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

Thank you, everybody, to the 2024 RBC Global Healthcare Conference. My name is Greg Renza, I'm the Biotechnology Equity Research Analyst here at RBC. We're pleased to have Exelixis with us right now. Joining us from the company is Andrew Peters, Senior Vice President of Strategy. Andrew, it's good to see you.

Yes. Good to see you. Thanks for having us.

Great. We look forward to the discussion a great deal going on with Exelixis and maybe we can just pitch it over to you to provide a brief update or introduction to the company to cabo and to the pipeline.

Yes. And thanks again for the invitation to attend. And before I get started, I just want to mention that we'd be making some forward-looking statements today, so please see relevant disclosures around risks in our business in our SEC filings. So Exelixis commercial stage biotech company focused in the solid tumor kind of GI, GU oncology space with lead products, CABOMETYX approved not only in kidney cancer, RCC, but HCC liver cancer as well as a couple of other thyroid cancers as well. . Mentioned before, cabo is approved. We've given 2024 product revenue guidance of $1.65 billion to $1.75 billion and that really reflects kind of the strength of cabo as the #1 TKI/I-O combination in frontline RCC, it's really driven kind of the bulk of that utilization. As we look ahead for cabo, on the back of 2 positive pivotal studies last year in NHT or post-NHT castrate-resistant prostate cancer as well as neuroendocrine tumors, we're planning to file for approval for those indications and look forward to launching those as well. And so the company really focused on execution from a prioritization perspective for cabo there. And then beyond that, we have a really exciting pipeline. And the way that I really think about and frame Exelixis big picture is cabo's the gas that fuels the Exelixis engine. And the Exelixis engine, we kind of framed at a really high level and actually in a lot of depth at our R&D Day in December. First one that we've had in quite some time, and it gave us a chance to focus on the areas of science and strategy that we're interested in, indications, modalities, small molecule in biotherapeutics across both mono and bispecific antibodies as well as ADCs. And then on the small molecule side, really focused on synthetic lethality for our earlier-stage pipeline. Our lead product candidate is zanzalintinib, which is a third-gen VEGFR targeting TKI that really builds upon kind of the cabo legacy. So if you think about cabo as a second-gen improvement, a lot of the earlier gen VEGFR targeting TKIs. What zanza does is similarly build upon cabo. And whereas kind of the core liabilities of some of the first-gen TKIs really, we're focused more around some of the improvements in efficacy and potency and hitting some of the other kinases like [indiscernible] and the TAM kinases that we know are important in kidney cancer especially. Zanza takes kind of that same kinase inhibition profile of cabo and then improves upon the half life. One of the main limitations of cabo is a reasonably long 4-day half-life, which can have practical implications from a patient management perspective as well as tolerability adverse event profile perspective. And so we were able to engineer a metabolic liability into the cabo scaffold and take that 4-day half-life and turn it into a little under 24 hours. And so that's a program we're particularly excited about, have initiated 3 pivotal stage trials there. STELLAR-303, third-line-plus colorectal cancer, 304 in non-clear cell RCC and 305 in front-line head and neck in combination with pembrolizumab, all of those really build upon a lot of the encouraging data that we've generated so far with cabo to help kind of inform and shape where can a cabo or cabo-like molecule be successful as part of an IO-based combination. Beyond zanzolitinib, we have XB002, that's our next-gen tissue factor targeting ADC. Again, everything that we do at Exelixis is kind of shaped through that cabo lens of how can we differentiate, how can we optimize? And XB002 is really predicated on the success that TIVDAK has had in cervical cancer that's from Seagen, Pfizer and Genmab, but really asked the question if you were to optimize on the antibody side, on the linker side and the warhead side, what's the profile that we can generate. And then lastly, XL309, it's our USPI recently went into the clinic. That's another one that we're excited about. And then beyond that, again, as I mentioned, we outlined the R&D Day in December, really focused on a whole host of really exciting pipeline programs that, again, we're using kind of the cabo gas to invest in the Exelixis engine.

