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

All right. Good morning, everyone. Thanks for joining us. My name is Derek Archila. I'm one of the Wells Fargo Biotech analysts. For our next fireside discussion, we have Exelixis. From the company, we have Andrew Peters, who's the SVP of Strategy. Andrew, thanks so much for joining us today.

Yes. Thanks for having us. Excited to be here.

Yes. All right. Well, maybe just as an intro, maybe just give us kind of the state of the business, what's going on with Exelixis and then we can kind of dig into some of the questions.

Yes, happy to kind of run through that and glad to be here in Boston this week weather in the East Coast this time of the year is always great. So really enjoying it. Before I begin, as a reminder, I'm going to be making forward-looking statements today. So please see relevant disclosures in our SEC filings around risks to the business. So Exelixis, I think, is in a really interesting and almost unique position in the industry and that we're a commercial oncology company, really focused on driving standards of care for patients with cancer. Our lead compound, CABOMETYX, cabozantinib, really is the standard of care across multiple solid tumors, HCC, DTC and then obviously, RCC where it's the #1 I-O/TKI and the #1 TKI monotherapy as well. We've given guidance for product revenue in the kind of $1.6 billion, $1.75 billion range for the year. And so obviously, we've been kind of successful from that end. But the reason I say that we're in a unique position is that as a company, as the cabo franchise continues to hum along, and I'm sure we'll get into kind of the growth drivers there. We're really focusing and investing in kind of the next-gen TKI franchise as well that really takes a lot of the lessons and learnings from cabo where cabo was kind of that second gen improved TKI, that improved profile from the first-gen agents. And then similarly, zanzalintinib takes kind of the key liabilities or kind of key issues with cabo and that improves upon that notably around its long half-life and some of the challenges from a patient management and a management perspective. And so as we're investing in the zanza franchise, we now have 4 pivotal studies either announced or ongoing with the first of them likely to read out in late-line colorectal cancer next year. So we're kind of at that -- I don't want to say transition point as a company, but we're certainly vectoring towards being a multiproduct oncology company then layering in a lot of what we're doing in our early-stage portfolio whether it's XL309 or USP1 inhibitor or some of the interesting ADCs that we're developing as well. So really exciting time to be at Exelixis and exciting time to have a conversation with you.

Great. Awesome. Well and maybe starting with cabo and some of the commentary that you just said, just -- how do you think about the growth trajectory of this product? And maybe we can go through some of the growth drivers just in RCC and kind of where you think you can maybe get more penetration.

Yes. So I think if you look back maybe to kind of around the JPMorgan beginning of the year time frame, where we gave product revenue guidance for the year, really kind of the core of that message was unsurprisingly, the RCC market is starting to hit a bit of a maturation. We've done a lot of kind of work on the commercial oncology space. And in general, oncology products tend to hit steady state around 5 to 7 quarters post-launch. Cabo is now in RCC kind of post 12, 13, 14 quarters in. And so as we looked ahead to 2024, we really thought it was going to be about a maturation of the RCC market and then looking ahead in 2025 and beyond to 2 potential new launches in NET and CRPC following 2 positive Phase III readouts last year. What we've seen since is not only kind of enthusiasm and excitement around the NET indication, certainly something that we're getting a lot of interest in patients, physicians, KOLs as they see the data and understand the data are certainly interested in, but kind of PJ and his team on the commercial side have kind of continued to really invest and kind of continue to increase our share in the RCC space. So if you look at second quarter earnings, we gained another market share point, which for a product that is now many years post that first 9ER launch is really impressive and is, I think, a testament to not only to PJ and his team on the commercial side, but really, I think kind of the data that we've been able to generate that really resonates with patients and physicians alike and kind of has established us as really a market leader in kidney cancer.

