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

All right. Well, welcome to the 45th Annual TD Cowen Healthcare Conference. I'm Yaron Werber from the biotech team. And it's a great pleasure to have with us Mike Morrissey, President and CEO. Mike, good to see you.

Yaron, always a pleasure. Good to see you.

Yes, My pleasure. So lots to talk about between cabo, obviously, a lot going on between prostate resistant -- metastatic castrate-resistant prostate cancer and neuroendocrine tumors and then obviously, the MSN 2-case and then obviously a lot of pipeline. So let's maybe start by the guidance for the year contemplated 1% to 7% growth. And there's obviously a little bit of a price increase, but then this is going to be a next leg of growth with prostate cancer and neuroendocrine tumors. Give us a sense, your latest thinking when you can file those, both of those new indications...

Okay. A lot there. Well, first of all, good morning, and thanks again for having us back. It's always fun to get to Boston. Talk to you guys. I'll be making forward-looking statements today. So just as a reminder, so please see our SEC filings for a description of the risks that we face in our business. So yes, cabo, it's kind of a plateau year for us in terms of revenue. Obviously, we're excited and proud to be able to post the kind of numbers we had in 2023. It's -- cabo is the #1 TKI in RCC for both monotherapy second line and as the TKI combination partner in first line, we think we have room to run with new indications. So we had a strong year last year with top line data for both metastatic CRPC from CONTACT-02 as well as CABINET from the Alliance in a mixed population of both pancreatic NET as well as extra-pancreatic or epNET. So the way we framed '24, we're 3 years after the launch of cabo/nivo and 9ER, which more than doubled revenues. Super pleased to see that growth over 12 consecutive quarters. So it's not surprising, we're going to flatten out. The IRA did us no favors in terms of price increases. So we were kind of had to stick to the rules there and subsequently, the 2024 price increase was only 2.2% based upon the inflation caps that are built into that law. So we're looking to, again, see accelerating growth in '25 and beyond based upon the success of the CRPC trial as well as CABINET in the NET population. NET will probably get filed first. A little bit simpler approach there from a filing point of view, excited about that data, really great feedback at ASCO-GI -- or I'm sorry, at ESMO, where the data was first presented and then a variety of ad boards this year, including at ASCO-GI. Clear unmet medical need for patients with NET, lots of moving pieces with Lutathera, the NETTER-2 data came out of GI. That will most likely move up into the frontline setting leaving second and later lines pretty open. Available therapies include chemo, include everolimus, includes -- depending upon the location of those tumors and the origin of those tumors. We're getting lots of good feedback. Again, the GI docs that use those drugs also know cabo well from either liver and/or thyroid or the community docs with renal. So we feel we're getting great feedback that cabo could really be a mover here. So big expectations in the NET space. Our #1 priority this year is to get both NET and prostate filed and moving forward towards approval and a great development team. Amy Peterson joined at the end of last year and certainly has tremendous energy and experience here that we're capitalizing on. So lots to do, but lots of momentum and lots of excitement. Obviously, getting the ANDA resolved with certainty is of primary importance. All the briefs are done now and in. So it's in the hands of the court. Again, I have a lot of confidence here in what we've shown, the evidence, the data that supports that the team did just a phenomenal job. So looking forward to getting that all done.

Yes. So let's go maybe just on the end, let's just get that out of the way. So the breach were filed, I think it was late mid-February. So it didn't seem like there was anything as expected, terribly new in the [ breach, the final breach ]. And any sense from the judge as to when he's planning on ruling?

So he's -- he at the closing arguments when those were all done at the trial in the fall said he hoped to have a ruling out in the springtime so whatever you want to define that California spring, Boston spring, but...

How does one define spring in your view?

Spring is strong. Usually that's second quarter.

July timeframe, right?

Yes, yes, July is not spring. Not in my book, yes.

Do we know when he's going on vacation, maybe you can work backwards.

Yes. I haven't checked his vacation schedule.

We can call his admin and figure it out. Okay. Neuroendocrine tumors, you'll fall for second line. This is -- as you said, it's cooperative. It's a group study, which you've had experience with group studies and using them filing purposes, obviously. Do you have all the data? Or do you need to clean some of the data yourself?