That's great, really comprehensive intro and it certainly attest to that there's a lot going on at Exelixis and a lot for investors to focus on. And maybe just to get it out of the way, I think one of the more near-term focus is for investors is certainly, call it, the patent risk with respect to cabo. We know we have the MSN2 trial on going or an outcome potentially moving. So just to give you the floor to kind of get that question out of the way. What is the latest development there and how you're communicating what you know as far as time for a decision?

Yes. So on the last earnings call, we reiterated our expectation for a decision from the judge first half of this year. I think from our perspective, we're on the glide path towards resolution. All the briefs are filed, all the back and forth has been completed and just kind of waiting for that decision. I think the best way that I think about it or frame it is we have confidence in our position, but we don't have clarity, and that clarity on the outcome is really what we're waiting for.

Great. So let's talk commercial and cabo performance. You mentioned the guide range and just walk us through, Andrew, just some of the assumptions regarding the performance for the year, some of the pushes and pulls there.

Yes. So as we outlined at the beginning of the year when we gave 2024 guidance, probably the biggest dynamic to think about is this year is more of a kind of a pause from a demand growth perspective ahead of 2 new potential product launches in [ net and prostate, ] drilling into that a little bit more. If you think about most oncology launches, I think, on average, it's between 5 and 7 quarters post approval for an indication as when you start to see a maturation of that market share dynamic, duration dynamic, et cetera, and we're now 12-plus quarters post 9ER, the frontline cabo/nivo approval. So not really a surprise that we're seeing a maturation of that market. So our 2024 guidance reflects that dynamic. But instead, we're really excited about the opportunities in Nets and prostate, in particular, as P.J. talked about on the last earnings call, those are both indications where I think there's a pretty significant unmet need, certainly in nets kind of the existing oral TKIs has been approved new therapy since 2016. And really, as we kind of do more and more market research kind of KOL checks, really kind of getting into what that opportunity set is, frankly, the more we're excited about it. And then similarly, in prostate, CONTACT-02, that was the pivotal Phase III study that we ran there. Again, represents an unmet need that's differentiated among kind of other contemporary studies in late-line prostate and in a sense that, that was a study solely focused on patients with baseline visceral metastases, which is really kind of the highest risk, highest unmet need cohort. And again, kind of positive study there, had PFS and had that data presented at the ASCO GU conference earlier this year and really received a lot of positive feedback and reaction from that data, in particular, from the patient community who I think represents kind of an often underserved voice in our industry and really reflects the fact that these patients really don't have them many options. And as P.J. has talked about pretty frequently, cabo/atezo really has the chance to be the first IO containing regimen in prostate cancer and has the potential to really add another treatment option for patients and physicians in their quiver.

Great. And on neuroendocrine, just remind us and touch a bit on the CABINET trial. How is that foundation for your confidence, how is that suggesting the competitive potential about second-line plus net?

Yes. I think, in particular, that cabinet data set have been very well received, again, from the clinical and patient community alike. As I mentioned, there are other oral TKIs available as well as radiotherapy in the form of Lutathera. But it's a relatively large population and about 8,000 incident patients and an even larger kind of prevalent patient pool. And so we think that cabo really has a chance to play an important role and even that patient journey and certainly, when you kind of compare and contrast and talk to physicians about their familiarity with oral TKIs, certainly, the RCC experience where not only SUTENT and everolimus, which are standards of care in nets, but RCC as well. And so there's a familiarity with kind of all of those dynamics as well. So as I mentioned before, it's an indication we're excited about. I think the community is excited about and all hands on deck from an execution perspective to kind of get that filing in and hopefully get cabo to patients as soon as we can.

And what would an optimal label for cabo and net look like?

That's an interesting question. I mean, I think it's kind of a statement of the obvious that in general, you get the label of the population that we studied. And if you look at the patient disposition, patient population, for CABINET, it reflects not only epNET, but pNET, also pancreatic -- extra-pancreatic neuroendocrine tumors as well as patients who had experienced Lutathera, some experience SUTENT, some of the experience everolimus. So a reasonably broad population there. And so we'll wait and see kind of what the final [ way ] looks like. But I really think it gives a pretty good perspective and data set on what cabo can do for these patients who really do have a pretty significant [ MET ].

And you touched on prostate. Just following the contact 2 results, and you touched on this earlier, but where do you see cabo fitting in here in the current treatment landscape in [indiscernible].