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

Good morning, everybody, and thanks once again for joining us for the 45th Annual TD Cowen Healthcare Conference. I'm Yaron Werber, biotech analyst at TD Cowen, and it's a great pleasure to moderate the next fireside chat with really someone who needs no introduction, Mike Morrissey, President and CEO.

Good to see you Yaron. Great to be here again. Thank you.

So lots going on in Exelixis this year, for sure. I mean, every year, there's a lot going on, but this year is really action packed. So I'm going to -- let's start, first of all, with the guidance, maybe a little bit on financials. You guided to $1.95 billion to $2.05 billion in net product sales. So that's up 18% to 14% year-over-year, but that does not include the upcoming approval of CABINET, which is expected in April. As you thought about the guidance, you gave similar-ish guidance last year, and of course, you beat it. And you said it was -- the guidance for last year on a year-over-year basis, you felt was at the right place. And at the end, obviously, there was pretty good growth year-over-year. How are you thinking about what went into the guidance this year?

Yes. Yes. Well, first, thanks again for the invite. It's always great to be back. We were just laughing that. It must be the beginning of March since we're at Cowen. So that's good. I'll also say 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 yes, 2025, I feel like it's July already. It's been such a busy year so far. We are very optimistic about taking the momentum from the back half of 2024 and continuing to use that to energize the business going forward. Cabo had a really strong year last year. Not only did we beat guidance, but we actually raised guidance on the Q3 call. So the base business is strong, continues to be strong. We have good expectations, high expectations for that base business growing this year, as you mentioned, in the guidance with the midpoint of the net product revenue guidance of about $2 billion. So cabo has built and maintained a leadership position in kidney cancer. The top TKI in the frontline IO/TKI segment. It's the mainstay in the second-line therapy as monotherapy. We're -- we think we're seeing literally every patient sequentially in some manner or form in that indication. And you think about launching in 2016 based upon the METEOR data, having a series of additional indications add on. Those are heady days. We're competing against the big boys and indications that really matter. And I think our -- the data that we've been able to generate clinically driving to regulatory success and then the, I would say, the depth of commercially our team and the data and just how we operate in that world is best-in-class. So we have high hopes for 2025. Obviously, the guidance out of the box is strong based on the base business. And then there's the net opportunity that hopefully will come online soon. The PDUFA is April 3, and we're ready to go. So exciting for sure.

Is the thinking to then update the guidance once you get the approval?

Yes. I don't want to give guidance on when we'll update guidance, but we'll certainly update guidance at some point as we go post-launch details, TBD. There's lots of different levers at play here. So I kind of like to see the kind of the launch velocity, if you will, how that trajectory looks before we put numbers out there. We have numbers now for the year that I think exceed what's kind of consensus from the sell side, but we think we have room to even grow from there, too. So we're very bullish. We'll talk more about that, I'm sure, but it's a prime spot for us to be in and to really invest in going forward. We want to convert the net opportunity into what we did with say, kidney cancer in the 2016 to 2022, '23, '24 time frame. I mean that's how you build the franchise. You double down, you invest, you cover all the bases, look at different opportunities and you build success for patients, which then drives value for shareholders.

What are -- we're about just a few weeks away now from the PDUFA. What are the remaining gating factor on neuroendocrine tumors? And FDA originally thought they were going to do a panel, but decided not to. Any thinking behind that?

Yes. I don't want to get into the sausage making in that conversation. Those are all confidential. We've had a great collaboration with the agency. Obviously, there's a lot going on in the metropolitan D.C. area right now. So let's just say we're very happy with the collaboration. We're excited to help patients once we get approved. Obviously, we'll market in a very compliant manner. So we're buttoned up there and I was looking forward to dotting the I's and crossing the T's and get it done.

And from the label, are you expecting both pancreatic and extra-pancreatic on the label, sort of a broad label for patients who've seen previous drugs coming?

So I would frame that topic without going into detail as the indication statement often pretty well tracks the population that you studied and the data that you got, right? So I'll leave it at that. But again, the way CABINET was executed by the Alliance cooperative group, enrolled over 6-plus years, pretty broad patient population because standard of care was kind of evolving over that time. So in some ways, it's a heterogeneous population, which speaks to the potential for cabo to help any number of different kinds of patients across any number of different kind of variable dynamics. So yes, just there's more opportunity for patients and for prescribers and for us, for sure.

