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

All right. Great. So welcome to this fireside chat with Exelixis. With us today, we have Michael Morrissey, CEO, Mike, welcome, thanks.

Mike, how are you? Good to see you. Thank you.

So we'll just jump right into Q&A.

Let's jump in.

Why don't we start with a discussion on CABOMETYX now that you have visibility on the IP runway following the recent U.S. District Court decision. And so in RCC, I think your market penetration is fairly mature at this point. You're still growing. But talk a little bit about how we think about midterm growth opportunities for cabo as we look at the years ahead?

Yes, yes, for sure. So thanks again for the invite. Great to be here kind of chilly this morning. So not the California weather that we're used to. But before I begin, let me remind everybody that I'll be making forward-looking statements today. So please see our SEC filings for a description of the risks that we face in our business. So cabo, RCC, yes, obviously, it's the main driver for our revenue and our business. We've had a lot of success there. It's just -- it's incredibly gratifying to see that we're the leading TKI for RCC, #1 TKI in the IO/TKI segment in terms of first-line RCC. Lots of room to grow. The vast majority of our revenue in Q3 and we did in the U.S., I think it was $478 million was from RCC. So it's a really important driver. You saw the business, we grew. I think it was 3% or 4% Q-over-Q versus Q2. I think 9% in terms of demand year-over-year in Q3. So really strong growth. From the market share point of view, it's really interesting. If you look at Q3 '23 versus Q3 '24, we gained about 4 points, right? And that's a 10%, 11% growth on a relative basis. So you're right, it's a mature indication for us, but we're still growing pretty dramatically and we would expect that to continue going forward. First line is still somewhat segmented. We're making great strides there literally every quarter. Obviously, those patients stay on drug for a long time. So you can see them stacking year-over-year as well, which I'm sure is partly driving the TRx growth that we're seeing. So -- but it's -- again, great data set from 9ER. It's still remarkable to me to see the fact that we're still growing literally almost 4 years after approval based on that 9ER trial. So just, I think, speaks to the team's focus and urgency in continuing to find prescribers that can use cabo in their regimens for their patients and then the data continues to look really strong from a competitive point of view. So -- so yes, more growth to continue as we go forward for sure.

Right. And so you obviously have two sort of near-term expansion opportunities, neuroendocrine tumors and potentially prostate cancer. So on neuroendocrine tumors, the CABNET study, I think, has been well received based on our physician checks and prescribers potentially. How do you think about potential labeling? Do you think there's opportunity to perhaps receive a second-line label versus third line? And then how should we think about tissues of origin in terms of the breadth of the label and the impact of that label expansion opportunity?

Yes. So it's great questions. I can't -- I certainly don't want to speak to what a label might look like before the fact. So I just don't want to kind of cross that threshold before we actually have a label from the agency. So I think what's important to highlight is you're right, the data was really well received at last year's ESMO, at this year's ESMO, the New England Journal of Medicine paper that was published simultaneously with this year's update certainly garnered a lot of interest and I think helps validate the data set. The Alliance cooperative group did a very just important trial there, looked at both pancreatic and extra-pancreatic NET patients. So broad population. If you think about the different grades, different prior therapies, including Lutathera, it really captured almost every segment of that market. So it's -- if the label tracks with the population that we enrolled in that study, one would expect a pretty broad label, but we'll see. Time will tell. As we talked about on the call a few weeks ago, this is a relatively large underserved market. The oral therapy space in neuroendocrine tumors is it's served by a number of older drugs, right, drugs that were, I think, most recently approved with everolimus, I'm going to say, in 2016 or 2015. So there's a lot left to be improved upon, which we think cabo can certainly do. And if you look at the patient population with the kinds of durations that we're looking at from CABNET with, I would say, contemporaneous pricing, we think that's the oral therapy market for NET is a $1 billion opportunity. So obviously, we're excited about that opportunity. I'm excited about the fact that most of the prescribers in that space have used cabo before. The small fraction that haven't are mainly co-located with accounts that have used cabo before. So we feel pretty good about the whole space. And obviously, as we talked about previously, we're going to hit this really hard. We think this is an important growth driver for us in the back half of the decade. And certainly, it plays a big part of that $3 billion number that we gave on earnings for cabo in 2030.

Right. Is cabo already used for neuroendocrine tumors, you think, at this point? And is there opportunity for early NCCN guideline inclusion?

Yes, I wouldn't want to speak to that right now, sure. We're looking at all the options in terms of compendia listing as you always do once you have a publication in terms of off-label use. We don't promote that and I wouldn't want to speak to that.

