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

Hello everyone and welcome to Oppenheimer's 34th Annual Healthcare Conference. I'm Jay Olson, one of the biotech analysts at Oppenheimer, and I want to thank you all for joining us here today. It's my pleasure to welcome Exelixis to our conference, and it's an honor to introduce Varant Shirvanian from IR and Andrew Peters, Head of Strategy. If you guys have any questions during this discussion, please feel free to submit them using the Q&A function. And with that, we'll get started. Thank you so much, Andrew and Varant, for joining us today.

Yes. Thank you. Thanks for the invitation.

It's our pleasure. So maybe for those in our audience who aren't fully up to speed with the Exelixis story, do you want to get us started with kind of maybe some updates on some of the key milestones from last year? And anything that you'd like to highlight?

Yes, happy to. And before I get started, just as a reminder, we may be making some forward-looking statements today. So please see any relevant disclosures in our SEC filings for risks to our business. Yes. So Jay, as a little bit of an overview to Exelixis, we're a commercial-stage biotech company focused primarily in GI/GU, thoracic, and oncology, kind of the solid tumor space with our lead product, CABOMETYX approved in several tumor types, but really kind of the main driver there being in renal cell carcinoma or kidney cancer. For cabo, we've issued financial guidance for net product sales this year of $1.65 billion to $1.75 billion. And we're really using that kind of financial success that we've had to, one, both kind of run the business in a very disciplined way as we showed earlier this year with kind of the announcement of our second set of share buybacks that will total $1 billion between last year and this year and then also investing in the future. I'm sure we'll get to it later on, but we have 2 -- or 3 now, clinical stage pipeline products in zanzalintinib, a next-generation VEGF-targeting TKI that really builds upon the success and kind of the uniqueness of cabo, but makes some improvements upon it as well. Then there's XB002, that's a tissue factor targeting ADC, again, kind of a next-generation version which we think builds upon kind of the predicate molecules that are out there. And then XL309, that's a USPI inhibitor that we announced is now in the clinic. That's again, a molecule we're really excited about, we think, is certainly best-in-class. From an overview perspective, I'd really kind of point to 2 additional things. We held an R&D Day in December, which I'm sure you're very familiar with. You were there. But for those in the audience who didn't listen, I certainly think it's worth an hour or 2 of your time to really understand everything from a science and strategy perspective, kind of what's involved in our early-stage portfolio, where we're going with zanza, where we're going with XB002. And then I think Mike did a particularly good job earlier this year at the JPMorgan conference to kind of set up kind of the business side of the company. So we have 2 kind of bookended presentations over the last several months kind of first with the science side. And then second, about how Exelixis runs the company like a business, which I think certainly separates us from a lot of our biotech peers.

Great. Thank you so much for that overview. And yes, those -- I totally agree with those are 2 excellent reference points with a lot of -- packed with a lot of information. So with that, maybe we'll jump into cabo. Congrats on a solid full year 2023 performance as cabo continues to be the top TKI in renal cell carcinoma. I guess the question is, when you're growing off at such a large base, how do you sustain that growth, especially given the several years you've had of very high growth? And how do we think about the market opportunity for cabo in the established indications in the next few years, especially with potential impact from IRA?

Yes. So that's actually something that we focused a lot about, especially kind of coming out of the JPMorgan conference, where it gave net product revenue guidance for the year. I think unsurprisingly, you mentioned kind of the 2 biggest dynamics there is growing off a larger base with the success of cabo. Obviously, the bigger the denominator, the more incremental revenue you need to grow. But secondly, if you look at most oncology launches, they tend to start to plateau around quarter 5, 6, 7 or so. And we're now 12 quarters in plus post 9ER, that's the Phase III data of cabo/placebo in first-line RCC. And so unsurprisingly, we're starting to see a little bit of the slowdown. The good news is when you look beyond kind of this year, we're excited about 2 new potential indications: One in the NET side, the neuroendocrine tumor opportunity as well as in CRPC. So cabo growth going forward as the RCC opportunity is starting to slow is really going to be driven by new indications. Most oncology products grow that way. Cabo is no different and really kind of the data sets that we've presented with NET at ESMO last year and then earlier this year at ASCO GU with the CONTACT-02 trial in CRPC, that's really what we're excited about kind of the cabo growth profile going forward.