So the one -- I mean, the CABINET data was pretty clean, fairly effective in both populations. The only thing that sort of popped up is those 3, the imbalance in death, right, the extra pancreatic, there's 3 out of 124 possibly related to drug. In the pancreatic setting, I think there was potentially one, even though there was a little question about it. Anything you can highlight about those 3 patients or any of that imbalance?

Nothing that's not already been published or presented at ESMO or in the New England Journal of Medicine paper. So again, this is a -- depending upon the individual patient, they can be on drug for drugs, if you will, for decades. So there are individual comorbidities -- who knows, right? So focusing on individual examples out of that kind of a big pivotal trial is kind of tough. But again, we're locked and loaded. We're finishing up the review and hope to be able to secure approval and launch ASAP.

And can your partner -- can Ipsen follow with that data in Europe?

They have.

They have, right. And they're expecting approval by the end of this year?

Yes, I wouldn't want to speak for what they're expecting.

And the EMA has accepted the filing?

I wouldn't want to go into that. Yes.

They have not commented. Okay. And then back to maybe in the U.S., where do you think cabo is going to fit in? Maybe give us a sense kind of how do you market it into this population?

Yes. So it's -- again, based upon the population that we studied, it could be applicable for a wide cut of different patients depending upon how they present and what kind of drugs they have received previously. So -- and that's -- again, I think that kind of ties back to the elegance of the way the trial was designed and enrolled. It's the only contemporaneous study that's been looked at relative to post -- pre and post Lutathera, which is interesting. also looked at different grades, different sites of origin, different SSTR status in terms of SSTR positive versus negative functional status. So it covers all the bases, right? So -- and we've got some, I think, some nice kind of summary slides in some of our recent earnings decks, which kind of highlights that in kind of a checkmark fashion. So again, our view is we'll get the label we get. Indication statement will guide how we market. Certainly, the market research and the feedback we've gotten from the community of net prescribers, KOLs, community docs, advocacy groups, patients has been just overwhelmingly positive. NCCN gave us a very generous compendia listing recently back in January. So we have an opportunity to, I think, help reset standard of care here. We're certainly very excited about the opportunity to now start building out a GI franchise. As we talked about back on the Q3 call last November, I mean, we aspire to be a multiproduct, multi-franchise oncology company that has depth of world-class leading kind of offerings for both the GU and GI oncology, and this certainly helps us put a stake in the ground in the GI space with more to come this year, say, with zanza and 303. So -- but yes, look, expectations are high. And the team is ready to go. Data is there. team is trained. So we just need a letter, and we're off.

Yes. And the NCCN compendia, can you just remind us what that included. And how did they address prior Lutathera therapy within that competitor?

Yes. I don't think it was called out specifically. It was a very broad categorization across different types of origins. So I wouldn't want to recite it word for word. But again, I'd refer you back to that, and it's just -- it's very, very I think appropriate based upon the data we got and I think how it will be used.

It just required patients to fail 1 prior line essentially.

Yes.

And then -- got it. The STELLAR-311 study is ongoing. So this is the zanza versus everolimus study, [ advanced NET ], both pancreatic and extra-pancreatic. Maybe how is that study different than CABINET?

Different in 2 important ways; number one, it's a trial that will run ourselves, number one; and number two, we're going head-to-head against everolimus. So I think that's a very important next step in terms of kind of generationally looking at how you raise the bar for patients, right? The CABINET study was cabozantinib against placebo after progression. This is zanzalintinib against everolimus. So a common standard of care agent for these patients. So it really raises the bar. It's -- it's really the next best thing to do. And the feedback we've gotten there has been -- just been tremendous from -- again, from KOLs and people wanting to help enroll into the study. So they really see it as, again, raising the bar, right, making sure that we're constantly improving standard of care for patients.

And that study in terms of prior exposure to previous drugs, is it agnostic? Can you include naive and experience?

Well, it's post everolimus. So everybody gets an SSA first and then they would get everolimus first line, second line depending upon a variety of different how they present in terms of their progression and their same receptor status, et cetera, functional status. But it's really asking the question head-to-head similar to what we did with the first kidney cancer study with METEOR, right? That was head-to-head cabo versus everolimus in second line RCC. This is zanza against everolimus, either frontline for SSTR negatives or second-line positives.

