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

Good morning, everyone. I'm Andy Berens, biotech analyst at Leerink Partners. Thank you for joining us on day 3, the final day of our Global Healthcare Conference and beautiful sunny Miami at the W Hotel. We're very excited to have Exelixis with us. We have have Chris and Andrew from Exelixis. Thank you, gentlemen, for spending some time with us to walk us through the story. Why don't we start, I guess, with a brief overview of Exelixis. Obviously, you've been around a while, accomplished a lot. You have commercial assets and a lot of stuff the pipeline will talk about. I think would help to get an overview of the company.

Yes. So thank you for the invite. Happy to be here. And it's a elevator situation, a little late, but it's excited to have the conversation in great meetings so far this week. As a reminder, before I begin, we'll be making -- Chris and I will be making some forward-looking statements today, so please see relevant risks in disclosures in our regulatory filings. So Exelixis is a 30-year-old company at this point. And I think really unique in kind of the biotech, biopharma landscape in that we have cabozantinib, our main product. We've given guidance for about $2 billion in the midpoint in product revenue this year. We're profitable. We always like to say we run the business like a business, not a biotech. And we use that kind of philosophy, that mentality to really make sure that we're investing in growth in kind of in the future. And I'm sure we'll get to the pipeline layer, but also making sure that we're shareholder-friendly as well, and Chris can talk about a lot of those activities from a capital allocation perspective and share buybacks, and all of that. But cabozantinib, lead product, mostly used in kidney cancer, #1 tyrosine kinase inhibitor in monotherapy as well as in combination. And then behind that, we have zanzalinitinib, which is kind of a next-gen version of cabo as well as a whole host of other earlier stage programs. I guess kind of from an overview perspective, I think I'd point to the third quarter call we hosted last year really because that was a chance for us to really talk about Exelixis 3.0. So after about a long 5 years of litigation with a generics company around cabo's core LOE, we kind of got that behind us. And we really had a chance to basically reframe the story for folks and say, okay, this is who Exelixis is. We gave guidance for cabozantinib in our expectation for it to grow, it will be a $3 billion product by 2030. On the -- really on the momentum of -- continuing momentum on the base business. And then our anticipation or our expectation for growth coming from a new product launch or a new indication launch for neuroendocrine tumors for cabo. And then secondly, we kind of framed out what we see as the market opportunity for zanzalinitinib across the 6 pivotal trials that we've announced or ongoing with zanza at around $5 billion. And then what we also said is kind of the cadence of those data readouts and those anticipated time lines basically partly by design, partly candidly by luck, really, the meat of that growth curve for zanza is right as that 2031 cabo LOE date comes up. And so we don't really see that typical post-LOE transition period. We actually think the zanza opportunity is sufficiently large enough that we see kind of growth really going forward from here. And so behind that a whole host of really interesting best-in-class, first-in-class molecules from our own kind of internal discovery effort. And then that last leg of the stool is being opportunistic from a business development perspective, using our balance sheet strategically to identify and bring in external assets that we like. So kind of that Exelixis 3.0 framing is kind of what we started with last year and kind of have continued to execute on.

Yes. And I think that vision of Exelixis 3.0, obviously resonated with investors. I think that's what your stock really broke out of a trading range you have been in for quite a while, and it's done well even despite the hard times, so a lot of the colleagues in biotech of experience. So congratulations on that.

Chris, maybe we could talk just a little bit about the guidance, the cabo guidance in 2025. Can you just give us what's behind those numbers, some of the pushes and pulls?

Sure. So from a -- so our guidance is for -- net product revenue is $1.95 billion to $2.05 billion. As Andrew talked about the midpoint of that range is $2 billion, which is about 11% growth year-over-year, and we grew about 11% comparing 2024 to 2023. So consistent growth. And that guidance does not include our -- the new indication. Andrew had mentioned the net indication of neuroendocrine tumors. And so it's continued growth in the RCC segment, and we continue to see great momentum on new patient starts and our TRx share. It continues to grow. And we -- it's really around that guidance is really around RCC. And then from a net perspective, we'll provide that guidance sometime this year after launch.

Right. Why don't we talk a little bit about cabo and the net indication? You originally had an AdCom schedule, the PDUFA date is April 3, and then it was essentially canceled. And I believe that was before a lot of the government cuts that have come down subsequently. So any color that you can give to us investors about what drove the initial decision to schedule that and then the subsequent vision to cancel it.

Yes. I mean, so we haven't really given a lot of kind of detail around the consistent back and forth of the agency other than we have a very collaborative collegial relationship with FDA. And we've been working with them for a very long time across all COMETRIQ and CABOMETYX indications. And so we've been very happy with kind of the back and forth so far. At the time that the AdCom was announced, we said that given the history of oral agents in NET, so we weren't really expected that an AdCom was called. And similarly, given the outcome of those, we weren't really surprised that it was canceled as well. .