Okay. Great. And thanks for mentioning NET and metastatic CRPC. Those are 2 areas that we wanted to dig in a little further, maybe starting with NET. We saw the super impressive data from CABINET at ESMO. Can you just talk about the next steps as you prepare for filing? And also, if you could just help contextualize the market opportunity for pNET and epNET, especially as Lutathera moves to earlier lines.

Yes. So I think this is one we're especially excited by, that's probably a little bit under the radar for many investors. NET is kind of a reasonably large indication in part driven by kind of a large prevalent population of patients who tend to have a reasonably kind of slow-growing disease, but fairly high burden. There are effective therapies out there. But unfortunately, patients do become resistant and refractory and so you see them, over time, kind of running through several options. And so the CABINET study was one that really showed kind of the substantial and very robust benefit of cabo in a patient population who really doesn't have many options beyond that. I'm glad you highlighted Lutathera, we think that's a drug that does around $400 million plus in the U.S. in kind of a somewhat later-line opportunity. And we think that's a reasonable approximation of kind of what the market could look like. Obviously, we're still doing a lot of work there from a market research perspective to kind of get a little bit more understanding of the nuances and specific dynamics of the NET market, but really shows that there's an opportunity there, and that's what kind of drives our excitement about the potential for additional cabo growth in the future. The NETTER-2 data that was presented earlier this year for Lutathera certainly looked quite interesting to us. We'll leave that to others to kind of better define that. But certainly, as Lutathera has the opportunity to move up in the lines of therapy, patients will be looking for effective therapies to kind of help their disease burden. And certainly, the CABINET data would be suggested that cabo could fill that role.

Okay. Great. That's super helpful. And then maybe moving on to metastatic CRPC. Congrats on the CONTACT-02 results. We know there was a lot of interest in that study at ASCO GU last month. So I guess, look, you guys ran a really difficult and successful study. So kudos to you for designing that study and executing it. Showed for the first time a positive clinical benefit with a checkpoint inhibitor combination in metastatic CRPC. So super exciting. And could you maybe just highlight some of the key points of the study and maybe share some of the feedback that you heard from ASCO GU?

Yes. So, certainly, we've been getting a lot of questions and feedback from the KOL community, from the patient advocacy groups, from the investment community about that study. And I really think it's -- one, our CMO, Amy Peterson, did a really good job on our last earnings call, framing a lot of the specifics. So won't want to repeat everything kind of that Amy went through, more in the interest of time than anything, but I think she went almost kind of point-by-point to really frame and reference a lot of the differences and nuances about CONTACT-02 that I think maybe got lost in a little bit of that conversation after the conference. So this -- I'm glad you highlighted kind of the uniqueness of the study. It's one -- it's a patient population that truly does have a real unmet need. 100% of patients enrolled in the study had visceral metastases at baseline or extrapelvic adenopathy. That's a kind of a much higher risk, more high unmet need group compared to a lot of other contemporaneous trials being run in this space. Certainly, there's a lot of debate and discussion around the appropriateness of second NHT as the comparator in the study. And again, Amy kind of framed that as well. But really, if you look at other contemporaneous trials, both prior to CONTACT-02 and those that are ongoing right now, really in practice, second NHT is the best option for patients because there really is a desire to kind of delay chemotherapy, just given all of the issues from a tolerability perspective that many of these patients can have. And so coming out of the study, it makes us even more excited about the data looking at both the ITT population, the overall population, but then we think there's really compelling data coming out of some of those important subgroups, such as those with visceral metastases, where you saw in a hazard ratio around 0.43 or so. And that's just really goes to show that the treatment effect here is substantial, a tripling of the medians in that population. A lot of people haven't really picked up on it, but again, kind of doing all of the problematic cross-trial comparisons and caveats related to that. But if you look at kind of that liver met population as a subgroup in PSMA4, for example, with Pluvicto, they had an HR of around 0.41, I believe. And so really kind of the 2 data sets are quite similar there. I think the big difference is we were looking at a distinct defined population really to understand and provide kind of the best perspective of does cabo plus an IO have a benefit here. Obviously, Exelexis has a history of development of cabozantinib in prostate cancer. And so the learnings from the COMET studies certainly played into kind of our decision to really focus on this defined group first and then understand what are the areas that we can go in prostate afterwards with something like a zanza, for example.