So the data cleaning is done by the cooperative group. We provide oversight there since the filing is ours, and we have to make sure that the -- I would say the data integrity and quality meets our standards for filing. We're obviously doing that great collaboration. The Alliance team also did CABOSUN. So different PIs, different, if you will, kind of indication GI versus GU, et cetera, but they just do a phenomenal job. So -- and in this case, based upon the experience with CABOSUN, we actually 4 cooperative group pivotal trials that we're involved with. We based upon that CABOSUN experience, we had a few more bells and whistles built in. So they were already doing an internal blinded independent review. They were collecting scans. They were doing all those kinds of important enhancements to the trial to give us that kind of that momentum to be able to file and submit if the data was good. So again, I don't want to get into the details, except to say that we're very pleased with how that collaboration has gone since the top line data was released back before ESMO. The data looks -- at ESMO looks solid. The KOL feedback and market research continues to look very promising, and we're doing a number of ad boards with that data. And again, we're getting very strong support there. So we're feeling good about that. And this is an area that with cabo with zanza, we think we can double down on and really mix something of it because it's got that -- it's kind of not exactly like renal in a lot of ways, but it has that same kind of intuitive feel at least to me from the standpoint that it's a pretty good sized incident population. The prevalence population is 40,000 or so patients. These patients live for a long time, so they need durable effective therapies. Some of the radionucleotide Lutathera, for example, there's -- it's used and certainly has done very well. In the U.S., I think it's 2023 numbers were probably in the $400 million-plus range in the second line therapy. So it's an effective therapy. But it comes at a cost, right, in terms of -- I mean patients when they take that are essentially radioactive. They have to change how they live, how they -- what they -- some patients impacts where they work, impacts how they operate at home. So it's not a trivial impact on their lives. It's effective, which is great, but it comes at a cost, right? There's downstream concern about other secondary [indiscernible] MDS, AML, that can pop up. So having other options for these patients is super important. And the encouragement we've gotten at ad boards from KOLs from patient advocacy groups has just been fantastic.

And can you just remind us the data from CABINET? What was the PFS or duration of therapy? And then how many patients do you think are there in second line?

So the incident for second line is about 8,000, right? The prevalence pool is really interesting, too. Patients, again, can live a long time with slow-growing tumors. So how much of the prevalence pool can you pull into that number and address it's TBD. But certainly on our market research and analytics, we're looking at that very carefully to get a sense on just how big that could be. It's obviously label dependent, blah, blah, blah. Sorry, other question you asked?

Duration of therapy.

Duration of therapy. Between regular NET, pNet and epNET, it goes between 8 and 11 months, right, in terms of PFS benefit. So that's a significant -- it kind of feels like kind of like renal, kind of like thyroid, right? So that's -- we know how that works. And we know how effective dose reductions can be to keep patients on drug for a long time. And that's important here. The success of 9ER starting at 40 can't be underscored that really change the equation in terms of not only the clinical benefit, PFS response rate, overall survival, but quality of life had a huge impact as well, especially compared to either lenvatinib or axitinib. So we know how to nuance that. And I think physicians are becoming much more comfortable about using the lower doses with confidence going forward.

Do you need to expand the sales force? or can you handle it down the road?

Well, it's -- it would be an incremental build for both prostate and/or NET. We're talking about maybe a handful of additional reps. And we have the ability, right, to be able to mix and match as we need to, too, because a lot of our reps are calling on community physicians, right? So an [ MBA ] would be very, very well-tuned. I will say right now, based upon kind of early looks at prescribing patterns, we're already covering about 2/3 of the NET prescribers with our GI sales force. So it's, again, incremental build really, if we're successful here, best case is that this is a huge impact on top line growth without much additional expenses from a commercial marketing point of view, which is great. So we can then use that extra cash if it's there to invest wisely give more back to shareholders to continue to build the business as we go forward.

Let's now move to CONTACT-02 CRPC. The PFS looked good. I think we will answer the question about safety. The overall safety was interesting. We'll talk about some of the trial design. But I guess the question is, when do you expect survival? And do you need to have survival at least the latest cut of survival to file?