Right. Okay. And then how are you tracking towards CONTACT-02 submission for prostate cancer? And how will you frame the opportunity in that setting post-NHT?

Yes. So as we talked about on the call, in terms of our longer kind of midterm guidance, we're really discounting that right now relative to what we can -- in terms of growing the business with the base business and with net relative to getting to that $3 billion a year number in 2030. So we'll see. It all depends on regulatory interactions and where that goes. So I wouldn't want to say more than that.

Right. Okay. So shifting gears to zanzalintinib, which is becoming an important growth driver in the near to midterm actually, now with the STELLAR-303 study potentially reading out next year already. So can you discuss, again, sort of the trial itself, what the clinical bar is relative to regorafenib in this particular study and then sort of that initial opportunity in colorectal?

Yes. So we're really excited about zanza. Again, we think it's certainly a next-gen potentially best-in-class TKI. [indiscernible] cabo's inhibition profile, shorter half-life makes it, I would say, more user-friendly clinically, potentially -- still early days, but potentially better tolerability. We'll see how that pans out relative to randomized pivotal trials. But we're excited about the fact that even as we stand here today, we've got three ongoing pivotal trials. Three more planned to start shortly. The collaboration we announced with Merck a couple of weeks ago in the RCC space, I think, really validates the potential for zanza in RCC as a growth driver. We are very bullish on the trials that we're doing. We have a lot of conviction in those relative to how we think we can navigate taking the learnings from cabo and then applying those to zanza as we navigate the clinical framework. You mentioned 303 is first up. Importantly, we think that could be our first approval if we're successful in terms of both the clinical and the regulatory side of that in 2026 and then have basically one approval from there going forward. So important growth driver, certainly addresses any sort of cabo patent cliff we might see in the 2030, '31 time frame. So it's an important part of our story. In terms of non-liver met CRC, I would say the benchmarks based on all the published data are probably in terms of the non-liver met population for survival about 12 months. For the ITT population, both liver mets and non-liver mets about 7 months. We haven't talked about powering for 303, so we'll do that later on as we get closer to top line results. But we're really excited about what we've got the trial enrolled really fast. We'll have a data update early next year on a small randomized Phase II that we did, looking at zanza, atezo versus zanza. Details of when and where all that stuff will be outlined once we get the abstract accepted and titles announced. But we're excited about '25. We expect the first top line results for 303 in '25. And that will be the starting gun for the entire zanza cascade then going forward.

So just to clarify, that small randomized Phase II, is that in colorectal specific?

It is. Yes.

And what is the purpose of that study?

Just to provide data for us relative to what zanza and atezo looks like. It was part of the STELLAR-001 study. It's one of the cohorts there.

Got you. Okay. And that would come before STELLAR-303 potentially?

I wouldn't want to give you exact guidance on timing where we're hoping to have it out early next year.

Right. Okay. Great. And then for the non-clear cell RCC opportunity, we know that the KEYNOTE-B61 study was recently included in the labor for Lenvima, how does that impact in your view, how zanza may play a role in the market once STELLAR-304 reads out?

Yes. I mean it's an interesting data point, single-arm, non-randomized study that was added to their label. Again, 304 is looking at zanza plus nivo versus sunitinib in a large global randomized study. So in terms of Level 1 evidence, randomized study, depending upon the data and how it all looks should really carry the data but no randomized studies to date run in non-clear cell RCC. So we're excited about that. It's enrolled well. We should finish enrollment sometime next year and then we're off to the races in terms of accounting events. So those are 303 and 304 are the most mature pivotal trials with zanza, 305 in head and neck is really gaining a lot of momentum. We have years advantage in terms of country activation, site activation enrollment over some of the newer trials that are being started. So we're really excited about that. And just the momentum we've got relative to that combination as well.

And for 304 and non-clear cell, just remind us of the size of the magnitude of that commercial opportunity relative to clear cell RCC perhaps?

It's a fraction, right? So non-clear cell is probably 15%, 20% of the overall population.

Got you. And on 305, as you just mentioned, the head and neck study, which is now -- it's already been open, I think, for almost a year. And there are several other companies being evaluated in clinical studies. Can you just comment on the pace of enrollment you just touched on it relative to your expectations and how we should think about the TKI-IO approach in the face of some of the emerging competitive mechanisms?

