotherapy. Based on feedback from the FDA, we will discuss a potential regulatory submission when the OS results are more mature. Also in August, we announced positive results from CABINET, a Phase III study conducted by the Alliance for Clinical Trials in Oncology. The study evaluated cabozantinib versus the placebo in 2 independently powered cohorts, 1 in previously treated patients with pancreatic neuroendocrine tumors or pNET, the other in patients with extra pancreatic neuroendocrine tumors or epNET. Those really 2 positive Phase III studies in 1. Data were recently presented at ESMO by Dr. Jennifer Chan, noting PFS hazard ratio of 0.27 and 0.45 in the pNET and epNET populations, respectively. In pNET, the median PFS for cabo was 11.4 months versus 3 months for placebo. And in epNET, the median PFS for cabo was 8.5 months (sic) [ 8.3 months ] versus 3.2 months for placebo. No new safety signals were identified for cabozantinib and we look forward to discussing these results with the FDA once we bring the data in-house. I will now turn to zanzalintinib. Our STELLAR-001 and 002 Phase Ib/II trials are evaluating zanza monotherapy, zanza in combination with PD-1, PD-L1 immune checkpoint inhibition, and also triplet combination of zanza, anti-PD-1 and CTLA-4 [indiscernible] free targeted therapy. As you can see from the slide, we have multiple expansion cohorts in a variety of tumors testing these combinations. Data generated from these cohorts will serve to support expanded development for zanza. Indeed, we previously shared early yet promising data with the zanza monotherapy in patients with clear cell kidney cancer were compelling and durable responses are being observed in both cabo cab-naïve and cabo pretreated patients. These data have been accepted as late-breaking oral abstract for presentation by Dr. Monty Pal, on Friday, November 10 at the International Kidney Cancer Symposium taking place in Nashville. Turning now to our registrational studies with zanza, enrollment continues into STELLAR-303, evaluating the combination of zanza plus atezo versus regorafenib in patients with non-MSI-high non-dMRR refractory metastatic colorectal cancer. This study was revised to evaluate outcomes first in patients, who do not have liver metastases, nonliver met or NLM followed by an evaluation in the ITT population. The sample size for both NLM and LM patients is capped to ensure adequate number of events in each of these analyses. STELLAR-304 is our Phase III trial, which compares the combination of zanza plus nivolumab to sunitinib in patients with previously untreated metastatic non-clear cell kidney cancer, and is now enrolling in multiple countries. And last but not least, STELLAR 305, our Phase II/III trial, which will evaluate zanza in combination with pembrolizumab versus pembrolizumab alone in patients with untreated PD-L1 positive advanced or metastatic squamous cell carcinoma of the head and neck was just posted to clinicaltrials.gov, and we are full gear into site activation mode. Given the emerging favorable activity and tolerability profile of zanza, we believe this combination of zanza plus pembro may result in improved outcome versus single-agent pembro and has the potential to offer patients a chemo-free option. We're excited about the emerging data with zanza as monotherapy and in combination with ICI. This, combined with clinical data generated with cabo, provide compelling rationale to move zanza into broad development program that will address patients with unmet need. We will continue to evaluate the treatment landscape to inform the design and initiation of additional pivotal studies for zanza. I'll turn now to XB002, our antibody drug conjugate, which targets tissue factor and incorporates a modified auristatin as the payload. We've initiated expansion in multiple cohorts at 2 different doses, which will allow us to determine the best dose to take forward into registrational studies and combinations while also fulfilling project optimists. Combinations with nivolumab and with bevacizumab are also underway, and data here will serve to inform a broader clinical development program. Finally, I'm very excited about XL309, our recently acquired USP1 inhibitor. We anticipate full transfer of all obligations towards the end of this year and are in the process of assessing how best to aggressively and urgently advance this asset through dose escalation, both as monotherapy and in combination. We believe this to be a best-in-class molecule that has the potential to not only deepen responses with DNA damaging agents or agents that inhibit DNA damage repair like PARP inhibitors, but also to broaden the addressable population beyond those who carry a BRCA mutation. In summary, we're advancing a robust pipeline of molecules while maximizing the potential benefit to patients from our flagship asset cabo in unmet need indications. I'm optimistic about what we can do for patients who, despite significant advances, still need better treatment options, and I'm very much looking forward to sharing more detailed information about our progress and the recently presented data at our R&D Day in December. And with that, I'll turn the call over to Dana.

