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

All right. Good morning, and welcome to the fireside chat with Exelixis. With us today, we have Mike Morrissey, CEO. Mike, welcome. Thanks for joining us.

Michael, good to see you. Great glasses.

Thank you. Appreciate it.

So yes, for those who don't know, I'm Michael Schmidt, biotech analysts with Guggenheim and we'll just jump right into Q&A, Mike. Perhaps starting just with a quick commercial question. You recently guided to 2024 revenue, [ $1.65 billion to 1.75 billion ] cabo sales for this year, which implies a slowdown from the prior year. Just remind folks again, so what are you seeing in the market for cabo at this point in time and talk about different dynamics as you generate that guidance?

Yes, sure. Well, good morning, everybody. Great to be here. Thanks again for the invite. Michael, always an honor to fund chat, right, especially so close to earnings. Where we gave you the first question this time... Before I begin, 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 let's talk about start of the year. Yes, it's been a busy year so far. We had guidance for JPMorgan. Certainly, going into year 4 after the 90-year launch, you would expect to see a bit of a slowdown in growth not too surprising. We've doubled revenues since launching in 2021. So obviously, cabo's got the -- its whole position as the #1 TKI for RCC. Both, #1, in terms of the IO TKI segment and #1 in second-line monotherapy. So we're real proud of that. Obviously, it's an important drug for a lot of patients globally. We did about $2.3 billion in global sales in 2023 between us and our partners ex U.S. So important franchise for VEGFR targeting TKIs #1 in terms of global sales there. So we think we have room to grow. Obviously, new indications coming online end of this year, early next year that we're really excited about with both net, which we think is a bit of a sleeper indication, but could have a pretty significant upside, doing a lot of market research there right now and then the prostate cancer space, which we had our data at ASCO GU talked about it a lot on the call a couple of days ago. We're really proud of that trial, proud of that data and certainly spend some time talking about that today. But, yes, '24 is a transition year in terms of revenue growth, and we would expect to see growth pick up again in '25 and beyond.

Great. And I have to ask 1 question about the ANDA litigation. I understand that generally, I think post-trial settlements are less common, as I understand in the industry in general. Can you comment if that is something that is still on the table at this point? Or are we just waiting for the judge's decision at this point in time?

Yes. I would say everything is always on the table until, I guess, stating the obvious until it's not. We've always taken a, I would say, a broad kind of corporate view that we like talking to people. And we have a lot of important dialogues across literally every component of the business. And -- this is certainly 1 of them where we would consider options that make sense for the patients that we serve for shareholders for the momentum we have in the business. We had a very strong, I think, showing at the second MSN trial in October. I'm not going to get into the details of that. We're just too close to a ruling. We expect the briefing process to end in the next few weeks. I talked about that on the call a couple of days ago. So we'll see. Look, strong data, strong patents. I think the team, the combination of the kind of the full force of Exelixis, coupled with our outside law firm did just a phenomenal job. The experts did a great job. We've got a really strong case and it's vectoring towards a ruling in the first half of the year. As we talked about on the call, this is a very, very important single milestone for the company. It could really mark an inflection point for the business and for the franchise this year. So excited about that and the momentum it brings for sure.

Sounds good. Then maybe switching over to some of the pipeline, and you mentioned the CONTACT-02 study, the prostate cancer data was at ASCO GU recently, which obviously hit the PFS endpoint, and it showed up a trend -- a positive trend at the first interim analysis for OS. Yes. Maybe just remind us sort of what gives you confidence in both sort of regulatory alignment at this point as well as the sort of market potential based on the data in prostate cancer?