Okay. Great. And I'm glad you mentioned patients with visceral metastases at baseline. Do you know what percentage of these patients fall into that category? And then I guess, can you just talk about where atezo plus cabo can fit into the treatment landscape for metastatic CRPC?

Yes. So we haven't really framed out exactly what that population looks like other than I think P.J. at the R&D Day and then at our earnings calls, has really said that we think the opportunity is still quite substantial. If you look at the unmet need and the number of patients with CRPC, it's quite substantial and quite large. And so that's a lot of what's driving our excitement in our belief that CRPC plus NET is really going to be kind of the 2 key drivers of continued cabo growth going forward through the end of the decade. And so it's an opportunity that as we continue to do the work to understand what a potential label could look like, that will have a better understanding of kind of more specifics around what that is. So kind of stay tuned there. But needless to say, we think it's substantial.

Okay. And then I think you mentioned that you would have a final OS analysis later this year from CONTACT-02. Do you -- are you planning to wait for the final OS before filing? And have you had any pre-submission meetings with FDA?

Yes. So kind of, again, stay tuned there as we're kind of finalizing our regulatory plans, somewhat of a statement of the obvious that conversations with FDA are continuing and have occurred. What we said in the past is the agency wanted to see additional, more mature survival data prior to filing. And so as we continue those conversations, we'll get a bit more final with our plans for filing. So stay tuned there. But the survival data are continuing to mature. So we're looking forward to seeing those outcomes.

Okay. And then is there a scenario where you could file prior to having final OS if you were to target a subpopulation with visceral mets?

Yes. Again, I don't want to kind of get into the specifics ahead of time, but we're continuing to kind of dig into the data, have a lot of conversations about it to really understand what's the best path forward for us.

Okay. Got it. So I was actually planning to shift gears over to zanza but audience question coming in about COSMIC-313. And when do you expect the next OS analysis?

Yes. So again, that's an event-driven study on survival events. And so we've talked about the next -- or the final survival sometime this year, but don't really have any details beyond that.

Okay. Understood. So with that, we'll shift gears over to zanza. And I guess based on the pioneering success that you've had with CONTACT-02 and increasing excitement about IO combinations in metastatic CRPC. Interestingly, you've got metastatic CRPC patients in both STELLAR-001 and STELLAR-002. So I guess how are you thinking about the metastatic CRPC opportunity with zanza? And since you've got different combinations, how will you determine the best combination to move forward with?

Yes. So for those in the audience who aren't familiar with zanza, it's really a next-generation VEGF-targeting TKI that we're quite excited about. So the background on it is with cabo, one of the kind of the key liabilities as I say of cabo is its relatively long half-life, around a 4-day half-life, which can have pretty significant implications from a patient management perspective, especially when it comes to adverse events. So if you think about that long half-life, the accumulation in plasma and necessary washout period as patients do ultimately get adverse events and see adverse events can be on the order of 10 days to 2 weeks. And so what can happen during that time: one, drug is obviously off board; and two, kind of the inertia to get back on to cabo or CaboNivo, whatever, can be quite significant. And so what we wanted to do is really phenocopy the kinase inhibition profile of cabo, kind of that -- the very specific combination of VEGF plus the TAM kinases that we believe contribute to its unique and kind of best-in-class profile, but really mitigate a lot of the complications and related things around that longer half-life. And so what zanza has is kind of that same chemical scaffold for cabo and kinase inhibition profile, but we were able to engineer a unique metabolic liability that has changed the half-life from around 4 days to a little under 24 hours. And so we present a lot of data now for zanza which established that and really shows that we've been able to do exactly that, kind of recreate that efficacy profile for cabo, but really improve upon both the kind of combinability through the shorter half-life but a lot of the emerging data also shows that the tolerability profile seems to have been affected as well as one would expect. And so what we're doing with zanza beyond the 3 pivotal studies that we've announced so far is really continue to interrogate additional indications and opportunities that we can look at through the STELLAR-001 and STELLAR-002 and now the STELLAR-009 studies. And regarding prostate or any other indications going forward, what we really are is a data-driven company. So if you look at the 303, 304 and 305 studies, those leverage both prior cabo data to help inform areas of unmet need or areas that we think zanza could be effective, but also layering in a lot of those learnings from the STELLAR trials to help understand where we can go next. And so stay tuned there on what the data begin to emerge, say, out of those prostate cohorts. But that's probably a good way to think about zanza going forward in general, is we're using a lot of the experience in the 20-plus tumor types that cabo has shown real RECIST 1.1 activity and then layering in those learnings from the STELLAR trials to really see where we're going to go next there.