Got it. Yes. So maybe just a follow-up to that in terms of just in renal cell, what has made cabo so successful there and you're kind of keeping this toehold in that specific market, but also, how do you guys think about kind of the evolving competition there? Like will you be competitive in that market for years to come and even going maybe with the future zanza like TKIs, are they going to be -- continue to be a mainstay in renal cell?

Yes. So I think one of the kind of throughlines across everything we do as an organization is the belief that really, at the end of the day, our job is to shift standard of care for patients. And we're not in the business of developing me-too programs, developing generating data that looks just as good. Because I think what a lot of times people miss in this industry is they view FDA approval as the finish line when in fact, it's actually the start of line. And what we found over and over and over again is we've looked -- I spent a lot of my time looking externally kind of on the BD and M&A side, there are a lot of assets that really are developed through the lens of this looks good, let's just develop it quickly, get on the market and hope it works out. And so what we found is, as you're able to generate differentiating data that truly shifts the standard of care for patients, that's ultimately what drives utilization, that's what drives value creation, both for patients stakeholders and shareholders. And so that's kind of the focus. And so if you think about what we've been able to do in RCC, ultimately it comes down to that data set that continues to resonate with 9ER, not only kind of that initial data, but as we've had these incremental 3-year and longer updates, these are data sets that continue to kind of hammer home that the combination of cabo/nivo, in particular, kind of the key insight that we had ahead of 9ER was the 40-milligram dose versus the prior 60-milligram dose. Those are the sorts of data sets that kind of truly shift standards. So as you ask about where do we think RCC is going in the future, really the answer is going to depend on data. Do we think that TKIs have a role, certainly, we do. If you look at the data sets that not only cabo/nivo, but other IO/TKIs have generated, we think it actually really sets a high bar for differentiation from there. And so as we think about the RCC opportunity with zanza in the future, it's really going to be about understanding how we can shift that standard of care, what are the areas of opportunities that are underserved right now, whether that's earlier, whether it's other parts of that journey, again, the way we think about cabo or zanza or anything in RCC is we want to make sure we're part of the patient journey for anyone who's diagnosed with kidney cancer.

Got it. And maybe just shifting gears to neuroendocrine tumors. So again, you cited that as an interesting growth opportunity for cabo. I mean maybe you can just kind of frame up the opportunity and what type of profile are you starting to see from cabo in those types of patients?

Yes. So just to kind of highlight, so we're going to have the final data from the Phase III CABINET study next week at ESMO. And it's really going to be kind of the data set that's going to be going into the filing. So just to kind of preview that for folks. But, so CABINET was a large study across both EP and pNET pancreatic and extrapancreatic neuroendocrine tumors run by the Alliance cooperative group. Data there were very encouraging, kind of enrolled a little bit of a hodgepodge of patients who had experienced kind of post-TKI, post-Lutathera, post-SSAs, et cetera. So fairly heterogeneous group, but really saw a pretty robust data with HR, PFS HR ranging from 0.2 to 0.4. So across kind of both of those subgroups in that, and one of the things that we found is kind of we've continued to and really invest in a lot of kind of market research, KOL work, ad boards is really an excitement and enthusiasm about the data. One of the things that I get particularly encouraged by is show kind of a blinded TPP target product profile of the data and physicians are quite interested. Then we say, well, this is cabo, then they're like, "Oh, okay, no brainer." Because if you look at kind of the physician group that treats these net patients. We found that there's about 75%, 80% overlap of patients who -- or physicians who have already prescribed cabo. So it's a drug that they're familiar with. They understand how to use, they understand how to titrate based on AEs. And so it's not like they're going to be learning something kind of the first time around. So that translates to our enthusiasm about kind of the commercial opportunity when we combine that with a lot of our market research around size it. So neuroendocrine tumors, relatively indolent disease. We think there's about 15,000 kind of newly incident frontline patients, much larger kind of prevalent pool, given the slow-growing nature of the tumor, but as it specifically relates to kind of the cabinet type subset. PJ talked about on the last earnings call, we think there's around 9,000 plus kind of second line plus patients in the U.S., that's going to be kind of our target launch market initially. So when we combine what we think are a particularly compelling data set that seems to resonate quite significantly or quite well with the patient or the physician groups with cabo being a kind of a well-known agent in that space in a market that we think is underserved, that's why you're hearing us increasingly enthusiastic about that and why we're full speed ahead, investing ahead of the launch and then even looking ahead to something like zanza in the 311 study, which we announced recently, which is potentially going to help us establish Exelixis not only is an RCC company, but potentially in the future as kind of a net company as well.