Okay. Have those discussions included label negotiations with the FDA?

Yes, we again, we don't comment on kind of the extent of the regulatory discussions, but there's a very collegial back and forth with the agency.

Okay. you don't have net in your guidance at this point, but if approved, and you will give it. What what will you have to do to expand the infrastructure to repair for potential net?

Yes. So the net -- so there's -- from a prescriber perspective, there's around 3,500 net oncologists in the U.S., of which we cover about 80% of those today based on our current field force. And so about 2,800 of those are covered today. And the other 700 or so we -- there's either a prescriber in that -- the great majority of those is a prescriber in that group, that doctor's group that has prescribed cabo. So it's not -- we expanded our sales force very marginally incrementally last year, the end of last year, so it's already in our guidance. our SG&A guidance for the year. And so it's not a big expansion. It's really just an incremental expansion that we're ready to go, ready for approval and ready to launch.

Okay. The $3 billion number that you pointed to in 2030, does look like consensus is supportive that you'll reach that number. How much is for CRPC and that guidance number, the $3 billion.

Very minimal. Yes. So I think what we had said at the time is it's a heavily risk-adjusted contribution from CRPC. So we had given kind of prior commentary around an anticipated for prostate by the end of last year. But with kind of the net filing kind of continue to kind of move forward. And then the ADCOM is a little bit of an all hand on deck from a resource perspective. And so we pushed out a decision on the filing to this year. So once kind of we get net across the finish line, so to speak.

Okay. Why don't we move to zanza? I think, obviously, a big part of fundamental, but also probably strategic value for the company is going to be a viable tail to continue the success you've had with cabo. Can you just walk us through the profile of zanza versus cabo? Why don't we start there, and then we'll talk about the development.

Yes. So zanza was initially kind of conceived as a really a next-gen version of cabo. So if you think about the continuum of VEGF-targeting TKIs, cabo was really designed and the hypothesis around it was some of those first-gen versions of the VEGF-TKI, eventually develop resistance primarily around kind of MET, AXL, MER pathways, TAM kinases. And so what we had thought with kind of the original cabozantinib was, can we also target those kinases to essentially preempt persistence development in -- around kind of that anti-angiogenesis profile? And so that's cabo's special sauce, so to speak, is that it not only deeply hits VEGF, but some of those others as well. And so when we were thinking about Xansa and how to improve the profile to kind of create a next-gen version of that, we thought kind of that kinase inhibition profile was pretty -- the acutely dialed in. And what we wanted to do is really improve upon what the main liability is, which is relatively long half-life. Cabo has around a 4-day half-life. And when you think about that from what it means from a practical patient management perspective, any time you see an adverse event come up, which all TKIs see adverse events, you need to dose hold to resolution of symptoms and generally reengage at a lower dose. But given that accumulation in plasma and long half-life, that period can be 10 days to 2 weeks. And so from a practical management perspective, that can be challenging. And then you layer on the fact that we see the future of oncology is multidrug, multi-modality combinations going forward. And so having a long half-life backbone can be somewhat challenging. So zanza was envisioned basically asking the question, can we create a cabo like TKI with a shorter half-life? So our chemists were able to engineer in a metabolic liability into that kind of core cabo scaffold, which has altered its half-life from around 4 days for cabo to a little under 24 hours for zanza. And so all the data that we've presented so far has basically said, yes, we've been able to do that. And so what that allows us to do is have a more user-friendly version and interrogate zanza-based combinations in areas that we either didn't pursue strategically because of financial or kind of cabo profile-based reasons, things like colorectal cancer, head and neck cancer and things like that. So we've been able to use cabo data as a guidepost to help accelerate development in those areas that we think are particularly sensitive to a VEGF-targeting TKI, and then combine it in a more -- much more user-friendly way. And then the last piece, obviously, kind of the ultimate profile will come out in pivotal trials with 2 readouts later this year. But in the data that we've presented so far, it certainly shows that we're seeing the hypothesis confirmed around the shorter half-life, but that shorter half-life appears to be translated into kind of an emerging profile of potential better safety. So if you compare kind of the most apples-to-apples grouping around zanza monotherapy in clear cell RCC, we're seeing both a reduced frequency and severity of adverse events, in particular, around things like PPE, which from a -- again, from a patient and patient management perspective can be particularly challenging, given the nature of that adverse event. And so that's kind of the profile that we're seeing with zanza and how it was designed and kind of how we envision development going forward.

Okay. In terms of differentiation versus cabo, I think some investors were not convinced at some of the updates that there was a clear differentiation. How important is it that in all these indications, some of which cabo is not approved, that you actually have that differentiation. I mean, can you -- I mean, obviously, a big part of Exelixis 3.0 is extending the tail on the IP of a very successful drug, which, like I said, I think, adds both strategic and fundamental value. How important is it that there's a clear benefit for zanza over cabo to achieve that goal?