Sure. Well, it's hard to compare different approaches and modalities when we all have single-arm non-randomized data with 50 patients plus or minus or less. So that's always a bit of a challenge. You guys are paid to do that and talk about that. We just run -- move molecules forward and run pivotal trials and the data will speak for itself. We -- we've had some really strong Phase II data from an IST that was done and published on numerous different formats. The most recent data set response rate for cabo pembro, in this case, using cabo as a surrogate for zanza was 52%. PFS was, I think, 13, 14 months. Overall survival was in the 20-month range. So we have good single-arm data with cabo as a surrogate for zanza here relative to what you see out there. So all the caveats, obviously, of single-arm, non-randomized data. So I think the concept validation is strong based upon the cabo data. And certainly, the -- I would say, the enthusiasm for the trial based upon site activations and enrollment has been super high, right? But again, it's a competitive space. The fact that we got started a year plus is good. We've ran 20-plus pivotal trials now. So we know how to do this and it's just kind of getting everybody lined up internally.

And any learnings from the LEAP-010 study, which was, I would say, a close miss perhaps in head and neck?

Well, I think it just reinforces the importance of tolerability. This is a pretty frail population, obviously. And their comorbidities really suggest that you want to have a regimen that is appropriately tolerable to keep patients on drug for as long as possible, right? So -- and there was certainly some of the -- some challenges with the lenvatinib combination with pembro. I should mention that we're now -- as part of the deal with Merck, Merck is supplying pembro to us for use in that trial for free. So that certainly helps the P&L there as well. But yes, no, it's an important -- very important population, high unmet medical need, lots of competition, so kind of classic oncology opportunity in terms of indication, but it's one that we've got a really solid data on. And I would say really momentum ahead of everybody else relative to enrolling this trial.

Right. And then, yes, you just touched on the Merck collaboration that was announced not too long ago. And can you just remind us of your planned study of zanza with belzutifan? And will potential Phase III study initiations be gated by additional early data sets coming from ongoing Phase I or planned Phase I/II studies?

Yes. So the Merck trials, Merck collaboration we announced a few weeks ago right before the ANDA. That was a pretty good week with back-to-back updates. We've agreed with Merck to kind of keep all this stuff kind of under wraps for a while as we work out some of the details. So I can't say too much about that. Obviously, look, we're thrilled to be collaborating with who's arguably our biggest competitor in the RCC space. So we think working with zanza, a potentially best-in-class TKI with the first and only approved HIF inhibitor with belzutifan makes a lot of sense. They know the market dynamics. We know the market dynamics really well. We understand how to, I think, really look forward 4 or 5 years and ask the question, where is the market going to be? In the late 20s, early 30s and then design trials to maximize the value for patients and all of our stakeholders in that framework. So as things get more evolved and they're ready to talk about these trials more, we'll do the same. But for right now, we're kind of keeping it quiet and looking forward to working with them and making these really successful for patients and shareholders.

Makes sense. And then you've also talked about expanding your activities in the neuroendocrine tumor setting with the plant STELLAR-311 study in first line. And so yes, talk a bit about those plans and perhaps potential relative to some radioligands like glutathera that are being used in other therapies?

Yes. So the -- again, that space is pretty wide open right now with lots of interesting opportunities usually on the biologics side or the radiopharma side as opposed to small molecules. Our view is based upon all the market research that we've done is that the small molecule opportunities there are significant and really underserved and understudied. So with a molecule like zanza to be able to go head-to-head with everolimus and basically prove superiority in that setting would be a really, really good way to transition later in the decade or maybe early depending upon enrollment times and that's late 20s, early 30s from cabo to zanza with superiority over all of the existing or the mainly used agent right now, which is everolimus as a small molecule. So we think we'll compete there well upfront with cabo based upon the data, but having head-to-head superiority is obviously, as we've shown with METEOR, as we showed with CABOSUN, is really the way to go in terms of really locking down market share going forward. So yes, so we think it makes sense. I would think broadly, we won't exactly phenocopy the CABNET trial, but we'll have a lot of the same elements in that. But again, it's -- the goal is to have zanza be the first used -- based upon data from 311, the first used oral therapy in NET going forward.

Got you. Makes sense. And then what else will we learn from the ongoing STELLAR-02 study that you broad study that has a lot of cohorts here?

Yes. Well, again, the goal is to talk about all that data starting in 2025. We have some mature RCC data that looks really interesting, other cohorts as well. So again, I don't want to get into too many details until we get these abstracts accepted and titles published, but I think 2025 is going to be a very, very busy year in terms of things like top line data results for 303, getting that ball rolling with zanza, lots of STELLAR data from STELLAR-001, STELLAR-002, certainly a lot of preclinical data from the pipeline of compounds that we've got moving forward. If some of the early clinical data, say, with 309 or 010 matures, you might see that as well. So we're really, I think, firing on all cylinders right now to be able to move the ball downfield.

