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

Okay. So my name is Peter Lawson. I'm one of the biotech analysts at Barclays. I cover smid-cap biotech companies and a great pleasure to be for the last few years covering Exelixis. And I guess, almost a decade now. And so up on the stage with me, I've got Andrew Peters, SVP of Strategy; and also Chris Senner, EVP and CFO.

And maybe the first question I've been asked other companies, it's just because of the at least part of the disruption we've seen recently. The supply chain disruptions, if there's any kind of you're worried about, thinking about how you're planning and if there's any parallels there with COVID.

Yes. So Peter, thanks for having us. It's been a great set of meetings today. And so -- but before we start, we just want to say that [indiscernible] Andrew and I will be part of today, we'll make forward-looking statements and for a full understanding of the risks associated in our business, we refer you to our SEC filings. From your question perspective, we have a redundant supply chain. We source for many companies. And so we feel comfortable where we are from a supply chain perspective, we source from India, we source from China, but we have a very redundant supply chain that allows us to survive things like COVID. We had a lot of inventory onshore, and it allowed us to operate and make sure patients had product on time.

Good. And then as we think about the FDA and the potential disruptions there, is the dialogue dropped off, slowed down? Any noticeable changes? Are you anticipating any changes?

Yes. I mean, I guess we're in the process of discussions with the FDA, we obviously, we have a PDUFA that's on April 3 for the NET indication. And we've always had a positive relationship with the FDA and it continues. And I can't say that anything has really changed from our perspective. So it seems to be normal.

Any impact do you think or worry about from like NIH budgetary cuts? So I know you've had fantastic ISTs in the past. So just curious if there's any near to mid-term impact that you kind of worry about?

Yes. We always worry when there's change. But I don't -- we don't really see anything directly impacting us right now from an NIH perspective. Obviously, there's a lot of great research that happens at that level. And we, as a country, benefit from that. And so it's an important part of some basic research that companies like us utilize, but there's no direct impact that I would say. I don't know if Andrew, you have anything else?

No. I think that's exactly the point is that it's certainly an area that we as an industry here are trying to kind of wrestle with and understand what those dynamics are. But at the core of it, our industry is dedicated to helping patients kind of full stop. And how the NIH and kind of our collaborative relationship over the years kind of plays into that dynamic is something that we want to see continue because ultimately, we're here to help patients.

Yes. Are there other peripheral effects that we should be thinking about with the change in the administration? I kind of -- in my head kind of run through tariffs and supply chains, FDA, NIH, but are there other kind of secondary effects we should be -- how do you kind of plan for it?

Yes. We try to think through everything. Obviously, we don't know everything that's going to happen in the future. Otherwise, we'd be doing different jobs. But we try to plan for that. We try to risk mitigate. I can't tell you that we've come up with anything that you haven't asked already. So it's -- we'll continue to manage the business and plan for the business in the best way possible based on the available information, and we'll try to scenario plan. That's what we get paid for is to run the business and manage the risks that are associated with the business.

Yes. I mean one of the themes that we always kind of joke about is that Exelixis is really good at scenario planning just because I think we want to prepare for and have all of these opportunities or optionality kind of at our fingertips. And so we got asked that question a lot in the last 12 months around the ANDA. So certainly, it's an exercise that we're familiar with.

Okay. Fortune prepares -- benefits to prepared, right? So on the cabozantinib franchise, you mentioned kind of the looming PDUFA and kind of -- if we should think about that NET opportunity, what's the overlap of prescribers, patients -- or prescribers and your sales force?

Yes. So we talked about some of this on the third quarter call, but we see there's a universe of around 3,500 prescribers or so and prescribing for NET, of which we cover probably 80% of those right now. And so we have good overlap and doctors have good knowledge of cabo. So we're really excited about that. And then the rest of the universe is a good proportion of those that it's been a call point before, and they have some familiarity with cabo, either as part of another group organization. So we've been planning for NET for the last several months. We added sales force -- small amount of sales force in the fourth quarter, and we've been planning -- we have this scenario planning for NET for many months. And we're ready to go. We're looking forward to a launch, and we're excited for the opportunity to be able to communicate the data. Obviously, we don't promote off-label or anything like that. But we'll -- when it's approved, we will start promotion right away.