Okay. That's super helpful context. And then maybe just a follow-up on zanza. Since you already have 3 Phase III studies running. And I think you previously indicated that one of the priorities for zanza this year is to expand the clinical opportunity by working with -- in partnership with potential collaborators, can you just talk about the cadence of initiating additional Phase III studies this year for zanza? And how would you describe the strategy behind this first wave of Phase III programs versus the next wave?

Yes. So kind of to tackle the latter question, 303, 304, 305 really we've framed as kind of the first low-hanging fruit, so to speak, and ones that we felt that we could execute with a reasonably high probability of success in tumor types and areas that we know well. First 303, obviously, a clear unmet need in late-line colorectal cancer. The comparator in the study, regorafenib is unfortunately not a great option for patients and building upon what we think are really exciting data for cabo in that data set as well as learnings from other kind of VEGF-targeting TKIs like the LEAP-017 study with lenvatinib, we're really able to kind of hone in on and understand what's the unmet need, what's the study that we could potentially run truly to be successful and kind of shift to standard of care for patients. And so that was the first one that we initiated. 304, again, that's the second study, builds upon the success that we've had in RCC and really some compelling data sets from cabo, both this monotherapy and in combination in non-clear cell patients. This is, again, a patient population that while there are therapies that are used, really, there hasn't been a data set that has pivotal study that has been done to kind of definitively say this is a better option than one or the other. And so it's an opportunity for us to really kind of define the standard of care there and really kind of cement zanza as kind of the standard there. And then the third one, 305, again, builds upon some pretty compelling data of cabo plus pembro in a head and neck population that we think, again, is still quite underserved. If you look at the pembro monotherapy data, the response rate is sub-20%. And if you compare that to kind of the pembro plus cabo data that we reported at ASCO a couple of years ago, certainly much better. And so those 3 studies build upon a lot of the success from cabo. And then, again, as I said, kind of the emerging learnings from STELLAR. Going forward and kind of our desire or decision strategically to move to clinical collaborators really comes back to some of the learnings we have from cabo. So if you think about, say, the 9ER study or even the CONTACTs, where through our clinical collaborators, say in the case of Bristol, and then with Ipsen and Takeda, we were able to kind of fund those studies for, frankly, pennies on the dollar, and it really provides a good return opportunity for us to be disciplined with our expenses, kind of share some of that clinical risk, but also share a lot of that upside as we're able to help kind of define and shift standards of care for what those combinations could be. So that's big picture, how we're thinking about it. Obviously, we're talking to all of the major players in the IO space. We know cabo and zanza play well there. And so the idea is a more user-friendly and more combinable VEGF TKI, third-gen TKI that builds upon the success of cabo. That's what drives our enthusiasm. And frankly, that's what drives a lot of the enthusiasm from our potential partners coming out of the IKCS meeting where we presented that zanza monotherapy data in RCC, can certainly say that there was a lot of interest and enthusiasm from the IO players there, recognizing that having that kind of best-in-class -- potential best-in-class TKI that combines well really opens the door to a lot of combined -- combination possibilities. And so it's really about understanding what are the unmet needs, what are the areas that we're able to shift the standard of care for patients and really drive that next wave of trial, so to speak, for zanza.