All right. So looking forward to zanza really reading out data starting next year. As we think about the rest of the pipeline, I'm curious with clarity now on cabo IP and visibility on LOE on that front, I think you've sort of highlighted increased focus on BD, if I interpret your comments on the earnings call correctly. But has your approach to expanding the pipeline beyond zanza changed following the patent decision? And if so, how?

Yes. I wouldn't say it's changed. I would say it's -- we're just kind of nuancing it right from the standpoint of understanding -- I mean, the obvious fact is that we have a very full early-stage pipeline. We have about 10 compounds in either late discovery, early clinical evaluation behind zanza 309, the USP1 inhibitor is the most advanced and again, looking -- I think, looking really interesting. We've got -- by a brief accounting, we've got 3 small molecules, 5 ADCs and a couple of either antibody bispecific type modalities. So we've got a very rich, deep pipeline of early-stage assets, which is great. Now some of those are going to fail and they'll just be cast away. Others will go forward. And obviously, our challenge is to quickly and efficiently evaluate those preclinically and clinically and bring the winners forward as quickly as possible. We're very interested in building our late-stage pipeline. We have -- we've been burning the haystack for the last couple of years and we think there's a few needles that we want to pursue in the GU, GI space that we're interested in. We'll see if that happens or not. We're focused more on BD than M&A for all the obvious reasons. But I think there's opportunities out there that would play nicely in the GU, GI space. And what we want to do aspirationally is be a leader -- oncology leader in GU and GI oncology. Arguably, we're already there with cabo and GU. And certainly, we have aspirations and I think the assets and the mindset and certainly the trials in place to do the same thing in GI as we go forward. So yes, so look, we'll be thoughtful. We'll be pragmatic. We've got a great balance sheet. Cabo's cash flows are significant. We'll be -- we'll continue to be pragmatic about how we do this. But we're looking to become a multiproduct, multi-franchise oncology biotech. And the way you do that is you add late-stage assets that can get over the goal line in terms of both the regulatory success and commercial success.

Right. So fully understand your focus on GU, GI in terms of BD, obviously, in terms of leveraging synergies with your existing portfolio. But as we think about the earlier pipeline, it's obviously more broadly spread in terms of therapeutic categories and targets. Is there a theme? Or how do you approach thematically target selection as you build your internal pipeline?

Yes. So I think it comes down to the right science for the right indication, right? Obviously, the science and having conviction in targeting pathway X or cell type Y can make a difference for patients is the most important thing. And then having the right probes be able to prove that both preclinically and ultimately clinically. So it always starts with the science and starts with our really in-depth understanding of the tumor biology that drives different tumor oncology opportunities, right? There, we segment, right? But we have a real focus on asking the question, how do we support -- continue to be a leader in GU and how do we build GI with maybe some peripheral efforts in thoracic or breast or gynecological cancers, right? So it's really a matter of making sure that our discovery and development and commercial organizations are working together and working in the middle of that Venn diagram so that we can recapitulate what we did with cabo. I mean cabo is the lens by which we kind of view everything going forward. We have to have a lot of conviction in what we're doing clinically based upon the biology that we've done preclinically, but it always has to make sense commercially. We have to be absolutely assured that if we're successful in really improving standard of care that we can then make that work commercially. And that's been the cabo story. It's certainly how we're looking at zanza as well and we use that same lens for everything in our pipeline. It just takes time to generate the data we need to make those decisions.

And you just mentioned the USP1 is one of the more advanced product candidates. Just maybe briefly, how do you think about that opportunity? And I know there's been some data from a few other molecules out there?

Yes. It's funny. It just goes to show you that you can be in a highly competitive space one day and the next day it can be wide open, right? So -- and that's been the case with USP1. We think we have a best-in-class molecule based upon kind of cross-profiling kind of some of the early preclinical data. Clinically, some companies have had bad luck in terms of either tox or PK -- so molecules that were ahead of us are either stopped or stalled. We think we've gotten around a lot of those liabilities with 309 based upon how that molecule is optimized and some of the PK/PD parameters that we've got built into it. So we're excited about that. Obviously, if you can use that to double the PARP market, that would be a fantastic way to again build value for patients and shareholders. So -- but again, it's all based upon the data and our ability to interrogate the clinical opportunity.

Okay. Great. Well, Mike, with that, our time is up.

All right.

I really appreciate it.

Okay. Good to see you. Thank you.

Thank you for joining us. Thanks.