And yes, I mean, just to kind of add to that. One of the dynamics that I think comes through when P.J. talks about this or when Mike just talks about kind of our enthusiasm for the launch, it's that inherent familiarity with cabo that I think is one of the real kind of initial drivers for us because as you think about how patients are managed and kind of these AE protocols, physicians get to -- when they -- when a new drug is launched, physicians have to understand how the drug is used, how to work through adverse events, how to down titrate patients, and how to do all of those things, given the overlap in prescriber base with existing cabo prescribers. For other indications, there's just not really as much of that, that we need to do. And I think the other thing, candidly, is when you have a data set like ours and CABINET that was published in The New England Journal. It's one that I think has been embraced enthusiastically by the community.

And we've done market research, and we show the profile of the drug without name and with physicians. And they're like, yes, we'll prescribe it. And then when we tell them it's cabo, they're like, oh, it's cabo, we know cabo. And so it's -- we think it's going to be very well received as another option for patients and doctors.

Perfect. And then the commercial launch, how far is that commercial launch? Would it take before you kind of include that into the guidance? Or how do you think through that process?

Yes, we haven't given a specific time or date. We're going to look at it. We're going to see where we are, where we projected to be on the launch time line to see where that is, and then when we feel comfortable we can project better -- the future better, then we'll provide guidance at that point in time. But we're not giving guidance on guidance yet. So when we get to that point in time, we'll let you guys know. But it's something that we're very -- we understand very well that -- the Street generally wants us to provide guidance, but we'll do that when -- like we have in the past when we're comfortable being able to predict the future with some, obviously, errors bar around it, but, yes.

So it's kind of a matter of taking your internal projections, to see how they play out over the quarter...

Yes. And just seeing the dynamics in the market, like how is it being utilized? Where is it being utilized? Where do we see opportunity? And then trying to translate those data into a projection that we feel comfortable we can meet.

This -- the comment you made about adding to the sales force ahead of that launch? Is that the classic pattern? And do you kind of add, is it 50% before, 50% after? How do you kind of think of...

It was a small number, right? It was literally like a handful of sales reps. So it wasn't that many. So we felt confident, one, in the data in our filing, but two, in our ability to utilize those sales reps on other indications in the meantime. And then we've added them, and so we're ready to go right, literally today.

Got you. Okay. Perfect. How do you kind of square away the market opportunity for pNET?

I think the way we talked about it and we talked about it on the third quarter call, contemporary pricing, we think it's like a $1 billion opportunity from a market perspective. We haven't given any guidance on what we think our proportion of that is. But obviously, we think cabo is a very good alternative for physicians, and we're going to do everything appropriately to get it in patients' hands so that they benefit from that.

Okay. And then just as we think about prostate, where are you for the NDA submission and...

Yes. So kind of as Mike has talked about, so when we were getting ready to file or going through the regulatory conversations with NET, obviously, we heard about the AdCom and kind of that became an all-hands on deck opportunity given the prioritization and the opportunity that we see for NETs. And so we essentially put the prostate filing on the back burner and said, let's devote all of our time, focus, energy, et cetera, and getting kind of NETs across the finish line. And then now the AdCom has been canceled. We're waiting on the PDUFA. And kind of once that is over the finish line, we're going to refocus again on prostate. We'll give an update there later this year.

Okay. So no adding of sales force for prostate it.

No.

And then so as we think about next-generation molecule zanza, I guess, STELLAR-101 is forefront in my mind at least at the moment. And CRC, what are we going to learn from the additional data that we see in the first half of '25?

Yes. So that was the data set that was presented at the ASCO-GI conference earlier this year. And that was really a study that we embarked on to really flush out kind of the contribution of components from a regulatory perspective, given this is the first pivotal study with zanza. We really wanted to understand contribution of components so that trial that randomized study that we presented there was looking at the combination of zanza/atezo versus zanza alone to really understand what those dynamics there. And the data showed really across all of the core efficacy endpoints, response rate PFS and overall survival that the doublet performs better than zanza monotherapy. And so we looked at that data and kind of we're enthusiastic about kind of that contribution of components angle. And then one of the obvious questions that we got in response to it was really to understand, well, how does this make you feel about 303? And I'm sure we'll get to later. But understanding how that zanza/atezo compares to what would be expected with rego and with OS in the 18- to 20-month range at ASCO-GI in that non-liver met segment, we think that compares all the caveats with cross-trail comparisons, et cetera, compares favorably with that kind of 12-, 12.5-month expectation for rego that we would expect to see based on some of the A.R.CA.D data.