Okay. Great. And maybe just one quick zanza follow-up question. Is Exelixis planning to retain worldwide commercial rights to zanza?

Yes. So that's kind of the base case for now. Obviously, a lot of what we do, and frankly, what we talked about on the scientific side at the R&D day is kind of everything through the cabo lens. Base case is obviously keeping global rights, but we continue to evaluate opportunities as they come up. So if there's something from a strategic or tactical perspective that we're faced with, with zanza, we're obviously always having those conversations internally. We're obviously talking to a lot of partners on combinations. And so how that evolves over time, TBD, but as of now, kind of our base case is to kind of retain global rights because we do understand and believe that zanza is differentiated and has real value there.

Okay. Great. Super helpful. And then so maybe shifting gears over to XB002, especially since we spoke to Zymeworks earlier today, and we're all super excited about that program. Can you just talk about different combination strategies with XB002? And how are you seeing combination versus monotherapy opportunities?

Yes. So I think that's a really interesting question and kind of underlying that is what we think is really what's so special about XB002 is that it's differentiated from a lot of the predicate molecules that can help define and drive indications of interest, but are likely limited by some of the molecule-specific issues, say, with TIVDAK. So if you think about ADC, it has really kind of 3 components: The binder, the antibody, the linker and the warhead. We think XB002 is differentiated across all 3 components. Obviously, with tissue factor and its role in the coagulation cascade, the fact that our antibody is not competitive with Factor VII, whereas TIVDAK is, we really think differentiates and has the potential for differentiation on something like bleeding risk. And then on the linker/warhead side, a lot of the hallmarks of kind of earlier-gen ADCs where stability, free warhead can be an issue that can drive things like neuropathy, cytopenias, et cetera. What we've shown with our data that we've reported is at equivalent doses, we've reached about twice the exposure at about 1/10 the amount of free drug. So we think that's a really good starting point from, one, an ADC perspective as a monotherapy; but two, in potential combination when you start to have to think about overlapping toxicities and things like that. And so one of the things I think that's interesting and you may have picked up on is we're certainly interested in looking at internal combinations. Obviously, tissue factor expression is across a wide range of tumor types, something like zanza also expressed or has activity across a wide range of tumor types. And those are the sorts of things that I think we're going to be increasingly interested in going forward, especially when we start to layer in a lot of the earlier programs that Dana talked about at the R&D Day. So those sorts of combinations with XB002 and the rest of our portfolio would be areas of interest going forward.

Okay. Great. We're just running up to the end of our time. Maybe one last really quick question on XL309 since you mentioned it in the introduction, can you just talk about what you're doing there with PARP inhibitor refractory patients? And what are the timing and milestones that we should expect this year?

Yes. So we're just getting that program up and running kind of as the IND is cleared and patients are starting to enroll. It's really another program that we're excited by that, I think, again, fits through kind of this cabo lens in that it's not the first USP1, but we think it truly has the potential to be best-in-class. And so as you think about the biology of USP1 and the potential, especially in combination with the PARPs, it has the ability to kind of broaden the activity beyond, say, just the BRCA population. But even in the BRCAs, the ability to deeper responses, lengthen duration, those are the sorts of things that really benefit patients, but really kind of drive a lot of opportunities. If you think about the PARPs as a globally $3.5 billion category or so, as we're able to kind of potentially with that combination, deeper responses, longer duration. Those are the sorts of things that make us excited about that as we think a lot of the properties from some of the other USP1s may get best-in-class.

Excellent. Thank you so much. That brings us to the end of our time. So we'll wrap things up there. Really appreciate your bringing us up to speed on all the impressive progress you're making at Exelexis across so many innovative programs. So thank you, Andrew, and thank you, Varant. I really want to thank you for your time here today and appreciate it.

Thanks, Jay.

Bye-bye.