Yes. That was something we are actually very deliberate about on kind of the last earnings call to kind of touch on. From our perspective, establishing that differentiation against cabo was kind of a little bit of a misguided question. Because as you mentioned, there's really no overlap between existing cabo labels and anywhere where we're developing zanza. Take colorectal cancer, for example, there's no cabo pivotal data. There's no cabo label there. And even something like RCC, the 2 Merck studies that we're pursuing with are in combination with belzutifan, where, again, cabo will not have a label in. So kind of this, I want to say debate in the Street kind of the -- some of the froth that we started seeing some of the questions started coming up. We really see it as kind of not a particularly relevant point of discussion given that there's really no overlap, again, by design between the 2 molecules.

Right. I mean it seems to me the most relevant question is, can you get approved? And what the data will look like relative to other options in those respect therapeutic areas?

Exactly. So one of the first pivotal study to read out was zanza will be from STELLAR-303, and that's the combination of atezo and zanza versus regorafenib in third line plus colorectal cancer. And so that, again, we're much more concerned about how does the profile look like relative to rego. And as you look at kind of the data that we presented at the ASCO GI conference earlier this year with kind of that overall survival for the non-liver met subgroup kind of in that 18, 19, 20 month range. We think looks pretty good relative to what some of the kind of contemporary arched, this French group has a database of basically all colorectal cancer therapies, and that data would suggest rego and that NLM group does about 12, 12.5 months. And so we're encouraged by that separation, but ultimately, we'll see later this year.

Okay. Can we talk -- that's obviously a very big milestone for the company, STELLAR-303 in third line plus colorectal cancer. Can we talk a little bit about the design of that trial? And how it's changed over the number of years?

Yes. So as I mentioned earlier, kind of zanza, atezo versus rego, one of the standards of care in colorectal cancer. And really, the design was initially envisioned slightly differently than how the trial looks today. And that's in part because when Merck's LEAP-017 study that was looking at pembro plus LENVIMA, lenvatinib, another VEGFR targeting TKI read out, and it was unsuccessful. We used a lot of the learnings from that study to amend ours to really increase the probability of success, primarily around this kind of emerging consensus looking at the biological differences between patients with liver metastases in patients without liver metassies. If you look virtually kind of in every study that's read out recently in colorectal cancer, there seems to be very clear delineation between those 2 groups. And so what we did is really amend our study to focus on both of those populations to really try and understand is there a difference between the group and how can each cohort perform on a relative basis. And so that was one of the primary amendments that we made to the study. And so that was really taking a learning from IO TKI study and then applying it to our own IO TKI study with this next layer of we think that zanza is really kind of that next-gen best-in-class TKI. And so can we improve upon that profile with a better TKI.

How does regorafenib do in liver mets versus non-liver mets?

Yes. So if you look at the ARCAD database, basically, I think about it as 3 groups of patients that do, I guess, increasingly better. So there's -- the patients with liver metastases to -- if you look at the data, it's probably 6, 7, 8 months overall survival. The ITT kind of the blended group, say, 8, 9, 10 months. And then the non-liver mets 10, 11, 12 months, probably around 12 months would be kind of the best guess for rego. So even something like rego does see that difference in the patient population. And then for us, as we look at our data and especially the combination with a checkpoint inhibitor like atezo, we really see is that the patient population that has the opportunity for that typical tail of the curve, that's a hallmark of checkpoint inhibitors to really have a greater effect maybe in that non-liver met segment. Ultimately, our job is to establish a new standard of care. And so that's what we're trying to do is just kind of shift that curve to the right point.

Okay. Third line plus colorectal cancer, obviously, a late-stage disease and a lot of colons, blood flow and lymphatic strain through the liver, what percentage of the opportunity do you lose by excluding patients with liver mets, you think?

So from a trial design perspective, we're actually looking at both non-liver mets as well as ITT. So our hope is actually to show a benefit in the total population, but the trial is designed to actually look at both groups. But I think our hope is that zanza and the combination can actually show an improvement across both cohorts. But from a market opportunity perspective, patients without liver mets is about 1/3 of colorectal cancer. But as you think about the differences in anticipated duration, we actually see the 2 groups as relatively equal from a market size perspective. So even though it's a little bit smaller from a patient's grouping patient size perspective, the revenue opportunity, given the longer duration is about the same.

Okay. What's your sense for investor expectations? Do you think that if you get the non-liver population, and it looks approvable in that indication, but not in the patients with liver mets. Do you think that, that would be a disappointment for investors? Or do you think that's going to be enough to -- you're positive catalyst?