Yes. Yes. So we expect to have the final survival output this year. Not going to give too much clarity or specifics around that. Obviously, it's all event-based, when we get it, we get it. PFS with no decrement and survival is an approvable endpoint. There's plenty of precedence for that in prostate cancer outside of prostate cancer. So -- but the actual details around how much -- or how mature survival needs to be, it's something that we're working out with the agency right now. So I guess I don't I want to speculate on that. I don't want to break into jail and say more than I should. But it's a discussion and there's 2 different work streams. One is a dialogue with the regulators on a global basis and the other is really around getting the events we need. But again, as you said, right, so we went on PFS. Hazard ratio was 0.65 in the PFS ITT population. Overall survival had a hazard ratio of 0.79, with -- I think an information fraction of 49%. So relatively early. So yes -- so we're excited. We certainly -- others in this space are starting kind of with their backs against the wall with hazard ratios for OS greater than 1, which is a place you don't want to be, obviously. So we're feeling pretty good about what we've got so far. The subgroup analysis that we had at ASCO GU, I thought was pretty impressive around the liver met population, the hazard ratio in the 0.4 range, which was exactly analogous to what [indiscernible] saw in the MSA 4. Again, similar population, different overall modalities but similar efficacy in that. We had 25% of our patients had liver mets, they had like 5%. So a very different overall kind of distribution, but similar activity. Prior chemotherapy, cabo/atezo did really well as well compared to the second NHT and then the overall population looking at patients with both visceral mets and bone mets did really well, too. So we're excited about that overall profile, 50% improvement in PFS for what was probably the most stringent population studied in the second line. First second-line setting with all miserable disease, lots of liver met patients, lots of prior chemotherapy. I think our level of lymph node metastasis was in the 75% range, which is just unheard of. So very, very poor prognosis population. And I was surprised that it didn't get a lot of play in [ ASCO ]. There was so much noise around the second NHT as a comparator, which I just didn't get because everybody does that. It kind of missed the mark in terms of just the population that we studied was so far advanced and have such bad disease and we did so well. So we're hoping all that momentum goes forward and certainly excited about being in that space, and I have ideas for zanza there, obviously, based upon the success of cabo and lots to do for sure.

So let me ask your question because at the end, you're totally correct about everything you said, obviously. And the KOL feedback, they're in love with radiopharmaceuticals, and they're not in love with the second NHT as a control but you have a positive study and a tough population, but the community is sort of not as enamored as they need to be. How do you change that?

Well, that was the case with cabo and RCC after METEOR came out as well. It's kind of like another PFS win survival, you almost hit. Yes, so what? And obviously, through the data evolving to have survival and then having really great focus in terms of educating docs on the benefits on the differences on essentially how cabo in RCC, second line RCC has the first kind of first salvo change standard of care for patients with RCC. And that's been our goal across the board. Everything we do is focused on that. Just getting over the goal line isn't good enough. If you're going to be successful commercially, and that's the ultimate kind of lens from which we've learned through cabo, you have to change. You have to improve standard of care if you expect to move the needle for patients. And if you do that effectively, then you will be successful in terms of driving revenue growth and driving the business. So I think we can do the same thing with CRPC with cabo/atezo. The -- when I think about the second NHT debate, there are 11, 11, either existing or already completed Phase III pivotal trials in CRPC that have used a second NHT as the control arm, right? And those include the PARPs. Those include hemo. Those include the radiotherapies. And those even include the latest and greatest kind of third gen NHT say that Merck is doing to their collaboration with Orion, right? Those all involve using those trials enrolling thousands of patients, maybe even more, have a second NHT. So splash, for example, the discussion, right? He was a PI for splash, what did splash used as their control arm? A second NHT. So it was a bit disingenuous and it was a bit academic, and that's fine. That's what these things are for. End of the day, if we get a label, I think we're very confident based upon the cabo experience and certainly in RCC. We can compete, and we've competed and we've done more -- I mean we've been able to move to a position where we're one of the dominant players in this space. So we can do it again.

So where do you ultimately see cabo/doce getting used? You failed an NHT and this is pre [indiscernible] pre second NHT?