All right. Thanks, Amy. I just want to start off by saying how excited I am to be working with Amy as my partner in R&D. I've known her for quite some time, going back to the days when we were working with Genentech on cobimetinib, and having her here on the team now has brought a lot of energy and focus into our organization. We've been working together preparing for R&D Day next month, and I'm excited about what's in store for that event. So what you'll hear from me to be just some brief highlights of what I'm planning to discuss in greater detail next month. In the third quarter, we made solid progress toward our goals of advancing existing development candidates toward IND filings, and advancing early discovery programs to development candidate status. We are on track to file 4 new INDs next year, 3 of which will be from existing pre-IND biotherapeutics programs and 1 of which will be for XL495, a new small molecule development candidates that we recently added to our pipeline. For our existing preclinical biotherapeutics programs, we are on track with IND-enabling activities and expect to file INDs for 3 programs next year. The first will be for XB010, our 5T4 targeted antibody drug conjugate that carries the cytotoxic anti-tubulin payload, which we expect to file around mid-2024. The second IND will be for XB628, our bispecific antibody that targets PD-L1 along with NKG2A, which is on track for IND filing in the second half of 2024. And the third IND will be for XB371, a tissue factor targeting antibody drug conjugate that carries the topoisomerase 1 inhibitor payload. This program is on track for IND filing in late 2024. So as I mentioned earlier, we recently added XL495 to our pipeline. XL495 is a potent and selective small molecule inhibitor of PKMYT1 that was generated from an internal discovery program. Inhibition of PKMYT1 is synthetically lethal in the context of increased Cyclin E levels, which occurs across a wide range of tumors, including, ovarian, endometrial and colorectal. Our molecule was designed to be best-in-class and is tracking towards IND filing around mid-2024. In addition to these programs, we expect to nominate several more development candidates from our biotherapeutics discovery programs by the end of this year. We are currently on track to reach our stated goal of up to 5 new development candidates this year, which, in addition to XL495 will include a monoclonal antibody targeting a novel immune checkpoint pathway and some new antibody drug conjugates. All of these programs represent first or best-in-class approaches and have the potential to meaningfully contribute to our mission of helping cancer patients recover stronger and live longer. And with that, I'll turn the call back over to Mike.

All right. Thanks, Dana. As you've heard on the call today, Exelixis has had a strong third quarter of 2023 and is moving quickly to capitalize on our momentum in the fourth quarter. We're excited to advance all our efforts to help many more cancer patients as we discover and develop our pipeline of the future. We look forward to sharing our latest strategies and science at our R&D Day in December. I'll close by thanking the entire Exelixis team for their collective efforts to support our discovery development and commercial activities. The team is highly motivated to achieve our mission to help cancer patients recover stronger and live longer. We drive our results every single day with a clear urgency and focus to build on our long history of innovation and collaboration. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exelixis, and we're happy to now open the call for questions.

[Operator Instructions] Your first question comes from the line of Michael Schmidt from Guggenheim Securities.

Congrats on all the progress. I just had a pipeline question regarding the upcoming STELLAR 001 zanza data at the kidney conference next week. Could you just help set some expectations here in terms of number of patients? And how many of them will be cabo-naive. How should we interpret the data coming out of the meeting? And then secondly, you mentioned the upcoming R&D Day a few times, could you just help us again understand sort of what to expect there? In particular, will you disclose any clinical data from some of the new or clinical stage pipeline products?

So Amy, take the first one, and we can all reply on the second one. So go ahead.

Yes. Thanks, Michael, for the question. I think we're really excited about the data that continues to emerge from zanza, especially in the clear cell kidney cancer cohort. There's not much I can give you in the terms of details simply, because the data is embargoed and the presentation is just around the corner on November 10. It will be data that is updated around the 32 patients that we've discussed before that received monotherapy with zanza. So I'm looking forward to going deeper with you on that at R&D Day, but that's about all I can say right now.

Okay. On the R&D Day side, just again, manage expectations, as we talked about, I think, numerous times today, we're going to focus on strategy and science as the main update for investors. I wouldn't expect any new late-breaking on published data, and we have a commitment to our investigators to do that first. So you'll see that throughout 2024 for the new compounds. We're super excited to frame our strategy and our tactics in the context of the success we've had with cabo and how we're moving forward with the pipeline. So it will be an action-packed day, and we're looking forward to seeing you and everybody there.

