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

Great. Well, thanks, everybody, for joining us here of Day 1 Annual Piper Sandler Healthcare Conference. I'm Joe Catanzaro, one of the biotech analysts here. It's my pleasure to welcome Exelixis. And joining us is their SVP of Strategy, Andrew Peters. Maybe, Andrew, thanks for joining us. Maybe before we kick off into Q&A, I could sort of give you a minute or 2 to just give a high-level overview of Exelixis, what you guys have been up to and what we have to look forward to.

Yes. Thanks, Joe, and excited to be here for the conversation, and lots of great meetings later today. Before I get started, just as a reminder, I may be making some forward-looking statements today. So please see relevant disclosures in our regulatory filings for risks around the business. So second half of 2024, really exciting time for Exelixis as a company, kind of with the resolution, so to speak, of our ANDA around the cabozantinib LOE as well as really strong quarterly results on the third quarter call, where we talked not only about kind of the momentum in our base business, but how we see kind of the rest of the company growing in the future and then capping it off also with a large clinical collaboration that we signed with Merck, which again, I think kind of gives momentum to a lot of what we've been doing. So really exciting time to be at Exelixis. Kind of third quarter was a chance for us to -- now that the LOE question, which had been first, second, third, fourth, fifth question we got pretty much in every meeting. Now that, that was kind of out of the way, it was a chance for us to step back and say, okay, what does the business look like in the near term? What does it look like in the medium term? And then what does it look like in the long term? Really kind of get a chance for all stakeholders to just understand who we are as a company and kind of now that, that LOE question is kind of out of the way, where are we going from here? So exciting time at Exelixis, really kind of firing on all cylinders internally, focusing on execution kind of across commercial, development and discovery. So a lot of good things going on.

So maybe to start, I'm going to ask you to sort of elaborate a little bit on it and maybe keep LOE question number one. Now with LOE sort of behind us, right, what changes are made to the overall business pipeline development strategy that maybe you weren't doing before LOE was resolved?

Yes. So I think kind of the way that we always talked about it or we always thought about it is we had confidence in the strong intellectual property portfolio around cabozantinib, but we didn't have clarity. And so the question is really kind of more around what that clarity means. And from kind of a day-to-day planning perspective, it's really not a whole lot kind of before and after Judge, Andrews' decision, we really kind of came into the office every day with kind of one mission, which is really to serve patients and help patients live longer, better lives, whether that's kind of in the development organization, making sure that we're running on kind of all cylinders, enrolling patients, designing new trials, et cetera, or in our commercial organization, making sure that we're having patients get access to cabozantinib as part of their treatment journey, whether it's in kidney cancer, liver cancer or thyroid cancer as well. And so kind of that -- the judge's decision didn't really affect that one way or the other. One of the things we have talked about is how it impacts, say, something like business development and how we think about external innovation and potentially bringing in new opportunities into the portfolio. But again, kind of the decision around the LOE wasn't before or after. It's kind of more of a continuum. And really the critical component that we always think about, whether it's an internal or external investment is what's our conviction level around the decision. It's -- is this a new drug that we think has the potential to really shift standard of care for patients? And if so, can we and will we act aggressively to go pursue it? If the answer is not yes, and that conviction level is not high, then anything around kind of the LOE really isn't as relevant as is this something that we want to be investing in. And so if you think about that, whether it's externally or internally around zanza or some of our internal other portfolio assets, that's kind of more of the key message is that conviction level more than anything.

So maybe before we get to cabo and zanza, I want to ask about the early pipeline internal versus external. I think historically, you guys have spoken of rightsizing the pipeline for your revenue base. Now speaking to 2030, 2033 revenue base that's there, how do you go about rightsizing that internal versus external? And I think one thing you guys have been really good at is making very quick go/no-go decisions on early-stage assets. Now do you take on a little bit more risk there and take things maybe a little bit further and see how things mature? Or are you still quick to make those go/no-go and sort of Phase I/II stages of development?