Got it. Interesting. Can you maybe just help us understand what the standard of care is in that right now? And I mean, presumably, most of these patients will progress. So I guess what's your kind of expectation in terms of utilization of cabo with response?

Yes. So the standard of care is a little bit kind of I don't want to say totally across the board, but that's sort of somewhat heterogeneous group of different types of sub tumors. As I said, epNET and pNET, SSTR positive, negative. SSTR positive, kind of the somatostatin receptor. It's about 80% of patients is another 20% who are negative who don't get kind of the SSA analogs, the octreotides, lanreotides, for example. Those are used, but on the kind of oral space, the oral TKI space, standard of care is really SUTENT and everolimus. We think about kind of the closest analog that helps me visualize at least NET, it's kind of more similar, if anything, to where RCC was in like that 2013, '14 time frame before a lot of the newer next-gen agents like cabo came out. Coincidentally, you have the SUTENT and the everolimus is there. But it's really a market that is ripe for kind of new agents. There hasn't been a new oral aging approved there since, I believe, 2016. And so it just shows kind of the opportunity set that we have, not only with cabo and the CABINET data, but as we look to 311 and running head-to-head zanza versus everolimus, that's a sort of opportunity that we think we can, again, really begin to capture and kind of establish that beachhead into a indication, we think, is underserved, and we think we can really become a leader there.

What do you think the ramp looks like in terms of sales and utilization in this type of tumor? Is it different than, I guess, RCC, like what do you -- what's...

So that'd be an area kind of I don't want to get ahead of. Usually, what I'd say is it depends on the label. And it depends on the label and it depends on a lot of factors. What I can say is that we're making those investments now. A lot of those prelaunch activities to make sure that we really optimize that. I think we'll see ultimately how the label shakes out the cabinet data set, we're compelling across a relatively broad patient population, but anything as it relates to market size or ramp just too earlier.

I mean what are some of the variables in the label? Is it specifics about the data that you want to get included or you're pushing for like what's the bull case label in your opinion?

Yes. It's probably an area I want to stay away from just kind of as we're entering discussions and continues back and forth with the FDA after the submission, but I think a lot of the key unknowns with any label is what is the indication statement, what is the patient population, those sorts of things just very generically.

Yes. Okay. Got you. Is there anything else that like for net that at least from a cabo perspective, from the way that physicians will use it, like, again, some of them already have experience, anything changed there? Like is there any like -- I'm trying to understand like is there anything that would be a hurdle for them to use it in NET patients?

Again, we'll see how the label shakes out. But I think one of the things that I'm particularly encouraged about is kind of that familiarity on the physician side with cabo, understanding the differences between 60 and 40 and how to down-titrate once you see adverse events, any VEGF-targeting TKI, you ultimately see AEs and need to down-titrate. And so understanding that algorithm, having the familiarity in that experience, certainly, we're starting from a favorable position, I'd say, so that's probably kind of the core of it.

Got it. And then maybe shifting to one of the other growth areas for cabo in prostate cancer. Maybe just frame up that opportunity based on the data we've seen from contact to and kind of the confidence level of potential approval there?