Yes. It's really -- it's a great result for patients with prostate cancer. I thought Amy Peterson, our new CMO, did a great job on the call a couple of days ago, really putting a stake in the ground and providing, I would say, our narrative, which is maybe counter to all the noise from ASCO GU around looking at cross-sell comparisons and compared our arms and all those kinds of things that in some ways, were somewhat I won't say I'm equally biased, but -- or unequally discussed, but I think a lot of the nuances from the trial were drowned out by some of the drumbeats around some of the really simple concepts around using a second NHT as a control arm, PFS plus or minus OS those kinds of things. The population differences between CONTACT-02 some of the recent trials, say, with radioligand therapy, some of the broader historical second -- first second-line prostate cancer trial. So we're really excited about the data. Again, I'll just reiterate some of the highlights. It's probably the poorest prognosis population that's been studied to date. Again, 100% of the patients had measurable disease by RECIST 1.1. That's a rarity never -- to our knowledge, never been done before in a metastatic CRPC trial. So 100% measurable disease, you would normally see 25%, 30%, 35% visceral disease incidents in our population was 40-plus percent. You normally see that in the mid- to high teens. Liver mets, we were close to 25% of the population. Some of the more contemporaneous studies say with PSMA4 had about 5%. So it's a very, very late line poor prognosis population. And that's reflected not only in the PFS of the control arm, but really needs to be put into context with all the caveats and some of the other recent trials that come out. So I was really pleased and this completely missed, I think, by a lot of people. But if you look at the liver met population with CONTACT-02 right, in terms of PFS has a ratio of 0.43. You look at that same population in PSMA4. The hazard ratio was 0.42. So similar activity with all the caveats across all comparisons , blah, blah, but it really reinforces the idea that this is a very active combination -- certainly active positive study. So very pleased with the outcome in terms of the PFS win. Again, the survival, the interim survival OS at information fraction of above 50% was 0.79, and that, I think, is important to look at relative to -- we saw a positive trend in a survival signal early days, but hopeful on that. And we're going to push it forward. So we have a lot of confidence in the data. I think the -- I think Neeraj Agarwal, the PI for the study did a great job talking about how other options are required for this population. Most men with prostate cancer really don't want to get chemotherapy. There's data -- real-world data from literally thousands and thousands of patients to support that. If you look at some of the quantitative data, only about 15% of men with prostate cancer actually choose to get chemotherapy, the vast majority, after progressing on a first NHT, will try a second NHT to delay the potential employment of chemotherapy. So we feel good about the data. We have a lot of support from KOLs and from advocacy groups. And our job is to push that filing forward as quickly as possible. Obviously, taking into account all the discussions we're having with regulators. And that, coupled with the cabinet data, we're really excited about having 2 potential new filings this year that could drive commercial growth in 2025 and beyond.

Will you have another OS interim analysis before submission? Or will you submit based on the data that is enhanced?

I would say that's really TBD right now. I wouldn't want to commit to that either way. Obviously, we're looking at a lot of data, understand the different nuances there. So we will make the best decision based upon how that data evolves and feedback from the regulators. So as I said before, the question really isn't if the question is when we file that.

Right. Okay. And then, yes, on CABINET, you mentioned the net opportunity. Just could you frame the size of that opportunity and perhaps relative to the somatostatin analogs that are out there for NETs?

Yes. So the opportunity -- I mean, it's a very -- in terms of its prevalence pool, it's a very, very large population. It's a relatively indolent disease. If you look, numbers vary in the U.S., I've seen numbers in terms of the prevalence pool as high as a couple of hundred thousand patients who are currently living with that disease in the U.S. in terms of patients that need drugs because their disease is actively progressing, even slowly progressing, but still progressing, and that's probably around 40,000 to 50,000 patients. If you look at the population that we studied in the CABINET with both pancreatic and extrapancreatic mets. It's probably drug-eligible population is probably around 8,000, to 9,000 patients. So it's a sizable population. These patients live a long time. Their therapeutic options are basically frontline somatostatin analogs that are not radioactive. That's kind of standard course, get those drugs first. Those are all agonists, which has turned basically turn on the receptor in a superagonist sense kind of slow things down that way, those are very effective. Many of those are generic now relative to the U.S. market. Then beyond that, you've got a variety of targeted therapies, chemotherapies and recently, some of the radioligand therapies that are coming. As you saw at ASCO GI, the NETTER-2 study was published with Lutathera, showing very effective PFS gains in the frontline setting on top of the SSTR compounds. So question really is what happens in the second later lines if that gets traction in the frontline setting, right? So if you look at Lutathera, I think a good benchmark. We're doing a lot of market research right now. If you look at Lutathera in the second-line setting in the U.S., that's doing about $400 million a year. So I think that's a pretty good surrogate for what the market looks like. Again, 4 doses only in that regimen. So you can imagine a cabo therapy could play in that space pretty well.

Yes. Okay. Great. Then switching over perhaps to zanzalintinib, your most advanced pipeline program at this point. where we've seen data recently from STELLAR-01. And yes, how did the clinical profile match up to your initial expectations relative to cabo?