Our next question comes from the line of Jason Gerberry from Bank of America.

Mike, I know you can't talk a lot about the IP with cabo, but my question is more -- is there any engagement with MSN as a counterparty regarding settlement? Or do you feel you're operating with a counterparty unwilling to engage in settlement talks? We know that settlements do occur post trial in some instances as well. So just curious to the extent you can comment on that dynamic. I appreciate it.

Yes, Jason, thanks for the question. Again, I really can't say a lot here. We're -- I'll put it this way. We like talking to people. We have a variety of different collaborators, who we work very closely with. It's in our culture, it's in our DNA to be as open and interactive as possible. So that goes here, right? If there's a settlement to be had, we won't be rate limiting in how we view that. . Again, I think we had a really strong week last week. I'm not going to get ahead of the court. They have their job to do. I was super -- and I think the whole team was just super proud about being able to go out there and put the context of the trial, the data, the legalities into context, and it's now in the hands of the court. So -- but you're right, things can happen when they happen. And if there's a settlement opportunity, we'll certainly engage them.

Our next question comes from the line of Gregory Renza from RBC Capital Markets.

Mike and team, congrats on the progress. Mike, maybe just a question for Amy. I know first time hearing from Amy and Amy, you're really diving right into the Exelixis pipeline, and we look forward to the data and the R&D Day coming up. Just wanted to give you an opportunity to talk a bit about the opportunities you see here with the pipeline and also perhaps some of the challenges that you think are ahead of you in order to realize the value that you're talking about in the portfolio and the pipeline.

All right. Well, thanks, Greg, for the question. I appreciate it, and thanks for the welcome. I'm really excited to be here. I think one of the reasons -- the main reason I'm excited to be here is because of the pipeline that Exelixis has and the opportunity to apply my development skills and the company's development skills into bringing all of these assets into the limelight and to fully develop them where they warrant more development. I'm particularly excited about zanza. I think the data that is emerging is demonstrating that it's a best in class. And again, we'll be able to share more of that at R&D Day. And I think our tissue factor ADC is differentiated from the Tivdak molecule in a couple of different ways, most notably in the payload and so the tax profile should be different. So we have opportunities there. And with the USB 1 inhibitor that's in the just entering clinic, that's a best-in-class asset, we believe. And as I mentioned in the call, the opportunity to not only deepen the responses seen, for example, in combination with PARP inhibition. And so to further improve those patients, who might drive benefit with PARP inhibitor, but also to broaden the accessible patient population beyond those with BRCA mutations. So there's a lot of really exciting opportunities for Exelixis in the future. It's hard to focus on any one of them, but I absolutely will be focused on each of them.

Our next question comes from the line of Jay Olson from Oppenheimer.

Congrats on the progress. For CONTACT-02, can you talk about when the next OS analysis might happen based on your modeling. And then also, can you file the sNDA without OS? And how would you describe clinically meaningful benefits for PFS and OS in this particular setting? And where do you see cabo plus atezo fitting into the treatment landscape?

So Amy, let's take the first part of that question and then maybe P.J. can kind of frame the commercial opportunity at a super high level.

Yes. Great. Thanks, Jay. I appreciate the question. So OS is event driven based on current estimates, we believe the final OS would occur sometime in 2024. I'm really not at liberty to talk much more about that. As for clinical meaningfulness of PFS, it's a totality of the data, and I'm not going to speculate on what a PFS difference has to be, but rather just remind the patients that were enrolled into this study represent a very poor prognostic group of patients. These are patients, who must have had measurable disease, and that included patients with liver disease, patients with extranodal visceral disease. So a group of patients that otherwise don't have many options available to them. And it's the totality of the data. So not just improvements in PFS, but also tolerability and accessibility and ease of delivering the therapy. And I think with that, I'll let P.J. talk about the commercial opportunity.