Well, with an incident population in the first and second line of metastatic CRPC of 70,000-plus patients annually. We can carve that up. It will be defined by our label to a certain degree, and it will be defined by others labels if and when they get them and then how we market that. But what's clear, at least in the U.S., and this is done -- this has been done has been published for the last few years now is that if you look retrospectively at real-world data, right, patients, 5,000-plus patients, right? Patients choose to right now use a second NHT over chemo on the order of 5:1 to 6:1, if you look at the actual data. Plus, if you look at that real-world data, it appears and there's lots of caveats here, but it's just data that overall survival for a second NHT is actually better than docetaxel. So in some ways, patients are the ultimate. They get to vote with what they choose to take. It's not the doctor's choices, it's the patient's choice. And if we have a better approach, not a second NHT because everybody wants to avoid using chemo until they absolutely have to, then we think that can really move the needle.

Questions from the audience? Before we go into the rest of the pipeline. Let's talk about STELLAR-305, the Phase II/III, this is specifically in head and neck. Zanza and KEYTRUDA versus KEYTRUDA alone. When you look at the -- this is first line, obviously, when you look at the prior cabo KEYTRUDA study, it's an IST, 52% response rate, about 15 months PFS, right, 22-month survival. So you compare that to LEAP-10, that looks pretty good. That was the Merck LENVIMA KEYTRUDA...

Yes, just came out last week, yes. Yes.

Which are 36% response rate, 8 months PFS, that was discontinued. When you think about the bar for you, what's the bar here?

Bars to win, right? No doubt. And that's a statistical game that we have to win. Again, the study, at least as I understand it, LEAP-010 was stopped because survival was trending the wrong way. I think the response rate cut was just to correct, at least my perception it was 46% for len/pem versus about 25% for pem. The interesting thing there is the duration of response was the other way around, right? So it was about 10 months for len/pem -- the median was 10 months for len/pem, not reached for pem. If you look at the 12-month split, it was actually about 60-40 favoring pem. So those curves really separate dramatically. And you have 50% more patients who have a duration of 12 months or more with pem than you do with len/pem. So I think this is actually presenting as a pretty typical phenotype of what you see with len/pem in pivotal trials, especially when you start at the full dose of lenvatinib. And I think that's somewhat pheno-copied with head and neck with melanoma with second-line lung and a few others, where the toxicity of lenvatinib gets in the way of using that [indiscernible] and dosing that combination chronically. And at least from all the feedback I'm reading from our MSLs and everybody else who's been just on the prowl, they look trying to understand what's going on there kind of from the KOL community. I think that general sense is that a more tolerable TKI, like cabo, like zanza, has the opportunity to have that extended duration of therapy for the combination, which then can bring benefit beyond just response rates and PFS. So in some ways, LEAP-010 actually validates. You can have an impact on the disease in terms of response rates were double PFS doubled. It went from 2.8 to like 7 months at the second interim. That benefit, if you will, "benefit" couldn't translate to improved survival because of the toxicity of that combination namely around lenvatinib. So that's been the goal. That was the goal with cabo and 9ER and RCC was to drop the dose, play that game, take a little bit off the activity but have it be a more chronically tolerable therapy, which it is, and certainly, the quality of life data supports that. And we think lenvatinib potentially is even better from the standpoint of some of the early data we've got out there right now within RCC. So I would say confidence is as high as it can be based upon where we're at. It's a Phase II/III design. So we'll get an early look at the first couple of hundred patients and understand how it's going. If we have to resize or reevaluate after that, that's the goal. But this is a -- it's an important population. Andrew Peters, our Head of Strategy, just likes to frame it as -- head and neck today is kind of where kidney cancer was a decade ago. He says it better than I do. But that's kind of the analogy. So we think with effective therapies and maybe 2 players here, others building a franchise in head and neck could be really interesting, right?

Okay. Yes, interesting. Let's go to non-clear cell RCC and before we talk about STELLAR-304, with zanza, do you have any sense how much cabo's being used right now?

Yes, hard to say. Yes. Our market research is, I would say, minimal there. And certainly, from a script point of view, they don't discriminate between clear cell and non-clear cell.

But is it considered standard or not necessarily?

Well, it is still there's about 20% of the overall RCC population is non-clear cell. We and others have a label for all advanced RCC both clear cell, which includes both clear cell and non-clear cell. So it's not discriminated, but there have been no pivotal trials looking at a non-clear cell population by itself. So again, if we're successful, we can educate and market on that really anomaly that could be a real, I think, beneficial way to go.