Yes. So CONTACT-02, that was our Phase III study looking at cabo/atezo in -- against the second AHT in later-line castrate-resistant prostate cancer. Again, that data, the final data is going to be presented next week at ESMO as well. And we think it's another area of high unmet need for patients. Obviously, if you think about kind of the treatment algorithm for patients with -- for men who have castrate-resistant prostate cancer, there's been a lot of progress in that kind of NHT first gen, second gen side. But unfortunately, when men ultimately do progress, they have relatively limited options. Right now, one of the standards of care is docetaxel and really CONTACT-02 was designed to really understand, is there a chemo-free option for these men, who tend to be older, who tend not to want to use something like docetaxel where the AE profile is just exceptionally challenging. And if you look at kind of the real-world utilization data, certainly suggests that no one wants to use chemo. And so CONTACT-02 was really designed to set-up and ask that question is in the kind of current use of second NHT is one of the more common agencies in that space, can we provide a more effective option? The other kind of important dynamic on CONTACT-02 is we evaluated it in a relatively unique patient population, where all of the patients at baseline and CONTACT-02 had visceral disease or extranodal adenopathies. The reason we wanted to look at it is really kind of the cleanest experiment to ask the question of, does the combination have an effect on shrinking tumors. One of the challenges that we certainly have experience with at Exelixis is kind of the dynamics of the bone only patients where they have bone disease, but understanding progression in bone only disease can be somewhat complicated. And so patients with baseline visceral mets, we were able to really ask a pretty clean and straightforward question. And so the data ultimately showed the answer is yes. So if you look at the PFS HR of around 0.64, 0.65 in doubling or so or significant improvement in progression-free survival, that's quite an improvement as well. And so it's really asked the question of can we show a benefit in these patients. And we think the data are particularly compelling. What we'll see next week is the final look at overall survival where we showed a trend and improvement numerically but not statistically. And so it just becomes a question of discussion with regulators about kind of what that benefit to patients is and ultimately, how do we make the case that this would be an effective therapy.

I mean is there -- are there analogs at least in prostate cancer, where you've seen approval on PFS and not OS or not segment you don't see OS benefit? I guess what are your arguments going to be to compel based on PFS?

Yes. So I think Amy Peterson, our CMO, has done a particularly great job of kind of articulating a lot of those dynamics. I don't want to take up all the time. I think if you go back a couple of -- the last couple of earnings calls, she has very robust and great evidence around each of those topics. I think it's certainly safe to say that there are analogs, certainly in GU oncology where kind of that PSF improvement, but no detriment and survival has certainly translated to approval in patients, but we'll see. So we're planning to submit the sNDA later this year and really make that case to the agency that this is an opportunity for patients.

I guess if you look at both NET and prostate cancer, I mean do you -- how are you viewing just kind of like commercially those opportunities from a revenue perspective and which one do you think is the most attractive?

Yes. So again, I'd say the answer around revenue opportunity ultimately depends on the label. So kind of stay tuned there. I think as we have talked about both those indications are really the opportunities for reacceleration of growth in the cabo franchise. But again, as we saw this quarter, kind of that RCC market continues to chug along and do well also. So I don't want to kind of pick our favorite children, so to speak, between the 2 indications. But certainly, we're excited about NET and then look forward to submitting the filing with the FDA in prostate later this year.

I guess how does your commercial strategy change with cabo with the in-line business, but also these growth opportunities depending on the outcome of the MSN trial litigation. Obviously, you don't need to comment on the trial itself, but just trying to understand like what happens in either scenario.

Yes. I mean I think it's safe to say we've been -- we're about the world's best scenario plan at this point. But at the end of the day, really kind of the cabo business in particular, really is about continuing to kind of drive growth. And so full speed ahead and that full speed ahead with the filing in prostate. And so that's kind of where our focus is. And so I don't necessarily think that two are interlinked, so to speak.

And then I wanted to just shot on STELLAR-303. Maybe just give us a quick review of that study. And I guess kind of the opportunity that you see for zanza and CRC?