Great. Yes. Thanks, Amy, and thanks for the question, Jay. I think as Amy highlighted, this is an area of certainly high unmet medical need for patients. So that's really important, and we've heard that from KOLs all along. I think if you think about how this regimen could potentially fit in. Right now, obviously, the majority of patients in the first-line metastatic castration-resistant prostate setting are getting an NHT. And then beyond that, you've got subsequent NHT chemo and obviously, the study addresses patients relative to a second NHT. So there's that data. But then beyond that, chemo, I think, it's something that physicians and their patients we hear consistently really want to delay in treatment. So I think a chemos option could potentially really help that in this setting. And then Also, these are 2 novel mechanisms of action potentially again for the prostate cancer setting. So I think any time there's a lot of excitement for new MOAs in a disease setting. And certainly, in a setting where there's no broadly available immunotherapy agent, there will certainly be a lot of excitement should this get approved for that as well. So I think you would potentially see cabo-atezo used prior to chemo and across multiple lines of therapy depending on the patient.

Our next question comes from the line of Jing Deng from Truist.

This is Jing on line of Asthika from Truist. I have one question regarding about how do you view the impact of the recent approval of belzutifan which is HIF-2 alpha inhibitor from Merck. They are trying to launch this drug in second line RCC, where we know the cabo has a very strong presence. So yes, so I want to ask you, do you expect that this drug will be capture a significant share of the market and how do you plan to differentiate cabo from other drugs?

Okay. Thanks for the question, Amy, P.J., do you want to take that one?

Yes, Jing, thanks for the question. I assume you're referring to the recently presented LITESPARK data at ESMO. So obviously, no approval for that data yet with the HIF inhibitor. And really, I think it's important to realize and contextualize that, that study is really in a later line setting in patients, who have received IO and TKI that was head-to-head with everolimus. It didn't have an OS benefit. We've had certainly a lot of discussions already with KOLs at ESMO and beyond about the data. And what we really see is that having likely competing in very late lines of therapy in RCC setting, predominantly with tivozanib. So we don't see any significant impact with regards to the cabo business generally or our second-line business.

Our next question comes from the line of Andy Hsieh from William Blair.

Amy, congratulations on your new role and look forward to working with you. So first of all, really pleased to see the first positive IO containing regimen in prostate cancer. So there's a lot of moving pieces in the field. Just curious if you can give us a sense of what the FDA is looking for pertaining to OS, right? I guess if you look at the Novartis PSMA4 that allows for crossover. It sounds like they want to look for something along the lines of no detriment there. Is the bar higher for CONTACT-02, just given the no crossover nature? So that's number one. And then kind of staying within the GU space, this morning, KEYNOTE-564 OS benefit in the adjuvant setting, I'm curious about your view on that regarding its impact to the first-line metastatic market? And whether you have plans to kind of navigate through that market evolution?

Thanks, Andy, lets have Amy take the first part or the first question, and then P.J. can talk about adjuvant. Okay. Amy?

Yes, sure. So I appreciate the question and the complexity behind it. I can't pretend to say what the agency is actually looking for. What I can say is that it's not inconsistent with the feedback that other companies are getting and they just want to see some more mature OS data. So I'll keep you posted as that progresses. Stay tuned.

Andy, thanks for the question. With regards to the 564 study in the adjuvant setting, as you know, that data was presented originally years ago and has been on the market for some time. The original OS hazard ratio, while not mature, was quite impressive, so to speak. So this is really no surprise. I think that these data were positive. I think it's important to remember that this sort of high-risk population as defined by the study is quite small relative to the number of patients who get an nephrectomy in a given year. So we're talking just a few thousand patients. And I think that's already been working its way through the treatment algorithm with regards to those patients recurring in the first-line setting. So we have a pretty good feel for that. Really haven't seen much of a significant impact to date. What we do here is patients who potentially recur while on pembro or relatively shortly after pembro in the adjuvant setting, many physicians do sort of think of them as refractory, so to speak, to checkpoint inhibition. And often then that leads them to consider a TKI monotherapy in the first-line setting. And obviously, with cabo on and the totality of our data, we're well positioned for those patients. I think overall, with OS, certainly, a few more physicians will prescribe that, but we really don't see much of a significant impact in the first-line setting. And obviously, these things take years to develop, but we've kind of been in it now for a couple of years and pretty comfortable with that analysis.

Great. Thank you, P.J. and thank you, Andy, for the questions. Operator, we'll take the next question, please.

Our next question comes from the line of Yaron Werber from TD Cowen.