Yes. So there's a couple of dynamics there. I think on the third quarter call, again, Mike was pretty clear around on an absolute spend basis being reasonably comfortable with kind of this $1 billion R&D number going forward. That's an appropriate level we think can continue to kind of fuel and grow our portfolio as well as kind of make a reasonably kind of conservative approach to delivering value to stakeholders, whether it's continuing the buyback or opportunistic business development, we think that kind of $1 billion number from an R&D perspective is probably good going forward. And then as it relates to kind of making those early decisions. The through line across the organization at Exelixis is kind of we view things through the cabo lens. And what we mean by that is cabo is successful not because it's the first VEGF targeting TKI but because it was able to generate differentiating data to shift to the standard of care and that's ultimately what our job is and what we're in the business of doing. We cite all the time examples of kind of me-too drugs or drugs that have generated relatively unexciting or undifferentiating data. And historically, those have been unsuccessful commercially. Contrast that with cabo, where we've been able to really shift the standard of care in something like kidney cancer and help patients live longer and that's how we've been successful. And so that cabo lens when we apply it either externally or internally into our early-stage portfolio is the simple question, does this molecule, does this program have the potential to generate differentiating data? Does it have the ability to define a new standard of care? And if so, we'll continue to invest in it. If not, we'll decide to kind of kill it quickly. Example of that recently was our decision to discontinue XB002. That was our kind of first tissue factor ADC. And really kind of the question there is, does it have the ability to differentiate versus some of the kind of predicate molecules whether it's TIVDAK that's already approved. And if the answer was no, that's kind of how we came to the decision to ultimately shut the program.

Perfect. So maybe with that, we could dig a little deeper and maybe start with cabo. So I think you maybe alluded to on the 3Q call, you provided 2030 guidance in U.S. revenues for cabo at just around $3 billion. Maybe talk through how you get there -- to that number versus where you are today? What proportion of that is coming from current label indications versus maybe some future expected label expansion?

Yes. So that $3 billion number, again, was kind of, call it, 2030 midterm outlook because it seems so far away actually coming up. It was really an opportunity for us to talk about not only the continued momentum in our base business, notably around kidney cancer and kind of the continued success we've had with gaining market share, backing patients as they stay on drug longer from that cabo/nivo revenue in first-line RCC, but also look ahead to potential launches, not only in NET but to a much kind of more risk-adjusted way prostate cancer as well. So that $3 billion number was really kind of a mix of continued momentum in the base business around kidney cancer and potential new product launches around NETs primarily. And so that's an area we're increasingly excited about. We've talked as a company about growing into this market leader in the kidney cancer space and similarly wanting to grow into becoming a leader in the neuroendocrine tumor space as well.

So you alluded it to a little bit in terms of cabo's momentum. I think it was up 12% year-over-year in 3Q, still growing at a very healthy clip. You mentioned sort of patient stacking, taking market share. Maybe speak to that a little bit more, how much more we could expect from that moving into 2025 and beyond? Again, it sounds like that's a key contributor to getting to that $3 billion number.

Yes. So I think that's something that's -- I don't want to say unique about Exelixis but something that we're especially proud of that we're kind of continuing to differentiate ourselves from a lot of other companies. If you look historically, most oncology launches tend to hit a steady state around 5, 6, 7 quarters post launch. And now we're hitting 13, 14 quarters post 9ER, and we're still continuing to, as you said, kind of gain share and really show momentum around the franchise. And so I think it's not only a testament to the data that as we continue to present data at venues like ASCO GU or ESMO, et cetera, where kind of the data set continues to resonate not only with KOLs, patients, physicians, et cetera, but it also shows kind of the strength of our commercial organization where P.J., our Head of Commercial and his team are able to kind of really on a dedicated basis ensure that we're maximizing the potential for the brand. And so we're in that unique position where we're what we call ourselves kind of a big, small company where we are big enough to execute at scale with any of our peers kind of in those verticals, those sandboxes that we play in, but we're also small enough to have that focus that speed that kind of dynamic energy to be able to, on the fly, make incremental investments that we think can really have huge returns from an opportunity set perspective. And that's how we've been able to kind of continue to gain market share. That's why cabo continues to be the #1 IO TKI combination as well as the #1 TKI. So a lot of that kind of uniqueness around Exelixis is, I think, what has helped us kind of continue the momentum in that base business.

So moving to potential label expansion, maybe starting with NET. You guys announced recently that there's going to be an ODAC in the spring around that NDA. I'm not sure how much you can say, but maybe any insights into what maybe some key questions the FDA has around that package and its approvability.

Yes. So as we announced last week, there's going to be an ODAC meeting in March. I can't really say much beyond kind of what was in the press release, but I think it's somewhat of a statement of the obvious that we're continuing and will continue to work with -- collaboratively with FDA to make sure that we're providing an opportunity for patients to get access to this medicine. The neuroendocrine tumor space is one that it's an indication where investors may not be as familiar with it, but it's one that kind of the more work and understanding we did around the opportunity set, the more excited we got about it. P.J. has talked in the past about how NET could be more analogous to what RCC looked like in kind of that 2014, 2015 time frame, where there wasn't a great standard of care. Coincidentally, SUTENT and everolimus were standards of care in RCC at the time. They're the oral options available to NET patients today. And as newer options are available, kind of that total addressable market can grow. And so we really see parallels there. And then obviously, kind of as we've gone out to ad boards and KOLs, done advocacy work with patients and physicians and all of that, kind of that excitement around the CABINET data set, the familiarity around cabo among the prescriber base is something that has gotten us excited ahead of a potential launch. One of the things that's always jumped out to me is, we do all this KOL work, these ad boards. And the data, frankly, we think are really exciting anytime you have kind of HRs in the 0.2, 0.3 range. It's something to be excited about in this industry. And so kind of these KOLs on a blinded basis seem really supportive of the data. But when you unblind it and say, oh, it's cabo, kind of the light goes off because what we've said is about 75%, 80% of prescribers actually already give cabo in another indication. And so there's this high kind of built-in familiarity, not only with cabo, but how to manage a lot of kind of the day-to-day important toxicity management, dose reductions, all the things that normally kind of go into a launch that's already built in. And secondly, when you think about kind of that 15%, 20%, 25% of prescribers that don't give cabo, we actually see them as broader -- as part of kind of our broader commercial coverage at other points in those cancer centers. And so we have this kind of built-in infrastructure and familiarity that we think really helps us and kind of makes us even more excited about the NET opportunity.

So maybe quickly sticking with NET. I think you've sort of positioned maybe the cabo/zanza franchise as a NET play. I guess I'm trying to figure out how much of the NET opportunity for cabo is a stand-alone real opportunity relative more so priming the market for a future potential zanza launch?

So I certainly don't think it's kind of one or the other. We're certainly excited about and kind of the $3 billion opportunity that we've talked about in 2030 reflects that excitement around cabo and NET. The zanza opportunity, again, is another example of us wanting to shift the standard of care. If you look at the CABINET data set across pNET and epNET, it was really kind of a broad base -- a reasonably broad patient population randomized to either get cabo or placebo, and that's a reflection of they were relatively later line patients. They had -- many had seen LUTATHERA and SUTENT and everolimus. And so CABINET is kind of a much later opportunity relative to, say, something like 311, which is our planned pivotal study for zanza in NETs where that's a head-to-head study against everolimus, really asking the question, can zanza be that first oral option for patients. And so it's moving earlier. It's looking kind of at an earlier patient population, and it's not kind of one or the other. It's more of an example of Exelixis wanting to be kind of that market leader in an indication we think is really primed for growth.

Last question on cabo, and then I do want to speak to zanza a bit more. So you mentioned the prostate cancer opportunity. How should we think about that, the likelihood, what the biggest risk there is to a potential approval? Maybe you could just speak to that a little bit.

Yes. So we've guided to filing by the end of the year. I think kind of the simplest answer to that is, again, if you look at that $3 billion opportunity for cabo in 2030, we did say that, that does include a relatively heavy risk adjustment for prostate. And so it kind of says it all in terms of our perspective on that. Obviously, we're excited about having the conversation and working collaboratively with regulators about potentially providing another option in the armamentarium for patients and physicians with prostate cancer. But again, kind of the 2030 number does include a pretty heavy risk adjustment from our end.

Great. So maybe moving to zanza, again, referencing sort of 3Q call, there, you provided 2033 unadjusted U.S. revenues for zanza of around $5 billion. I think that took a lot of people by surprise, stood out. Maybe at a high level, talk us through sort of what needs to happen for you to get to that number.