Yes. So 303 that's going to be the first of the pivotal studies that will read out with zanzalintinib. It's a Phase III study looking at the combination of zanza and atezo versus regorafenib in third-line plus non-MSI-high colorectal cancer. Another area we think that we have a chance to really potentially shift the standard of care. Unfortunately, for patients, regorafenib, one of the standards of care in that space really is in a particularly effective option. And so we base that study off of a prior kind of cabo data set like we have with a lot of our zanza studies shown pretty compelling clinical profile for cabo plus a checkpoint inhibitor there. And so that was kind of the underlying basis for the 303 study. Colorectal cancer across both either the liver mets or nonliver mets population, we think, is fairly substantial and really allows us to continue to potentially grow our kind of GI footprint. So if you think about Exelixis right now, strategically, we're really focused in kind of 2 areas, GU oncology with cabo and then GI oncology with cabo as well. But now with the net opportunity starting to really look compelling to us across both cabo and zanza and then 303, the mid- to long-term goal for us is to have those 2 kind of verticals be fairly similar, so to speak. And so if we think about colorectal plus HCC plus net, that's the sort of profile on that GI space that we're particularly excited about. And so 303 is going to be the first readout there. As I said, we're expecting top line data sometime next year, event-based studies, so I can't really -- don't really know when exactly that's going to happen, but study is fully enrolled. So we're expecting it.

What do you think you need to show in that trial?

So coming back to one of the earlier points that I was making is it's our belief, it's our view that when you -- the way you're successful commercially and drive real value is to drive standard of care. And we don't think that incremental improvements in how patients are managed necessarily translate to utilization. And lack of utilization tends not to translate to significant revenue. So as we think about value creation, it's really about generating those data sets that truly shift the standard of care. And so without kind of getting into powering assumptions and a lot of that, suffice it to say that when we think about kind of 303 or 304, 305, the trials we've designed with zanza really set out to ask the question, can we shift the standard of care for patients. Can we take that Kaplan-Meier curve and move it to the right so that patients live longer ultimately, that's what we're trying to do, live longer without their disease in the case of PFS. And for something like 303 where the endpoints of overall survival, are they going to live longer taking zanza versus not?

I mean is there a bar again in terms of like where standard of care is in terms of survival?

There is -- I want to say, I don't know, don't quote me here, I guess, but I think it's about 10 months plus-minus for rego. But again, one of the dynamics that we've identified, I think that the industry has identified in colorectal cancer is kind of the differences between liver mets and non-liver mets, especially for patients and their sensitivity to IL. And so we've actually designed 303 with the nonliver met population being the primary and kind of the liver met being more inclusive on the overall ITT basis. So that's kind of one of the dynamics to kind of keep mind ahead of that data.

Understood. Okay. And then for STELLAR-304 for zanza in renal cell. I mean, obviously, the opportunity to, I guess, look at the market in a different way with zanza there and cabo. So I guess how do you think about that dynamic? And ultimately, what's -- if you're going to try to ship standard of care, is it -- or just -- is it -- well, again, going using your words of shifting standard of care, are you trying to do better than cabo? Or are you just trying to get cabo-like efficacy with maybe potentially a little bit better safety? Like what's kind of the profile that you want to get from that so far?

So 304 for those in the audience who aren't familiar, it's again, a Phase III study looking at zanza plus nivo in this case against Sutent non-clear cell RCC. So non-clear cell RCC is about a 20% or so plus/minus of kidney cancer. And it's a space that's a little bit unique kind of in oncology in a sense that there are many standards of care, but there's no real one standard of care. What I mean by that is there hasn't been any real pivotal data to establish what the true standard of care in that indication is. The labels for all of the RCC agents, whether it's cabo, whether it's any of the other TKIs are all inclusive of the non-clear cell population as well. And so what 304 is really designed to do is really establish that for the first time with a pivotal study. So it enables physicians to have a much better level of evidence, so to speak of a large pivotal study to establish zanza as an appropriate standard of care versus understanding what relative guidelines, say and trying to parse out limited data sets from the other agents, cabo inclusive of that whether it's as a monotherapy or whether it's in combination with nivo itself. And so 304 is really designed to set out to kind of answer that question reasonably definitively and provide that first pivotal data set in that space.