Great. And nice job on the case last week. My question has to do -- and I know you can't comment on what you think the outcome would be. But can you maybe just comment that the judge did give some specifics on the next steps in terms of the initial briefs, response briefs and the reply briefs, which are due February 20. Do you -- maybe just kind of generically procedurally, can you help us understand the timing, the way you see it a little bit? Does that mean that the judge has a certain amount of time after the reply brief to then render a decision or give a time line by which you will render a decision or just so we understand procedurally how you understand things to be?

Yes, Yaron. Thanks for the question. It's really hard for me to opine upon the nuances and details there. I would refer you back to the transcript to see exactly what he asked for and what he's looking for. To me, it seemed like pretty standard stuff with how this stuff normally works. But I wouldn't want to get in the weeds there in the details. It's just, A, I'm not an expert; and b, it's just -- I want to keep it with what's in the public domain, what's in the transcript and not really opine for this.

Our next question comes from the line of Akash Tewari from Jefferies.

This is Amy on for Akash. So just 2 quick ones on an zanza. Number one, when will we get longer-term durability data on zanza that we can compare versus cabo? Will we be able to get a sense of this from the upcoming STELLAR-001 data? And then number two, given that both mono and combo efficacy data for zanza looks generally in line with cabo. We'd love to kind of revisit your internal goals here for zanza given it's sort of half-life. Is it to replace cabo and show a better safety and efficacy profile or to expand into new indications?

Yes. Sure. Thanks for the question, Amy. I like your name. So as for the longer durability, I think you'll be able to appreciate why it is that we're excited about zanza when the -- after the IKCS presentation on November 10, and if you're not able to see that, then certainly at R&D Day where I'll go into some more detail. With regard to the 001 and 002 cohorts, many of those cohorts are enrolled and the data is maturing. There's a number of different indications that we are assessing for support to our expanded program, our expanded development program, not only to give support to what we're currently doing and to support, for example, contribution of components as we proceed with regulatory discussions, should those trials be positive, but also support to expand the development of zanza into new and different indications, and that's where we'll also leverage cabo. So I can't go into much more detail, but I will be able to probably give you some good examples of why we're pretty bullish on zanza at this point in time given what we know about yet relative to cabo. And with regard to replacing cabo, I'll defer that back to Mike or P.J.

Yes, I think you covered it pretty well. Again, just as we said previously, the goal here is to use zanza to expand the indications, the combinations, the line of therapy, if you will. And [ cabo ] sensitive types of tumors and indications, the goal is to make that opportunity for zanza as big as possible across the different dimensions that we're talking about here. So it's a very important aspiration that we have that we think we can help a lot more cancer patients, who need better therapies across the different lines of therapy, early, late, different combination partners, et cetera. .

Our next question comes from the line of Silvan Tuerkcan from JMP Securities.

Congrats on the quarter. And Amy congrats on the new job. I have a quick question. In the press release, it seems like you released that COSMIC-313, so the triplet had a second OS look, which did not meet the threshold for that statistical significance. Can you just comment on when the next OS look is? And what we can extrapolate from the fact that the second OS look did not meet the threshold? What are the prospects here? And what are the plans as in the OS look with respect to filing and engaging with the FDA about these 2 populations that have different outcomes here in this trial?

Amy?

Yes. Thanks, Silvan. Thanks, Mike. Thanks, Silvan. So we did a press release that there was an interim that was conducted in the third quarter. Data did not meet the threshold for statistical significance. And so the trial will continue to the next planned analysis, which is anticipated in 2024. Just to remind everybody that these are event-based and I'm not really able to provide further precision on that at this point in time. And so I don't really have much more to say around that.

Operator, we have to take the next question.

Our next question comes from the line of Peter Lawson from Barclays.

Mike, you mentioned no new data at the R&D Day. Would you include kind of preclinical data around the new pipeline products? And then will you include time lines around data releases for '24 for the pipeline?

Thanks, Peter, for the question and for digging into the details for the December meeting. Yes, I was speaking to no new clinical data. You'll certainly see, I think, a lot of preclinical data that Dana will present and use to frame the opportunities for all the upcoming IND candidates and DC candidates that we've got best relatively broad and deep, and we have a lot to share there. Time lines, again, we'll see how that frames out. Again, both we're committed to presenting clinical data as it matures, that is in the eye of the beholder in terms of how that works from a duration and durability point of view. So stay tuned on that. And again, we have very, I think, deep presentation that we're pulling together right now that covers all the aspects of strategically how we view success and how we're going to go about reaching these very aspirational goals for helping improve standard of care of patients with cancer and then a lot of details and really getting in the weeds on a variety of different molecules that we're really excited about. So looking forward to seeing you there.