Okay. And do we get an update of STELLAR-101 in the first half or that's...

Yes. So beyond kind of what was published at ASCO-GI, I don't want to say when that data is going to be presented next. I think kind of really in that CRC segment, the next big step is going to be pivotal data later this year from 303.

Got you. Okay. And then you kind of talked through the rego kind of what you want to see for OS. And kind of what's the feedback you're getting from the physician, or just like physical they want to see for an improvement?

Yes. I mean kind of somewhat of a statement of the obvious, but one of the things that we talk about a lot internally at Exelixis is we're in the business of changing the standard of care. And so what we want to see, what we think physicians want to see is a data set that is compelling enough that has an opportunity to show that patients hopefully live longer on the combination of zanza/atezo versus regorafenib, but regorafenib alone. Obviously, a large study, we haven't talked about kind of the specifics around the SAP, but we think the study is both designed to show statistically significant and clinically meaningful advantage, again, to hopefully, establish a new standard of care, so we can go out and help patients. Just as a reminder, the amendment that we made to the study a couple of years ago now, really looks at first that delineation between the liver met and the non-liver met population, which is kind of this emerging -- continuing to emerge dynamic in colorectal cancer, where you really see this big distinction in terms of how those two patients groups perform not only on kind of sensitivity around checkpoint inhibitors, for example, but even kind of the A.R.CA.D data for rego show kind of clear differences there. So that's something that we're keeping in mind and why it was a kind of key feature of the data that we presented at GI.

Okay. What's the bar for success do you think in non-liver met kind of just that for OS?

Yes. So again, coming back to the A.R.CA.D data. So A.R.CA.D is a French group that has robust database of virtually every clinical trial that's been run for rego and Lonsurf and those active agents that are used in colorectal cancer. And their data would show that in that kind of non-liver met population, it's probably around 12, 12.5 months. And then in ITT, probably closer to 9, 10-ish months, maybe 10, 11. And then in kind of that liver met segment, it's a little bit lower kind of at 6, 7, 8 months or so.

Okay. And how should we think about dividing that group into like the non-liver mets versus the broader intent to treat, what's the cut? Like the market opportunity?

Yes. So I think that's kind of one of the interesting dynamics is from a TAM perspective, market opportunity perspective, we really think that they're about the same. Even though the non-liver met patient group is about 30% of patients overall, given that those patients tend to live a little bit longer, have longer duration as you think about kind of the smaller number of patients but potentially longer duration, they're about equal in size, actually. And so obviously, we're hoping to show a strong signal in the ITT group, but non-liver mets, we think, is a sizable opportunity on its own.

Got you. And then STELLAR-002 and kind of what we should expect from that -- because I believe there's additional data there rolling out in the first half? Kind of what should we expect to see.

Yes. So we haven't kind of given the what, when, where of it all kind of per our practice where we wait for abstract titles to be presented to kind of make sure that everything is all locked in place. We've guided, we've commented that there's going to be updates from STELLAR-002 this year. And kind of stay tuned on the specifics, but it's going to give another more mature look at how the emerging zanza profile is looking kind of all the caveats with a small and kind of early studies aside. We always joke about internally is the cosmic truth of all of this is ultimately going to come out in these large randomized pivotal studies. And the good news there is what we said is we're expecting data from both 303 and 304 to potentially happen this year. And then the go/no-go, on the Phase II/III for 305 also this year. So it's going to be a very kind of data-rich year for zanza, not only kind of with these more early updates on kind of the Phase I/II programs, but seeing real pivotal data is exciting.

Yes. Is there -- I know they are different indications in the sense but in RCC, is there a nice read-through from 002 over to 304?

I think understanding kind of the similarities and differences between clear cell and non-clear cell RCC can be challenging sometimes, but obviously, it's a sensitive tumor type. Cabo is used there, all RCC approved drugs are used in that non-clear cell space. So I don't want to get ahead of, again, of specifics and kind of when we'll see what, but certainly, we're excited to share not only that data, but importantly, the pivotal 304 readout as well.

Got you. And as we kind of do those cross-trail comparisons, what's the bar for success as we think about the 304 readout? What's the best way of thinking about the patient types, et cetera...