I think that's a better question for you. Our job really is to -- at the end of the day, we're here to help patients live longer. And we think that when we help patients live longer, we can sell more drug, we can generate more value. So kind of starting with the patient drives value for everyone else. So that's what we're worried about.

Okay. Okay. Fair enough. The trial has also altered with RAS mutation versus wild type. Can you talk a little bit about the implications and the genesis of that?

Yes. So that kind of comes back to some of the early cabo data that we use as a guidepost for zanza development. And so some of that early cabo data suggested that maybe there is a potential difference between RAS status, wild-type versus mutant. But again, when LEAP-017 read out their data actually showed that IO-TKI patients actually did relatively better in RAS mutants. And so we came to the conclusion looking at that data, looking at our data that, again, the much more relevant patient population, patient subgroup was around liver metastases as opposed to assets. We ask the question all the time, I ask our team all the time around biological hypotheses around live met, non-live met or hypothesis around RAS status. And one of the things that I think is interesting that kind of pops up is if you think about RAS kind of MAP kinase pathway and some of the adjacencies around the TKIs that cabo such zanza does hit in LENVIMA, maybe that's the reason why they actually saw in LEAP-017. That group do a little bit better. So from a 303 perspective, we certainly see the liver met, non-liver met is much more relevant than kind of RAS. So going back to the ASCO GI data that was just a wild-type grouping, but it's more of a reflection of what that trial was designed to do. It was designed and started enrolling before we had made that amendment because that study was actually part of a contribution of components analysis that we need as part of the regulatory filing for 303. So the GI data actually just looked at zanza versus in atezo to understand the contribution of components there. So we didn't amend or change that study to look at both RAS mutant and wild type because it was much more of a regulatory driven exercise and signal finding.

Okay. Got it. We only have a couple of minutes left, and I want to make sure we talk about the other programs. What -- I guess, before we move to some of the earlier pipeline, what about STELLAR-304, can you just give us a rundown of that program and what kind of achieve?

Yes. That's another one where we've said we expect kind of to hit the number of events this year and present that data or to top line that data. So that's actually the first randomized pivotal study in non-clear cell RCC. So it's the combination of nivo, zanza versus Sutent . Non-clear cell RCC is about 20 -- 25%, 20% of kidney cancer. And by the nature of the labels for any of the drugs approved in kidney cancer cabo included. They all have a label that's inclusive of non-clear cell RCC but utilization tends to be driven by NCCN guidelines, IST single-arm type studies that really don't provide an answer to the question of what is the kind of level of evidence standard of care in that setting. And so 304 was really designed to set out to answer that question and establish zanza as the standard of care there. And we hope to generate positive data, help patients live longer and really drive kind of utilization for zanza in that space.

Okay. And it's going to be the PFS endpoint that comes up?

Correct. Yes.

How important is OS and the regulatory decision?

Yes. I mean from a regulatory perspective, you can certainly look at kind of the precedents in the clear cell space that PFS is an acceptable endpoint statement of the obvious that having survival in the label makes everything better. So we're certainly hoping that the effect size will be large enough to see survival as well. But from a primary endpoint perspective, we certainly think that PFS is good enough to not only if positive, drive approval, but utilization as well.

Yes. Okay. Maybe just on the head and neck program for zanza, what do you assume as the contribution from head and neck? Because it's an area we're very interested in. We have a number of companies that developing, and we think it's a pretty large opportunity. What are your assumptions for zanza's potential there?

Yes. So from a market sizing perspective, again, coming back to that $5 billion zanza number, about 10% of that, we assume is coming from head and neck. It's about $500 million. That's a good example of just philosophically how we see things like guidance. Obviously, we believe head and neck is a very large market, but we don't want to put out unreasonable expectations. And so that number really reflects fairly conservative utilization.

Okay. It's risk adjusted or...

It's not.

It's not.

Okay. Yes. We see those multiples beyond that, especially based on the duration of some of these drugs that could expand the market. We only have a few seconds. What in the early pipeline besides zanza is important to the overall strategy for the company going forward?

I think it's a combination of kind of XL 309 or 628 or kind of -- we have a whole host of what we think are really interesting early programs. But what Chris and I spend a lot of time with is also thinking about capital allocation. If you look at our portfolio, it's reasonably kind of barbelled. And so can we opportunistically and strategically use our balance sheet to find those mid- to late-stage assets to add to that next leg of the stool, so to speak, from a value proposition perspective. We always say we're a big small company, meaning were scaled and sized to be able to take drugs and really run with them. And so I tend to view both our investments in the early pipeline as well as potential external innovation as kind of key drivers going forward.

Okay. Well, we really appreciate the updates. Congrats on all the progress. You've got a big readouts this year, and we'll definitely be watching.

Thank you.

Thank you. