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

I'm David Lebowitz, one of the biotechnology analysts at Citi. Thanks again for attending Citi's 2025 Virtual Oncology Leadership Summit. And I'm happy to have with me here today from Exelixis, CEO, Michael Morrissey. Thanks so much for coming today. If we could just start out, you can introduce yourself and the company, the mission, what you've achieved overall just from a top level for the year?

Yes, for sure. Well, it's great to be here. And thanks for the invite and the opportunity to join you today. It saves me a trip to SFO. That's always a good thing. So glad to be doing it virtually as well. I've got Susan Hubbard and Varant on the line as well. So there -- I think they're in a listen-only mode, but got the full team here. So great to have, again, a chance for Exelixis to chat about what we're doing, where we're going, those kinds of things. So again, I appreciate the opportunity. So before I begin, let me just say, I'll be making forward-looking statements. So please see our SEC filings for a description of the risks that we face in our business. Get that out of the way, number one. Yes, I'll talk about Exelixis. So again, we're -- I guess, we're moving into the, maybe, late adolescent stage of our existence, been around for 30-plus years. Many different, I would say, flavors of a technology platform that's always been really focused on high levels of science and great people focused on helping patients and that certainly has evolved over time. Today, in 2025, we sit here with a market-leading drug for kidney cancer, having spent many years discovering and developing and now commercializing cabozantinib, cabo for short, into what we think is a very important drug for a large number of patients with kidney cancer as well as liver cancer, thyroid cancer and hopefully more in the near future with other indications that we can talk about this morning. But again, high focus on science, high focus on running the right experiment at the right time. So we've been very -- we haven't been shy about running pivotal trials and making big investments and placing big bets by ourselves, with our partners, with clinical collaborators that we think has been very successful and paid off dividends for both certainly our patients that we seek to serve as well as investors and shareholders. So we've got our -- done a lot. We'll talk about that today. Obviously, cabo is a big drug for us and providing a lot of gas in the tank, if you will, for us to build out a pipeline that we'll talk a lot about today. We're thrilled to be able to work with investigators on a global level to be able to move our pipeline forward. And obviously, in the medical and commercial world have great relationships with health care providers to make sure that we're doing the right science, have the right molecules and then doing the right work clinically to be able to really improve standard of care for patients with cancer. That's what we think about and do every single day, every hour of every day is really ask the hard questions, design the right experiments and get those going. So now if I could add a little bit more, obviously, 2024, 2025 were really important years for us and will be for us this year as well. We're moving into a, I think, realm where our aspirational vision for building a multiproduct, multi-franchise oncology business is really taking shape. Obviously, the success we had in Q4 of 2024 on the IP front, on the collaboration front, certainly on the commercial performance of cabo has really set us up very well for 2025 and beyond. And I think we certainly use all that momentum from the end of last year to really put us in a very good position to come out of the blocks sprinting in 2025. So part of that is the success of cabo continues to be very, very strong commercially, and you saw very good growth in 2024. Again, 11% growth around basically demand, new patient starts, revenue. It's fourth or fifth year now that we've had double-digit growth since the 9ER data came out in 2020 and was approved in terms of that frontline cabo-nivo RCC setting in 2021. I think this year, you'll see zanzalintinib, zanza, really take the spotlight. Again, we have a lot of high hopes and expectations for that molecule. I'm sure we'll talk more about that today. We think we have an opportunity to surpass cabo in terms of the scope and scale and revenue and certainly is one of our main mid- and long-term drivers for revenue growth. So we're very, very excited about that molecule. Expect couple of trials to read out with top line data this year if event rates continue to show themselves to get that data as well as other trials either starting or moving forward. So a lot going on there. Again, we're all about the pipeline. And certainly, that is the main focus. We believe that we need and we want to have a pipeline of products, all with either individual or combinable franchises within the Exelixis product portfolio to drive, again, more patient benefit potentially, again, improving standard of care for patients as well as moving downstream into commercial. So lots of effort there that I'm sure we'll talk about, too. And then, we have -- we're in the fortunate position to generate a lot of cash, right? We did about $1.8 billion in net product revenue last year. We're guiding midpoint for NPR in 2025 is about $2 billion without adding on the contribution from NET approval, and we'll deal with that later. So generate lots of cash. Obviously, investing appropriate amounts back in the business with a great degree of discipline, looking at -- been very successful with our share repurchase program that has bought back. We're certainly vectoring towards, certainly, $1.5 billion of shares that we will buy back when we finish the current plan and then looking to really identify high conviction assets in the GU, GI oncology space that we believe have the ability to both clinically and commercially differentiate themselves from the competition and drive growth. So, yes, a lot going on. Again, the whole focus is really on developing multiple products, each with a franchise of their own to drive value for patients and shareholders. So a lot to do, big year for us. Certainly, very excited about the first 6, 7 weeks of the year. And looking forward to a lot of success throughout 2025. I think I've lost you here.

Thank you very much for that. I appreciate it. I'll unmute myself here. Certainly, cabozantinib has been backbone for the company for quite a while and renal cell carcinoma has been a big part of that. Could you walk us through the current treatment landscape in renal cell carcinoma, talk about the role that cabo has served, is currently serving and how you expect that role might evolve going forward?

Yes, for sure. It's a great story, and it's a great example of what can happen and what often happens in our industry when individual companies but also the whole industry kind of moves the ball downfield effectively for patients in a way that is really meaningful and change the standard of care, improve standard of care. So how you can compete, how you can collaborate with the competition, how you navigate all those different components. For us, it's been just a remarkable journey for us since we got the top line data for cabo and RCC from METEOR in 2015 to where we're at today. What I find very instructive as some of the kind of the high-level components when you look at how the market basket has just grown since 2016. So 2016 or so, when we launched cabo and RCC, the RCC market basket was around $3.5 billion, $4 billion a year market. 2023, it's really -- and that with all the success of cabo, other TKIs of checkpoint inhibitors, the combination of those, it's become a $10 billion market, right? Without the incidence or the prevalence really growing at all, same more or less patient population. We're just helping patients live longer, live better. And just for us it's a really exciting part to first, we're competing with all of big biopharma in this realm. And then we collaborate with them, too, to be able to really combine and conquer and do better by patients while building value for our shareholders. So it's a big part of that. In terms of the market today, you've got checkpoint inhibitor in the adjuvant space. You've got different flavors of either IO or IO-TKI combinations in the frontline metastatic space. You've got molecules like cabo and other TKIs that then kind of fill in second line, third line along with newer MOAs like the HIF alpha -- HIF-2 alpha inhibitors that come into play as well. So the level of investment here has been, in some ways, absolutely remarkable and very instructive in terms of what it takes to move the needle for patients. And then the reward when that's successful. We're very fortunate. Again, cabo is the #1 TKI for frontline IO-TKI combinations, and that's kind of the pole position that we're very proud of, since we got in there late, but we got in there with arguably really strong data across not only PFS response rate, overall survival, but also quality of life. We had the 5-year update on overall survival from 9ER at ASCO GU this last weekend. And I'm still -- I still get goosebumps when I see that data, how well it's matured, how well it's maintained to still see a statistically significant survival advantage after 5 years. For me, it's just -- it's great to see and so fortunate to us to be part of that and so happy for patients who have that option. I have some family that are now on that regimen, and it means a lot to me to know that they have the option and the opportunity to be able to benefit from that. So that's really special. And then mainstay second line is cabo. Cabo is the go-to single-agent drug that's used after patients progress on frontline combination. And that's been growing since it was launched with METEOR in 2016 and continues to, I think, really do the job relative to keep patients doing well, right? Again, METEOR was the first example where a TKI showed a survival advantage against an active control, in this case, everolimus. So super proud of that, and it certainly has been -- we've been able to make the most of that as we're going forward. So that setting, that indication is really important to us, the one that we've cultivated really well. Our sales team and commercial organization, I have to say, is probably in a bias, but probably best-in-class there for a reason. Great data, great team, great effort, and I'm just super thrilled to continue to see that performance. Now there was a lot of discussion at the beginning of 2024. Were we going to flatten out, were we going to -- how do we maneuver going into year 4 after the 9ER launch. And I think a lot of people were surprised by just how well cabo continues to do. So we're actively marketing that drug, both as a single agent as well as combination therapy. And I think that extra work really pays off on top of all the data that we're able to generate and then talk about in a very compliant fashion. So great progress. I want to do that again and again and again with molecules like zanza, with things in the pipeline -- molecules in the pipeline. We're super excited about the, hopefully, upcoming NET indication. When that comes online as well, we think that could really move the needle for those patients. So a lot of work to do. We're excited about our past, but we're not content. And I think the energy that just permeates this organization is palpable and one that is industry-leading. We want to get the job done for patients. And if we do that, then we're confident we can make money for our shareholders, too.

So you mentioned that, certainly, that's going to be an important topic in the next month or so, given the FDA's imminent decision. Could you run us through what was presented in the NET data in the CABINET trial to this point? And what we should take away from it as far as the potential in that particular population?

Absolutely. So again, CABINET was a cooperative group trial that was run by the Alliance cooperative group. It was based on some really compelling Phase II data that Jennifer Chan from Dana Farber generated really years ago, right, back in the, I think, 2015 time frame. So there's been this kind of emerging swirl of interest and activity in the role that cabo could play in this tumor type in this histology. And obviously, we were very excited to be able to support the effort that the cooperative group ran in terms of CABINET and then have the data come out so strongly in terms of -- I think there have been 2 ESMO presentations right now. There's been a publication in the New England Journal of Medicine that just came actually in paper version that came out, I believe, in the last week or so, as well as then all the work that's gone into the filing. So bottom line is that we see a molecule, we see data with cabo in both pancreatic NET, neuroendocrine tumors, as well as extrapancreatic neuroendocrine tumors, or NET, where we see strong efficacy with looking at the primary endpoint, progression-free survival. With the epNET population, the medians there were about -- let me look at it here, about 8.4 months, for cabo versus placebo of about 4 months, so about a doubling of the PFS benefit. The hazard ratio was even better than that. I believe it was in the 0.38 range. Whereas in the pNET population, it was even more pronounced. The hazard ratio was 0.23 and the median PFS basically tripled with cabo versus placebo. So -- and these are patients who have been previously treated, progressed on one of a number possible really first-line therapies post progression on a somatostatin analog. Very -- I would say, very compelling data. No decrement in survival as you would expect in a cohort that, again, a population that lives a very long time, but needs new therapies, right? So we're excited about that. But I think the beauty of the trial and certainly want to tip my hat to Jennifer and her -- all her investigators, all the investigators on the trial. It was a really, really broadly inclusive trial design that really covered all the bases, if you will. And really, I think in that regard, discriminates the CABINET trial from other trials that have been run with other -- certainly other oral therapies like everolimus and sunitinib in the different populations. So in terms of site of origin, they looked at GI-originating NETs, lung-originating NETs, pancreatic-originating NETs in terms of the grade, the actual severity of the disease. If you look at that quantitatively, greater than 40% Grade 2 or Grade 3. So the real -- honestly, I think the patients that really, really need active therapies was heavily focused here. We looked at patients with functional disease as well. And maybe most importantly, based upon the time it took to enroll this study, which is probably 6, 7 years, we had a very high level of population of patients who had been previously treated with Lutathera. So when you look at the different components, it was actually a fairly heterogeneous population, just a, by design and b, by the time it took to actually enroll the study. But I think the really important news is that from the standpoint of looking at these different kinds of subgroups, cabo did better in all of them. So we're certainly very excited about that. So looking at the -- really, the heterogeneity of NET and being able to cover all the bases, we think, is super important and potentially a benefit for prescribers and patients.

So given how heterogeneous the population is, how are they currently treated today? And how will you expect that might change? And as we look towards this approval, what is the opportunity actually represent? How large?

Yes. So our estimation -- and we've talked about this on various investor and earnings calls. If you look at the current kind of market research around the different oral therapies and they're all generic now. So you use contemporary pricing and you use kind of the standard kind of cabo potential duration of treatment based upon PFS with a little fudge factor. We think there is probably a $1 billion market for NETs in the oral therapy space. And that covers really all the different components. How patients are treated comes down to the individual patient needs and what the individual doctor or prescriber feels is appropriate and, again, how they work out those details. I think the good news is that there's a lot of options for patients. The additional good news is that these patients can live a long time with their disease, but they still live a long time with their disease while it's progressing. So any new molecule that has proven efficacy that can be brought into play to help them, it gives everybody more options on when to use it and how to use it, right? And I think that's -- as we see it, that's a really, really important benefit in terms of we're not pigeonholed into one potential kind of niche subpopulation here based upon the way the trial was designed and based upon the results, we think. And certainly, the KOL feedback and what we see with -- from NCCN and their recent update really supports us is that it could be used in a lot of very important parts of that disease journey to be able to help patients. So we're excited about that. Again, I don't want to get too into the weeds on the label and on the interaction we've had with the agency. That's -- all that's confidential until it's not. And then we'll be sort of -- we'll be sure to talk about it in more detail. But we're launch ready, the commercial organization. We're just so fortunate and so excited about having this veteran team that's done so well in other indications and certainly provided industry-leading support in kidney cancer to be able to jump into NET at the appropriate time and in a very compliant fashion to help educate physicians and prescribers about the cabo data from CABINET and how to -- what kind of options they have for their patients. So obviously, we have to wait for the approval letter and that will come when it comes. We have an April 3rd PDUFA date and -- but we're ready to go now and certainly excited about that next move forward for sure.

What type of cadence could we see with penetration into it given how heterogeneous the market is? Will it be more gradual?

Well, we'll see, right? We all have different expectations. We all have models for what we could do. I think the reality is the kinetics of any launch are really, really hard to model, especially in a population like this that is, again, has a pretty long tail from the standpoint of having a lot of patients available who need therapy. And a pretty good level of incidence in terms of new patients coming in. So we'll give -- we're not going to give guidance today. We're not going to give guidance on giving guidance. We'll certainly take the appropriate view on how to update guidance. I think the expectation -- certainly, my expectation for the team is that we're going to do everything we can to be able to get out of the blocks as quickly as possible, educate everybody we can. I would say the momentum is there right now. If you go to national meetings, you go to advocacy meetings for NET, certainly at ASCO GI a few weeks ago, when NET gets discussed, cabo is front and center. And I think the KOLs and people that we've talked to in terms of market research are very excited about the opportunity. So we just got to -- we play by the rules, obviously, and we'll do what we do and make sure that we're ready to go and get out there ASAP. But I have very, very -- personally very high expectations for the team here. And they know that. We know that. And we're going to be off to the races as soon as we can.

Excellent. And let's jump over to prostate cancer. Could you update us and tell us about the CONTACT-02 data and where things stand on that end?

Yes, I'd say at a high level, and we talked about this on earnings a few weeks ago. CONTACT-02 is certainly a very interesting data set looking at first, second-line metastatic prostate cancer, castration-resistant prostate cancer, looking at cabo-atezo versus a second NHT. We won on PFS with no decrement in survival. Some of the subgroups in terms of liver mets and bone mets, et cetera, looked really encouraging. With the focus and the urgency around NET, that filing has just kind of been put on the side until we get this one over the goal line. So as I said at the last earnings call, not really commenting on next steps there or plans there. We'll deal with all that once we get past the approval with cabo and NET and get the launch off the ground, and then we'll come back to that. So stay tuned on that. The 2030 guidance that we gave of $3 billion is really -- has little, if any, revenue in there for prostate cancer. It's basically all the base business growing and the NET. And with the way the base business has been growing, and we expect we'll continue to grow, and then with the NET opportunity, we're very, very confident we can hit that number. So anything we get from prostate, if we do, is just icing on the cake. So stay tuned for that, though.

Got it. Let's jump over to zanza. I guess to start, how is it similar and how is it different from cabo?

Good question. So the interest we have in zanza has historically, and this goes back 5, 6 years now, really around what do we have with cabo and potentially, how do we make it better, right? And the idea was always -- cabo is a great molecule. We think it, by design, has the right target inhibition profile going after the tumor, going after the vasculature, going after the immune compartment. We really -- it's amazing how much [ proof ] we got for this multi-targeted drug back in the, I would say, mid-20 teens or so as opposed to these super selective nano niche-focused molecules. But it was all done by design. And it was built to cover all the bases because, quite frankly, tumors are really smart, and they evolve like crazy and going after one target, one pathway, in some ways, is and can be a bit naive in terms of how tumor, especially resistance operates. So we took some -- we took -- we placed a big bet with cabo, and I think it's turned out well from the standpoint of being able to have an impact on various different tumor types. So we like the profile, right? And certainly going after those important cell types and those important pathways that cabo fits was something that we really, really wanted to build upon with the next-gen molecule like zanza. The one drawback that we've heard back from KOLs and prescribers on market research is that its long half-life, which is about 4 to 5 days, can be a complication when patients need to be dose adjusted. And that's super important when you're talking about chronic therapy, right? In the frontline setting, even second-line setting now, patients can be dosed for 11, 12, 18-plus months. So with any -- it's a class effect, any VEGFR targeting TKI, there's this cumulative toxicity that has to be addressed with lower doses. So having a 4- to 5-day half-life just complicates that, right? So the idea was, okay, can we build in a simple metabolic liability into the cabo scaffold that allows us to shorten the half-life, kind of fine-tune the half-life, so it's like daily dosing, daily dosing with like a 24-hour half-life. That then makes it easier to dose adjust if and when that's needed. So that's how we did, right? And it was a great, I think, piece of really, really high-end medicinal chemistry to do that and then to characterize that. And I would say the -- some of the early data we got was really encouraging. And you never prove any of this stuff until you're running large global randomized pivotal trials. But some of the early data that we talked about at the end of '23 seemed to highlight and suggest that we might have a differential tox profile too because the compound based upon C14 labeling studies, zanza appears to distribute differently between tumors and normal tissues compared to how cabo does. So you could rationalize why you might see less hand-foot syndrome with zanza compared to cabo because there's less zanza actually in the dermis based upon some of these C14 label studies. So all interesting, all early data. Obviously, the best way to prove it is to prove it in pivotal trials against active controls, which we're doing now in 3 trials that are ongoing and a few more that will start shortly. But we like the momentum. From my point of view, I look at how -- if you go back in the day, look at what Celgene did with thalidomide to Revlimid to POMALYST, I mean, it's a very kind of similar idea. Can you make these important and kind of thoughtful structural changes to a molecule to improve the activity to give you more room to maneuver clinically across all the different aspects of kind of clinical pharmacology and clinical science, which I think we're doing here with zanza. So we're up, we're going. Very excited to see that now. Again, as we talked about this year and even at the end of last year, we have numerous pivotal trials going with zanza. We expect, again, 303 -- well, at a high level, we expect to have the first launch if things go as planned in 2026 and then basically one launch per year after that. I think we've timed the cadence and planned the cadence really well so that cabo indications like RCC and potentially NET for zanza would come online after the cabo LOE in the 2030-2031 time frame. So we're not scavenging cabo with zanza. Cabo will have a natural kind of tail after the LOE and then zanza if we expect we'll have better data in those trials and reset standard of care that would be used as the mainstay. So I like how we frame the opportunity. The first wave as we talked about on the Q3 call and then certainly highlighted at JPMorgan as well as on the Q4 call, we think it's a big opportunity. It's a good split between GU and GI indications. Head and neck is certainly interesting. If those indications all hit based upon our market research, that's -- we think that's a $5 billion a year business by 2023. So it's big stakes for us. Obviously, it kind of takes any kind of perceived nadir with the cabo LOE out of the picture and provides us with a lot of horsepower then to build up the rest of the pipeline because that's the key thing, right? My view is replacing cabo with zanza is interesting, but that's not enough. We need to build a pipeline. I want to have more legs to this solid table. And that's how -- frankly, that's how you build companies into the next Genentech, the next Regeneron, the next Vertex by having multiple product opportunities that deliver across indications. And that's -- quite frankly, that's the goal. It's a simple goal. Everybody gets it. It's just really hard to do.

So we have some pivotal data coming up in the second half of the year. Could you set the stage for what we should expect from each of those studies?

Well, I can tell you what we're hoping to see is positive data, right? So 303, we think we'll read out second half of the year. That's the third line plus trial in colorectal cancer, looking at zanza-atezo combination versus regorafenib. That's obviously very well powered to show overall survival as a primary endpoint. Primary endpoint is in the non-liver met populations, which seems to be sensitive to an IO component if you look at some of the evolving data from some of the IO-IO combinations and then LEAP-017 from the len-pem combination data versus standard of care. That population seems to be the most sensitive. Obviously, we want to win in the ITT population, both liver mets and non-liver mets, if you will. It's a big opportunity. We think that's probably a $1 billion-plus market in totality, about half non-liver mets due to the good -- better prognosis and the longer potential duration of treatment, but we certainly want to win in both if we can. And that trial has gone well in terms of enrollment, and we're tracking event rates closely. So we think we're on track for that. 304, STELLAR-304 is in a non-clear cell RCC population, looking at zanza plus nivo versus sunitinib. Surprisingly, there's never been a global randomized pivotal trial run in non-clear cell RCC. So again, we're kind of the leading group to do that. It's -- that population is about 20% of the overall population. Everybody like us with cabo and cabo-nivo has that in their label because people just assume that the crossover is pretty good in terms of the information. But I think having definitive data, again, looking at the trifecta of response rate, PFS, overall survival, if successful in some shape, manner, or form could really put us in a good spot there as well. So -- but again, both the 303 and 304, these are all event based, tracking that very closely. So we think that will happen this year, but things could be delayed based upon events slowing and if they are, that's just the way it goes. 305, STELLAR-305 is in PD-L1 positive head and neck cancer, looking at zanza plus pembro versus standard of care pembro. Again, this is part of our clinical collaboration with Merck in head and neck as well as in RCC, and we're looking at zanza-belzutifan combinations as well. So super -- just super excited to be working with them in terms of both indications, all 3 trials. And when you add those 3 to the first 3, that's the first wave of trials that we'll do. And Amy Peterson and her team are working on designing the next wave of trials after that. So again, building a franchise here, man, that's the bottom line. That's one of the lessons we learned from cabo and certainly plan to do that again and again as we go forward.

We are getting close to the end here. Last question here, a little free for all for you. What's next? What do you want to tell us about what we can expect in the future?

Yes. Well, zanza is super exciting. That's obviously mission-critical for us. I think the pipeline is coming together really well, right? XL309 is our USP1 inhibitor, which, again, is designed, again, mechanistically, biologically, to play in the PARP space, either in terms of increasing the number of responses in PARP refractory patients or extending the duration of efficacy with the way that pathway works. So super excited about that molecule. That's gone forward really well. And hopefully, we'll have some data to share on that later in the year. We have made some really important strategic investments on the biologics side as well. So we have a number of ADCs that are now either in the clinic or about to go into the clinic against novel targets, some known targets, novel linkers, a mix of payloads and warheads. We've done, I think, a really, really great job from the point of view of mining the biology and then really doing the appropriate level of investment around manufacturing to be able to get those molecules into the clinic with very, very high purity and great data. So we're looking for one of those kind of get to the level where we can move it into full development. Again, it's a tough business, lots of molecules don't make it, and we accept that, but we're going to find the winners and move those forward. And then we're very active on the BD side, too, right? We have got a lot of interest in other later-stage GU and GI assets. There's -- as I said previously, we burned down numerous haystacks. There's a couple of needles that we're interested in that we have conviction in. And again, we view everything through cabo lens ,right, in terms of having the conviction that we -- whatever we invest in, especially large investments, pivotal trials, BD, some shape, manner, or form. We have to have the conviction that whatever commercial -- whatever clinical data we can generate is differentiating enough to allow us to have the success we had with cabo commercially, right? So it's that conviction around the clinical-commercial nexus that I just think gives us very unique insights into how to play that game well. As I'm sure you and your friends know, nothing can be more value destroying than doing bad BD, bad big M&A. Even small M&A if it doesn't work can be very expensive. So we're very disciplined there. But I think we've got a good eye and cabo is a good example where it was given back to us twice, but we had a unique view on that, and it's a multibillion-dollar drug today. So I'm very confident with the team we've got, with the focus we've got and just the experience and the energy, we're going to do a lot of great things as we go forward.

Excellent. Thanks again for coming today, and look forward to chatting again soon.

All right, David. Have a great day. Thank you.