Yes. I mean ultimately, it's -- as I was saying before, we're in the business of p-values, and we're in the business of shifting standards of care. So the one kind of interesting thing or important thing to consider about 304 is that while all of the existing RCC drugs have kind of on-label approval for the non-clear cell indication, there's actually been no pivotal studies run in that space. They tend to be based on single-arm unrandomized data. And so what 304 does is it provides that opportunity to really plant a flag in the ground with Level 1 evidence and say, this is the only treatment option out there. The only combination out there that has been proven, hopefully, in a large randomized study against the standard of care to show activity. So that's kind of the initial goal around 304 was to actually provide some real Level 1 evidence around activity and let that kind of inform utilization decisions and all of the kind of the downstream effects from there.

Got you. Because all these are in collaboration with Merck, is there any kind of restriction about how much data you can release? Or you've kind of got to a clear strategy around...

Yes. So 304 is actually our study. The two Merck studies we'll announce details on later this year. But just as a reminder for the audience, we announced in October a collaboration with Merck, who -- one of the things I like about it is, Merck is our biggest competitor in RCC. So anytime you can work with your biggest competitor, it tends to be a good thing. But we're running, or Merck is running two studies in RCC evaluating zanza and belzutifan, their HIF-2 inhibitor. And kind of -- the important thing in one of the dynamics that we've certainly done in the past with the 9ER study that we're continuing is this clinical collaboration model, where Merck is running the studies, Merck is paying for one of the studies, and we're paying for half of the other study. And that gives us kind of a pretty nice attractive bang for the buck, so to speak, on the expense side, as Chris can talk about, where coming back to the 9ER study, Bristol paid for half, our partners, Ipsen and Takeda paid for half of our half. And so we took a $0.25 on the $1 investment to really more than double top line revenue. So that's a model that we liked and learned a lot from 9ER and we're hoping to continue that with Merck and that was kind of opening the gate, so to speak, for other clinical collaborations with potential partners to come up as well.

Yes. It's a great way to leverage both of our P&Ls and derisk it to some degree. They're also providing free pembro for 305. So that's another benefit to the P&L that allows us to continue to think about how we manage R&D expense. Mike has said, we'll keep R&D expense in that $1 billion range. And so we're below that this year, and we'll continue to strive towards that around $1 billion number over the next several years.

Got you. And then I guess, 305 head and neck, how should we think about that for just like the data disclosure within the second half? Is that...

Yes. So that one is pretty straightforward. It's a Phase II/III trial design and so that includes a go/no-go decision a Phase II/III gate, so to speak. Given the design of the study, it's really going to be a yes or no, will the study continue because we actually won't see that data because if we did, and we were unblinded to it, we wouldn't be able to use that for the Phase III portion. And so the decision we'll get later this year, the data we'll get later this year is really will the study continue to the Phase III portion or not. We haven't talked about what exactly the parameters that are behind kind of that gate. But from a just disclosure perspective, it will it continue or not.

Got you. Okay. Perfect. And then the USP1 inhibitor, kind of where are you for the monotherapy and combinations studies and data?

Yes. So that's a program that I kind of think of as like next on deck, so to speak, after zanza. It's a target, it's a mechanism that we're particularly excited about, just given the complementary nature of the USP1 pathway and kind of DNA damage repair and to the PARP space, really, the opportunity there is can adding a USP1 either as a monotherapy or in combination with the PARP deepen responses, can it broaden responses? And can we grow upon that $3.5 billion or so PARP inhibitor market right now. And so we're continuing to escalate not only in the monotherapy but in combination. And so if we want to generate data as quickly as possible to make a decision on that program because we're in the business of making smart, prudent investment. As Chris talked about, kind of P&L management. So we want to be able to decide as soon as we can. Is this something we're going to invest in and really run? Or is it not going to hit the bar for differentiation and we're going to shut it down. So those cohorts are continuing to enroll.

Yes. Because -- but there's at least been one company that's pulled out the USP1 space. And why do you want to sell for? What's the differentiation?

Yes. I mean from a pure structure perspective and Dana, our CSO, talked about that a little bit at our R&D Day in 2023. It's an instance where we went from kind of third-in-class, but with what we thought was a best-in-class asset to not only first-in-class, but likely best-in-class as well as some of the other molecules either fell off from tox or due to kind of drug-like property, solubility issues, dosing issues. And so it's one where we kind of found ourselves all of a sudden in the lead with what we think of is a differentiated molecule. So we're excited to generate that data.

Perfect. At the bottom of the hour. So thank you so much.

Thank you.

Thanks again for having us.