So not necessarily like competing with cabo, but trying to be more niche, I guess? Or like is that the best way to look at it?

Yes. I think it's a way to establish a foothold in kidney cancer for zanza. Given that there's no real pivotal data for cabo or any of the other agents, it's -- right now, there's a lot of like squinting and cross drop comparisons of these somewhat limited Phase II studies and then just understanding what's used in the clear cell RCC population. So instead 304 is really designed to kind of give a definitive pivotal data set to really help physicians understand that profile. So it's kind of a little bit of everything, but really is to give a level of evidence to the space to establish it there.

Got it. And then just kind of on the broader earlier stage pipeline, I mean, obviously, you guys have held an R&D Day kind of let us under the hood to kind of show us what you're working on and different things. Maybe if you can just walk us through like some of the or highlight some of the key programs that you think that are coming from the emerging pipeline that we should be focusing on?

Yes. So certainly, I'm glad you mentioned that the R&D Day, that was one we hadn't had one in say, 5, 10 years or something. But it really was a chance to kind of reestablish Exelixis as a kind of R&D powerhouse, so to speak. Post kind of the launch of cabo in RCC kind of a 2016 to 2018 time frame was really when we had the chance to restart and reestablish discovery having had to shut it down prior to that due to kind of capital constraints. And so since then, we've been as prolific as any company can be of our size in terms of not only reestablishing discovery, but complementing that with a whole host of licensing transactions that have enabled us to be particularly effective in kind of IND generation and really refill that pipeline. And so it's spanned areas from synthetic lethality with something like XL309, which we think is kind of a best-in-class, potentially best-in-class USP1 inhibitor to XB010 5T4 ADC, XB371 similarly, a tissue factor targeted ADC. So we're really in kind of the small molecule and biotherapeutic space. What Mike always likes to say is our focus is GI, GU oncology with mechanisms that ultimately we can put in the bottle and sell. And so we have a kind of a wide range of mechanisms, but really in a fairly narrowed focus in that kind of space. I would certainly highlight our ADC effort. We had a chance, again, coming back to 2018 to really look around and understand what everyone is doing and where do we want to focus and ADCs seem like a natural fit for Exelixis with our historic capability, expertise, leadership in small molecule chemistry and then our emerging kind of growing effort in biotherapeutics, ADCs are a natural marriage of that. Again, we looked around in kind of everyone's platforms, and we're trying to understand how do you really make the best ADC. And what we found was what we ultimately came to is platforms ultimately can have the Square Pay groundhole issue, where if you have a certain platform that does x, every drug you make needs to do x even if the biology doesn't necessarily call for it. So what we've done is we put together kind of a network of technology collaborations that allows us to optimize and iterate each of these molecules where we take the binder, we take the linker and we take the warhead and really understand for this target, for this tumor type, what is the best combination of those 3 components. And really, that's kind of the through line across our ADC effort. XB010 and 5T4, a great example of that, similarly with 371 and kind of the differentiation on the antibody than on the warhead linker side as well.

So -- got it. Maybe last question, just in terms of the ADCs that you mentioned. Like when will we get kind of like a first look at some of the data and kind of start to validate your approach there?

Yes. So 010 in the clinic right now, recently in the clinic, and then we've guided for 371 filing IND next year. So ultimately, this business is about data. So we'll generate some data and understand, does this have the potential to shift standard of care or not. And we're in the position that we don't want to develop bad drugs. And so if it's -- it doesn't look like that, we'll kill it quickly and move on to the next thing.

All right. We'll leave it there. Andrew, thanks so much.

Thank you. We appreciate.