Yes. What do you think, looks pretty good, right? Yes. So the -- I talked about this at the IKCS presentation that Monty Pal made. He joined us for our R&D Day in December and gave a similar presentation. Certainly, a very active molecule late-line population. We're seeing about a 40% response rate across a third line plus population. I think notably, we're seeing responses in cabo refractory patients, which is actually pretty interesting. So we are able to salvage a handful of patients that had seen cabo had progressed in the patients that were both IO experienced as well as TKI experience, we're seeing a very high response rate in the 50%, 60% range. So overall, I think it's very, very encouraging. The tolerability is a real, I think, encouraging part of the story as well. As we all know, TKIs in general that target VEGFR and that spectrum of RTKs can have longer-term chronic effects. And we've seen, as we play and modulated the half-life of the molecule. We are seeing some, I think, pretty encouraging signs of better tolerability, which I think Monty did a good job of really highlighting at both IKCS and then at our R&D Day. So we're full steam ahead there. We've got 3 pivotal trials ongoing in third-line CRC frontline, non-clear cell RCC -- and then we just started a first-line head and neck in combination with pembro based on some cabo pembro data that looks pretty encouraging. And it's -- we're off to the races. But certainly, very excited about what we're seeing in terms of the STELLAR early programs in terms of single-agent activity, combination activity with checkpoints, both doublets and triplets as well. And as that data matures, we'll be very excited to talk about that later this year or early next year, whatever, whenever that data has matured.

Right. Yes, it was my next question. Do you have a sense of when the first Phase III trials were read out? And which of the 3 studies is most advanced at this point. And we'll read out first?

Yes, hard to say. We're still enrolling. We should have the third-line CRC trial fully enrolled this year. We're just really wrapping up the non-liver met population, and we'll be doing that over the next several months. We have great traction with the non-clear cell RCC as well. That's really picked up steam as well. And that's -- I would say that's probably the highest probability of success trial relative to what we've seen to date with cabo and RCC and we're just starting to activate countries and sites and enrolling in 305.

Right. And then I asked about head and neck on our earnings call, but understanding that there's been some other attempts with other TKIs like the LEAP-10 study that did not succeed. And obviously, a very interesting data with cabo and checkpoints in head and neck. But do we know whether these TKIs have single agent activity in head and neck cancer as opposed to the combination?

Yes. I'm not sure we -- it's a good question. I don't want to misspeak here. I don't know what we've seen with cabo per se, from a competitive point of view, hard to say what's been seen with [ len ], et cetera. Certainly, the activity that we've seen in that IST 50-plus percent response rate, I think compares pretty well with what you see with single-agent pembro alone which is in the high teens. So obviously, we have some more work to do there. In this case, we're doing a very simple trial, zanza [indiscernible] versus pem. So contribution of components is pretty clear as that reads out relative to the primary analysis, right? I would say there's a lot of -- it's been really interesting to watch the attempted expansion around I would say, TKI checkpoint combinations across what we've done, what has been done with savolitinib, other TKIs in the space. I think what's really interesting to watch the Phase II to a Phase Ib, if you will, the Phase III progression is really the importance of tolerability in driving potentially a PFS benefit into a survival benefit, right? You can keep -- if you keep patients on long enough to delay their progression, but they have adverse events in that timeframe or afterwards, which then complicates the longer-term follow-up for survival you're often just comparing checkpoint to checkpoint, right? So it's a very, very important consideration for long-term chronic tolerability, which was the mindset in taking cabo and making some very important chemical modification is to really make the half-life more user-friendly, which then turned out at least based on early data to giving us potentially better tolerability. So we're really excited about what we're -- opportunities for colon cancer, for head and neck, obviously, renal is in our sweet spot and then a variety of other tumor types that we can pursue in combination with checkpoints and other therapies as we go forward.

Okay. Then maybe switching gears over to XB002, your ADC. Yes, can you just help us understand where you are at this point in sort of the clinical development trajectory and update us on perhaps some expectations for data updates?