So can you talk about the STELLAR-304 zanza study and maybe the design, I believe data is going to be in 2025 or so.

Yes, we haven't given guidance on data. It's a pretty straightforward study. It's zanza/nivo versus SUTENT in frontline non-clear cell RCC very similar design, if you will, to what we had for 9ER for the overall population. So I would probably be willing to see the probability of success is pretty high here. Sensitive tumor type, the [ ITCS ] data we have with zanza at the end of last year, pretty compelling in terms of response rates, pre and post cabo, that continues to look really encouraging from the standpoint of a late-line population. So yes. So it's -- we're off to the races there, for sure.

And the primary is PFS or it's a combined PFS in the secondary survival.

PFS. Yes, yes, exactly.

So it's not a co-primary.

No.

Okay. Let's move to the ADCs, maybe next, you have 2 different tissue factor ADCs. As you said, 002 the JEWEL-101 study is ongoing and now you have an IND next year with 371. The first one is a microtubule and the second one is to [indiscernible] inhibitor. Can you talk about what's the reason to have 371 in the different -- slightly different mechanism?

Simply trying to be able to -- simply focusing on matching traditional tumor sensitivity to chemotherapy with the payload from the ADC, right? One payload is not going to service every tumor type equally or potentially effectively. Just getting it there might not be enough if that tumor, the way that tumor is built and it's redundant in terms of pathway activation and resistance mechanisms may make one over the other less effective. So we like the idea of having 2 different approaches going in the venn diagram view going after different tumor types or going after similar tumor types that could allow us to be even more effective. So it's purely an empirical game, if you will, based upon prior precedents for really tumor sensitivities to chemotherapy. And we're surprised it's kind of a no-brainer to us. We're surprised more people don't do this because it's a good way to recycle, if you will, a known effective binder with the right chemotherapy for the right tumor type, maybe in the right combination at the right time, it's just making that targeted therapy that much more specific.

So it's the same binder and it's the same underlying affinity antibody.

Same antibody. Exactly. Same binders, same epitope, everything. It's just a different linker warhead right, which -- and now today, that's so -- they're still readily available. It didn't involve us inventing anything on just really kind of making the construction work and then getting it into docs, right? So the data looks. Dana had some just phenomenal data back in December.

As you think about your pipeline, you've really filled it out both into Phase I, 4 different compounds and pre-IND of another 5. Do you have more room to bring in more pipeline?

So again, part of the refocusing at the end of last year, earlier this year was really an acknowledgment and kind of a statement of the obvious that we don't need more development candidates, pre-INDs and INDs. The pipeline is actually really, really full there with a lot of exciting molecules. So our focus is really late stage now, right? And we've been looking at late stage over the last few years, haven't found anything that we're -- we have a lot of conviction in, but that continues, right? If we can bring in a molecule that has the appropriate level of data supporting a pivotal trial or in a pivotal trial, that would be very, very attractive to us, and we would push a transaction because for us, it's really -- the vision is multiple products across the continuum of solid tumors in GU, GI, thoracic, if you will, head and neck and lung. And then women's tumors, breast, gynecologic. But that's the sweet spot for us. And if we're effective there then -- if there's a late-stage molecule that can fit in then it's very attractive to us for sure.

With the downturn, and I think hopefully, we're beginning to emerge from, especially in oncology, there's been -- there are several mutational best programs that are now moving into pivotal. I think these companies have all become victims of well, these are not going to be mega blockbusters, they're going to be smaller drugs and can you survive as a stand-alone. But a lot of them have some proof-of-concept data that's fairly reasonable. They're not going to be $500 million, $750 million programs. Are you open to bringing in things that could do $200 million to 300 million? Or do you want to do things that are bigger?

Well, if it's $200 million to $300 million , if we can get convicted on that, sure. If it's $25 million to $50 million, probably not. And that's -- see that's the issue. The confidence intervals are so big at this stage, and that's the learning from the last decade of going after these hyper targeted therapies is that it's often $80 million or $100 million it's not $300 million, it's less. So you've got to have the conviction that it's going to be big enough to be able to move the needle, right?

Well, Mike, terrific. Thanks for joining us. Always good to see you. We appreciate it.

Yes, you bet, man. Good job. Thank you.

Thank you.