Yes. Did you consider maybe going head to head against Lutathera? And so what were the considerations there?

Yes. That's probably one that I would say it would probably make more sense to do in combination or in maintenance relative to how that's used. So I think our view of how we saw the treatment paradigm evolve, how that's used, in some ways, how little that's used, how much that's used. We thought that was a great additional study that we could look at in terms of either ISTs or potential Phase II/III trials later on.

And the thought about doing a combo, what's the benefit of Lutathera that will ultimately, obviously, in addition to their data making a mainstay?

Well, it's all about the data, right, in terms of can you -- any either additive or synergistic tumor shrinkage, right, in a maintenance-type setting where after the fourth dose of Lutathera, can you keep enough anticancer drug in the system to be able to keep that tumor at bay, that would be the goal. But at the end of the day, you said it's all about the data. It's all about p-values and hazard ratios that drive benefit, right?

Yes. Yes, if you have any questions from the audience, just let us know, and we'll be happy to take them. Let's move to the STELLAR-305 study. It's testing zanza and KEYTRUDA versus KEYTRUDA. This is the advanced head and neck study. This obviously builds on your prior cabo/KEYTRUDA data right on the IST in first line, this is the first-line study. You showed a 52% ORR about 15 months PFS, 22 months survival. So pretty impressive data. When we talk to KOLs, they compare it to LEAP-010. Obviously, as you know, LEAP 10 had a lower response rates about 36% versus 52%, 8 months PFS versus [ 14.6]. LEAP-010 ultimately did not show an OS benefit, so it was discontinued. So it's the one thing kind of KOLs kind of hedge about. Is there really going to be synergy pembro alone is pretty good and the field is competitive. Any thoughts about that? And maybe why did LEAP-010 fail?

Yes. Well, they -- in that commentary, the missing piece there was the toxicity of lenvatinib, right? So I think as you -- and KOLs have done this for us, so it's not us doing it, but just kind of reiterating what we're hearing from them is -- but the data is obvious. Survival actually favored the Pembro monotherapy arm. What we found to be almost as interesting was the duration of effect in terms of response rates was actually better for pembro than for lem/pem so that the whole idea of that duration of response was actually hurt with lem/pem suggests that when patients were discontinuing and they had a very high lenvatinib discontinuation rate. Actually, the toxicity was so severe that they stop pembro as well, which would give you the duration of response, winning for the pembro monotherapy arm. So it just kind of reinforces the experience that I think has been seen for across a variety of trials with that combination. And look, to -- cumulative toxicity matters. If you look at renal, I think one of the big differentiators from 9ER was the quality of life benefit we saw relative to sunitinib that no other combination had. So we like -- we like playing in that space. We think zanza based on early Phase Ib data. It's a softer general TKI with the same punch, obviously, you prove that in pivotal trials, and we'll start seeing some of that data this year with 303 and potentially 304. So we'll see. But look, the head and neck space is -- it's like everything else. Statement of the obvious. Everything you do is competitive. You're competing with anybody you're not collaborating with to a certain degree. So we're certainly -- well aware of the bispecifics out there. We think the opportunity that we have with zanza pembro is super interesting and very high. And the cabo pem data, with all the caveats of single-arm, nonrandomized Phase II looks really good. side-by-side comparisons, which we shouldn't do, but we all do anyway, it looks really promising. So look, we're in the pivotal trial game. We're in the p-value game, everybody is -- that's where you separate the wheat from the chaff. And we do that well with the right level of, I would say, risk tolerance and view on what ROI could be if we're successful. And doing things collaboratively like we're doing with Merck, where we cost share, we compound share. 9ER has to be in the ROI Hall of Fame, right, from the standpoint of we paid $0.25 on the dollar for that trial, along with help from our partners on the commercial side and the clinical side, and that's doubled revenue and then add another 30%, 40% on top of that, right? So it's pick the winners, you can really do well.

Yes. And the -- so this year and I think in the second half, you're going to do an interim right in STELLAR-305 and the Phase II.

Yes.

To then essentially decide if you want to move into the Phase III component. What's that interim going to look at, kind of what's the gating factor?

So we haven't gone into the details there for obvious reasons. We won't actually see the data because if we see the data, then we can't use it in the Phase III portion. So it has to -- we have to be blinded to that, but it's a very, I would say, typical efficacy readout that we need to see to kind of have that go signal appear.

And it's that -- what triggers that Phase II look? Is it duration?

It's the -- it's a number of patients, so patient number. And then the essentially that efficacy parameter, which obviously has a duration component.

Got it. Okay. 303, I think you've also talked about potential first preliminary data in the second half. I think that there might be sort of an estimated primary completion around August, which is around a year. I think it was completed an enrollment in July of last year, I remember correctly. This is...

You're going off the base in [ clinicaltrials.gov ] There's err bars there, right?

It's probably have been a month earlier or whatever that delta may be even longer. For that population, we're talking about kind of advanced CRC.

Third line.

Third line. And so you're looking at a PFS that's fairly short right, and survival that could be -- there's a range, right, anywhere between 12 and maybe even 18 months, depending on the studies or...

Well, I would say it depends. So for the ITT population, it's probably 7.5 months, plus or minus.

For PFS or survival.

Survival. Survival is the primary endpoint, right? So you've got the ITT, which looks at both. Certainly all patients with and without liver mets. The primary endpoint is focused on the non-liver met population based upon the RCAD data, which is a compilation of 25-plus studies, 18,000-plus patients in this space. Looking at, I would say, a more refined look at the [ non-liver met, liver met ] continuum. We think the non-liver met population for survival should be 12, 12.5 months. So ASCO-GI data, very supportive for zanza and atezo. The ITT was 11-plus months. The non-liver met was 20-month range. So everything is vectoring in the right direction with all the caveats of it being a small 100-patient randomized study. So -- but it rolled well. There's lots of enthusiasm for the trial, like with 304 or 303, the trigger is event-based, right, but we feel pretty good about where that's at. And we think we'll have data in the second half of the year.

And so just to go back in the Phase II, the cabo/atezo, the non-liver mets was around 20 months.

Well, that was from the GI. We never broke out or non-liver mets and liver mets for the cabo Phase II.

So within that GI was mostly that was [indiscernible].

ASCO-GI. That was ASCO-GI data that we had was a third-line CRC population.

Yes. And so I guess, that 20-month is fairly long, right, and considerably longer than the 12 months you're thinking in the non-liver mets. And the non-liver met population is the one that usually will do better than the liver mets.

Well, that's the historical data from RCAD is about 12, 12.5 months for the non-liver met population. So 2 months is a good sign, but we have to -- it's just you have to be careful. It's a small end and a small number of sites and all the caveats have to be applied. So that's -- we're in the pivotal trial business. We know how to do them. We've done a lot of them. So I'm thrilled to be back in that game now with zanza and that's how you build value for patients, right? As you do the right early work, you place your bets on these large pivotal trials. You're right some big checks. And when they work, you can redefine standard of care, and that drives commercial wins. And I think that's the game that we're in. And we did that with cabo really well. We're thinking it will be a $2 billion drug this year in the U.S., go to $3 billion by 2030, and we aspire to do that with zanza and then with molecules out of our pipeline that we bring in IIb.

Yes. And this study has multiple looks, I imagine, based on events. There's a preliminary look [indiscernible].

Yes. So I don't want to get into the SAP how that's all -- how we're dividing up alpha and interims and that kind of stuff. Yes. Again, we'll have a data look TLR, second half of the year.

And that sounds like that's the first look in that study.

We'll have a look in the second half of this year.

Okay. Okay. I actually want to maybe skip. The non-clear cell the STELLAR-304 study, zanza nivo versus sunitinib. I mean, that study has to work in frontline. This is a population that cabo is obviously listed in the NCCN guidelines. So this was a great white space to go into. I mean, obviously, very low risk.

And there's been no global randomized pivotal trial ever done in non-clear cell, right? So you can define standard of care here with this trial, which is why we did it in zanza.

Yes. And that study is also expecting to have potential data in the second half.

That's correct.

Do you call that preliminary data? Or do you think that's also going to be [indiscernible] data.

Yes I don't want to parse out preliminary versus final we'll have data, if successful, we'll -- that will then drive a filing.

Okay. So the more interesting one is you're also collaboration with Merck, targeting first-line RCC or at least in combination with WELIREG. You -- WELIREG is obviously approved for a specific subpopulation and also approved for RCC, doing the cabo makes a lot of sense. This isn't there that totally -- you haven't said a lot about. But then I mean, the obvious here is there's a need to replace cabo and nivo/cabo frontline. So I imagine doing a KEYTRUDA zanza maybe plus or minus WELI or some kind of a triplet versus a doublet would make a lot of sense. Am I kind of thinking about things correctly?

That's 1 way to look at it. I would make it more general right now, and we'll get into the details. We're working with Merck on this they're going to run these trials. So as the executor or the implementer, we've agreed that we're going to kind of keep things quiet. It's a competitive space, obviously, until we're ready to go. So the details will be defined, I would say, soon, but not today. The way we look at this is the following, is that we aspire to be at the leading position of defining and then exploiting standard of care in the future going forward, right? So we -- I think we've been very grateful to be able to align with Merck on what standard of care could look like. In the back half of this decade into the 30s based upon the evolving biology and pharmacology and understanding of how both RCC operates, but then how the treatment paradigms could evolve. So you have to have a hypothesis about where you think you need to be to help patients basically improve standard of care for patients first and then you have to execute effectively. And to be frank, there's nobody better on the planet and executing new mark, right? So we're thrilled that we're working with them with zanza. We're even more thrilled that they're going to run the studies because then we can give us some compound, we can write some checks, and we can allocate our resources to other zanza trials with the pipeline. So that's awesome. So yes. So -- but statement of the obvious, right? We are a leader in RCC. We want to fortify that position going forward. We think zanza is a great molecule that has already shown it can do a lot in a space that is already fairly well congested, and we're working with the preeminent partner in the space to be able to make that happen. So it's early days still, but the momentum is certainly there.

So maybe in the remaining time, we are going to get potentially the resets of Phase I data this year. XL309 is the USP1, you originally licensed that from Insilico. I believe you're testing that in homologous recombination defect solid tumors.

Yes, that and certainly focused on the BRCA and PARP space, most of all early on with the potential to impact that market and then expand into HRD positive in a broad sense. And even looking at some of the chemos which play in that BRCA and [ BRCA-like ] space as well. So, yes.

What kind of data can we expect from that Phase I? Is this sort of early dose escalation? Is there going to be dose expansion data?

It's hard to say right now. I don't want to preempt what could be. We're looking -- the priority we have for our entire pipeline is to interrogate the right clinical work in data, generate the right data we need to get to crisp go-no goes into push fast, invest more move into full development or basically stop, right? So as we're on that continuum across the portfolio, whether it be 309, whether it be ADCs, whether it be 628, our latest IND, which is a bispecific for PD-L1 and KGaA2. It's getting the right data we need to expedite full development because that's what drives value. I mean certainly, talking about data is great for you guys and for the buy side. Our job is to move the needle for patients. And ultimately, that was what's going to generate value for everybody. So that's the focus.

And which tumors are you targeting with the 5 -- the 5T4/ADC.

It all comes early, right, when we dose escalate, certainly, once we get to doses that we think are in the right range and/or have activity, then we'll double down there. Yes.

And how are you thinking about the therapeutic window with the MMAE just given the indications?

Thinking about it very carefully, obviously, right? All the well-known kind of class effects and their tops are well known. We're using a novel linker from Catalent to which has not 1, but 2 points of cleavage. So the stability, and we validated this now clinically as well. The stability of that agent in the periphery is very, very high, which we think we will certainly add to the overall tolerability and safety profile. But again, it's all going to be in the data. We need enough patient experience and enough duration of therapy to be able to understand that. So early days. We're not -- we're somewhat different than from most biotech. We don't need to go out and raise money next week. We're doing pretty good in terms of how running the business. So we need to generate the data first and then talk about how we're going to present that and frame that advance that or not based upon the data once we get it.

And which tumors come to mind that are 5T4 high?

Oh gosh. Most of them are, right? That's the reason why we chose that. And the discrimination between tumor tissue and normal tissue is very high. So that -- this is one of those -- one of these addresses that we're really, really excited about. Yes, for sure.

Great. All right, Mike, I think we're at time. Great to see you.

Right. Good to see you again. Thank you. All the best, Matt. Good luck for the meeting.