Yes. So again, kind of the method to that or kind of the philosophy around that was kind of once we had this clarity around the cabo LOE, most of the questions went from ANDA, ANDA, ANDA to zanza, zanza, zanza. And what we were realizing is kind of there was maybe not as much understanding or people hadn't really done as much work on that zanza opportunity just because the ANDA had been such a big binary barrier for any real investment thesis around that molecule. And from our perspective, we look at zanza as kind of the continuum of investment around kind of that core cabo franchise. So if you take a step back and say, if cabo is a second-gen VEGF-targeting TKI where kind of the original hypothesis around cabo was, can we create a TKI that also targets some of the key resistance mechanisms from some of the first-gen VEGF-targeting TKIs, I mean MET, AXL, MER, et cetera. We think that kinase inhibition profile is reasonably dialed but kind of that core liability that cabo has is its long half-life. And so what Zanza is, is it's taking that core phenocopied kinase inhibition profile of cabo and then we engineered a metabolic liability into that scaffold that changes the half-life from 4 days to a little under 24 hours. And so what that means is it provides a much more user-friendly, potentially more combinable, potentially safer option relative to cabo because the challenge with cabo is all patients who are on a VEGFR targeting TKI inevitably see some sort of adverse event. The dose reduction, the dose hold period given that long half-life can be on the order of 10 days, 2 weeks, et cetera, so that day-to-day patient management, the combinability of that is much more of a challenge. And so kind of that zanza opportunity was really to say, what could we do with a cabo-like molecule in terms of its efficacy that's much more kind of combinable and user-friendly in this environment where multidrug, multimodality combinations are likely going to be the future of cancer treatment going forward. So what we wanted to do with zanza in the third quarter call was really to say we have 6 ongoing or planned pivotal studies with zanza, and we really saw kind of a lack of appreciation of not only we view it as a reasonably derisked program but also the breadth of the opportunity sets of where it's being developed right now. So we talked about that $5 billion total opportunity, relatively evenly split between kind of the GU indications, GI indications and a little bit of head and neck. That's a contrast to kind of our current cabo business where it's GU is way up here, GI is much, much smaller. Hopefully, that GI kind of dynamic is going to increase with the NET opportunity. But that $5 billion number, I think it's around 45% GI, 45% GU and then 10% head and neck. And so that's a reasonably, quantitative perspective on how we see those relative opportunities.

So the first pivotal trial that will read out will be a GI indication in STELLAR-303 with CRC. I think many people point to the LEAP-017 trial and its negative outcome there. How much sort of read-through is from that trial to STELLAR-303? Is it a fair comp or an unfair comp? And then how much read-through is there from STELLAR-303 to the rest of the pivotal development program for zanza?

Yes. So the question on the comparison versus lenvatinib is actually one that we unsurprisingly get a lot. And we actually view it in a slightly different way, and we talked about this last year when we amended 303 once the full results of LEAP-017 were made available. If you think about, say, RCC, and we can all make kind of comparisons between lenvatinib, pembro and cabo/nivo and really understand what some of those core differences are between those VEGF TKIs, not only around efficacy but around tolerability and importantly, around dose. Similarly, if you think about everything I was just talking about with kind of the differences between cabo and zanza around the shorter half-life and what that means from a dose management and dose hold perspective, those are some important aspects. So when you look at LEAP-017, one of the things that we did, for example, again, when we amended our study was really kind of dig in and understand why did that study -- why was it not successful. So you can look at things like the liver met versus non-liver met population. And there's a pretty clear emerging consensus in kind of this GI oncology community about -- around functionally different biology, especially as it relates to sensitivity to checkpoint inhibitors, for example. So 303, we have a hierarchical analysis, where the primary endpoint is in that non-liver met population and then the overall kind of ITT population. Similarly, when you look at LEAP-017 and kind of the differences in the control arm, so as a reminder, they randomized patients to either get len/pem or rego or Lonsurf. And so if you look at that study and the results, if the patients who got rego or patients who got Lonsurf actually did much better. So if you contrast that with 303, where we're actually only randomizing to regorafenib, that's one of the things that, again, we would point to as kind of an important difference in delineation between LEAP-017 and 303 beyond the fact that we're really excited about zanza and its profile as a molecule. And across the LEAP protocol, one of the consistent themes, whether it's in colorectal or even head and neck, where we have another pivotal study is kind of that tolerability seems to be a potential, real limitation, not only around kind of patients discontinuing len but also discontinuing both, which certainly can have an effect on things like overall survival. So certainly a dynamic we're paying attention to and looking forward to data next year.

Perfect. Well, with that, we're right on time here. So thanks, Andrew, for your time and thoughts. And thanks, everybody, for joining. Thank you.

Thank you.