Our next question comes from the line of Jeff Hung from Morgan Stanley.

Can you talk about what differentiates XL495 from other PKMYT1 inhibitors in development? And what gives you confidence that it can be best in class? Is it greater selectivity, potency, lower risk of drug-drug interactions or something else? I appreciate any color you can provide.

Sure. Thanks for the question, Jeff. This is Dana. So as I mentioned, XL495, we believe to be best-in-class. We don't say that lightly. We have a lot of data to back that up. All I really want to say right now is to stay tuned for R&D Day, which is where we will be presenting a lot more data on this compound. But we did look at the competition and pursued a very solid rationale toward developing something that was best-in-class, not just a second follow-on compound.

Our next question comes from the line of Etzer Darout from BMO Capital Markets.

Great. So thank you for laying out sort of the IND plans for Exelixis. But just wondered if you could comment at all on sort of the Phase I assets that you have in development and maybe for 2024, where we could see potential proof of concept in the clinic with assets like CBX-12, the ADU-1805 compound and some of the other assets that you have in Phase I, early clinical trial, I guess, is sort of where we could see potential proof of concept there?

Etzer, thanks. It's Amy. I'll take that. So we do have some other assets that are partnered that are in Phase I, and we are actively always looking at the data, and we'll make database decisions on how those progress and move forward. But those are good partnerships with our XB002 that is advancing into its expansion cohorts. I would say we're in the process of understanding really proof of developability and the way I differentiate proof of concept from proof of developability is proof of concept, you have a couple of responses, and it's interesting or you get a pharmacodynamic marker, it looks like the drug is doing something to the tissue in the human, but you don't yet know how to move that into a pivotal study. These expansion cohorts for XB002 will actually -- are designed to actually inform us if we see a certain amount of activity, how would we move into pivotal studies. And so those expansion cohorts are enrolling when they mature. And when we have that data, it's just dependent on how long it takes for the responses and the durability of the responses. So we could have some things in 2024. And then for XL, the USP1 inhibitor, right, that's just getting started. And as we transfer that in and we go through dose escalation, I think we'll have a better understanding of what we need to see in terms of proof of developability there. I think we already have a good head start, understanding the patient population that is most likely to respond to this sort of an agent and harnessing that knowledge in terms of our eligibility criteria will help us understand how we might quickly move into full development with that asset. And I think I'm not -- I'll stop there.

All right, Amy. Thank you. Operator, we'll take the next question.

Our next question comes from the line of Chris Shibutani from Goldman Sachs.

This is Stephen on for Chris. Two from us. On cabinet, the data that was presented at ESMO showed quite a clear PFS benefit, though the OS curves didn't separate as much. So I guess in that light, how confident are you that regulators will view that data package as an approval data set? And then on XL309 recently in-licensed, can you speak to what gives you confidence that, that could be a best-in-class asset among competitive USP1 inhibitors?

Okay. Good. So Amy, why don't you take the CABINET question and then Dana can speak to 309.

Yes. Thanks for the question, Stephen. It's an important question to bring up, because the way the study was designed is that crossover was allowed and the study was unblinded early due to the significant benefit in progression-free survival that was observed and all patients at that point in time were crossed over. So there's not really an expectation for survival -- for us to observe survival. Whether or not that passes the test of the agency is discussion we'll have. We're pretty optimistic given that this is such a rare disease and a high unmet need in late lines of setting where patients really have nothing else available to them. So we're optimistic. But again, we have yet to have that initial discussion.

Great. Dana, 309.

Yes, thanks for the questions, Stephen. Regarding 309. So even though that's an in-licensed compound, we actually did quite a bit of experimental work ourselves in our own labs with that molecule. We have quite a data set that supports our statement that we believe it to be best-in-class. And so similar to what I said about XL495, we're planning to give a lot more detail at R&D Day. So I would just say stay tuned for the update there, we will see a lot more -- you'll get a lot more information on the molecule.

All right. Thanks, Dana.

Our next question comes from the line of Joe Catanzaro from Piper Sandler.