So 002 is a tissue factor targeting ADC, a very interesting molecule. We talked about it a lot in the past, certainly very interesting target in terms of an address that is widely expressed in a variety of different tumor types and effectively masked in the normal tissue based upon kind of the role it plays in driving coagulation based on real tissue injury per se. So had the molecule for a couple of years now. We've defined some doses. And we're really in the signal searching phase now across our expansion cohorts looking at 11 different tumor expansion cohorts. This is where the action is at, right? This is where we define the activity of the molecule, the potential of the molecule, doing that in a heavily, heavily pretreated Phase I population kind of all-comers is really, really tough, especially in 2024 versus, say, 2014, where most patients are heavily, heavily pretreated with every molecule, every checkpoint imaginable. So getting into a -- asking the question in a scientifically more rigorous fashion in terms of discrete tumor types, in this case, 10 plus a tissue-agnostic 1 looking at tissue factor expression, coupled with what we think are the right tumor types with patients who are kind of fit into the early phase of their disease makes a lot of sense. So we're actively enrolling. We've got a global network of sites up, really pleased with performance relative to screening and enrollment and generating data. So the goal is to find a signal and talk about that when we have mature data. So hard to give you a definitive guidance on that. Again, we're not -- we're not a typical biotech that is looking to raise money next week. So we don't have the, I would say, the external pressure to put out pick a number, 10 patients' worth of data and then call the bankers. We're going to do this right. We're going to have a story to tell at the end of the day. I thought what we did with zanza with sellers the right way you have a mature data set, you have a story to tell. You talk about the potential based upon that data. And we'll do the same thing here. So I know there's lots of interest in the molecule. We have that as well. I see more data than you guys, and I'm excited about that. And when we have a full story with activity across cohorts will be very, very excited to share that with the community.

Right. cervical cancer is obviously clinically and commercially validated at this point for tissue factor ADCs. Which of the 10 other opportunities do you think are most exciting or most interesting perhaps based on the mechanism?

While they all have the potential to be very exciting. The question is, do we generate data that confirms that. So I mean, they're in the mix for a reason based upon all the obvious biological considerations that we look at very carefully in terms of target expression, sensitivity to the warhead that we've got, et cetera. But I mean that's all theoretical to a certain degree right -- proofs in the pudding, and we need to generate data to be able to then prioritize what would then be the highest priorities. Cervical is very interesting. You're right with TIVDAK there's a high degree of validation. We're looking to go well beyond that, both in monotherapy and combination opportunities. And that's the goal. So which is why we're looking broad and deep across those 10, and we've got other combinations coming up as well with 002, which are, I think, pretty exciting. So look at it as a full program. And as we get mature data, we'll be happy to talk about.

Sounds good. And then how do you plan on positioning your second tissue factor ADC relative to 002?

Again, that's -- it's a really interesting molecule that's XB371, same binder, if you will, in terms of the noncompetitive tissue factor binding antibodies to a different epitope than what is used by TIVDAK completely with a topotecan based warhead. So the whole idea here is that you've got a broader opportunity therapeutically, hypothetically because you've got the same binder, which is great if you believe in that target, and then you can tailor make your warhead to fit the sensitivity of the tumor type that you want to go after. And there's some overlap and there's some distinction between XB002. So that molecule is moving into GLP tox. Dana Aftab talked a lot about that at our R&D Day in December. We're really excited about moving that forward and having basically 2 shots on goal here relative to tumor types that are either outside of the sensitivity of a typical or a statin type molecule or where you might see either combinable activity or good sensitivities to both. So again, data will drive that process forward, but they have 2 shots here, I think, is a really important way to go.

Right. Then I know you have a range of other molecules that are following behind in clinical development, small molecules and other product candidates. But perhaps just a high-level question now in context of your balance sheet strength, obviously, and increased investment in R&D, but then you did do the restructuring as well. How do you balance at this point, internal investment into R&D and business development activities?

So yes, I mean, that's certainly something that we -- Chris, Andrew, I, others, I think executive team talk about literally on an hourly basis. We've been -- the opportunity to frame our success in December, right, at R&D Day and then talk about the business, the enterprise and how we're pulling different levers and kind of evolving the company based upon that success was a great. It was just a great kind of 1, 2 punch in terms of how we're moving forward in a very thoughtful, pragmatic sort of way. So bottom line from R&D Day, and for those of you that didn't get a chance to either join us or see it live as we have it online still. And if you have a couple of hours to spend, it's really, I think, a great introduction into how we do discovery and development in Exelixis and kind of full court present with the depth and scope of a big company, but with a small company mindset. We really have a very full IND pipeline right now, which is great. So we're able to move money down to later-stage development. We're certainly looking for external late-stage opportunities. Our BD has been focused primarily in the past few years on platform plays as well as early-stage molecules. So that's changed now. We've got a very full pipeline early stage and mid-stage. If we can find late-stage assets that makes sense that we have conviction in, then we can certainly transact because we have the balance sheet and the depth [indiscernible] both commercially and financially to do that.

Well, thanks, Mike. I think with that, we'll wrap up. And I really appreciate you being here. Thank you.

Good to see you again. Thanks.