Maybe just a quick one for me. So Amy, I know you have some ADC experience in some prior roles. So just wondering how you think about the next-gen topo 1 tissue factor ADC that you guys have in the pipeline relative to XB002 and maybe more generally, how you think about auristatin and tubulin-based payloads versus topoisomerase-based payloads and maybe how you develop these 2 programs sequentially?

Hi, Joe, thanks very much for the question. Thanks for the welcome. Yes, I definitely have some experience in the ADCs. So with regard to the topo 1, I think it's actually an opportunity to take a molecule into tumors that both express tissue factor and are sensitive to topoisomerase inhibition, so not all tumors that express tissue factor are sensitive to anti-tubulins like auristatin. So adding a different payload actually allows us to potentially cast a wider net with regard to some of the tumors that we might pursue. And, of course, would offer a differentiated toxicity profile. When it comes to the auristatin versus MMAEs, there are certain toxicities that are similar, for example, [indiscernible], but there are other toxicities that aren't as similar between our payload and what you might expect from Tivdak. So neuropathy and bleeding is not something that we would expect to see with ours. So the payload is different for our XB002 than what is with Tivdak. We're already starting to have a differentiated toxicity profile. We're excited about the data that Tivdak has shown, and that offers us an opportunity to think about how we might bring XB002 forward into that space, leveraging our differentiated toxicity profile. So I hope that answered your question.

Our next question comes from the line of Stephen Willey from Stifel.

Just a couple of quick clinical ones for me. So on STELLAR-305, I'm just kind of curious, I know Merck announced the LEAP-10 trial didn't hit its endpoint, I guess, a couple of months ago. And just curious how you think about zanza differentiation relative to [indiscernible] within the setting of head and neck? And then maybe just a quick follow-up to Joe's question. I know for JEWEL-101, you're not looking at cervical as part of any of the combination expansion cohorts, and I guess just kind of given some of the concern around combining Tivdak with the overlapping bleeding risk. Just kind of curious why that's not on your radar screen right now?

Okay. Amy, let's handle -- maybe handle the second question first, just to clear up that misconception.

Yes. Clear that up, cervical cancer is in our list of expanded cohorts for JEWEL-101. We are absolutely investing in it. And then with regard to STELLAR-305, what gives us confidence, even though pem-len didn't quite hit the mark is the data that was generated with cabo-pem in the study of 33 patients where we had a 54% response rate and a PFS of 14.6 months. We think that, that benchmarks favorably to what len-pem showed in their Phase II, which was an ORR of 36% and a PFS of 8.2 months. So we're different. So that was cabo-pem, this is what we're bringing forward is zanza-pem, which is what we believe to be a best-in-class and better than what we could have observed with cabo and already cabo-pem in cross-trial comparisons looks to be better than pem-len. So I hope that answers it.

Our next question comes from the line of Christopher Liu from Leerink Partners.

So you mentioned that during the R&D Day, it's going to be focused a lot on the science. Just wondering if there's any color you can give us in terms of when we can expect to see data for some of these pipeline assets like tissue factor in ADC, the CDK7, the USP 1 that you recently in-licensed, anything on that? And then in terms of -- just a quick second question. In terms of business development, are you guys looking to -- are you guys looking at assets that are earlier in the clinical stage? Or would you guys consider something later on in the clinical stage as well?

Yes. Thanks for the questions, Chris. It's my comments for both questions. Starting with the question. First, look, we're a very interested looking for molecules that are clinical stage assets early stage, mid-stage and late stage that have the data that help us understand the potential for both clinical and commercial differentiation, right? So that can be early, that can be late. Again, we have to be -- we have to have the right level of conviction that what we're looking at and potentially either partnering or acquiring can really move the needle for patients because, again, the [ cabo-len ], that's the only way we're going to be able to build value in this very, very competitive marketplace. In terms of R&D Day and time lines, getting into weeds there probably isn't advisable right now. I know we handle all that in December. I think it will be a great morning, and looking forward to having everybody there. So again, we can frame the science with the strategy, with the details to help everybody see where we're going and how we're going to be able to get these really large aspirational goals to help patients with cancer.

Thank you. At this time, there are no further questions. And so I will turn the call over to today's host, Susan Hubbard. Ms. Hubbard?

Yes. Thank you, and thanks, everybody, for joining us today. Certainly, if you have any follow-up questions, don't hesitate to reach out to me or [indiscernible]. We'll get back to you right away.

This concludes today's conference call. Thank you for participating. You may now disconnect.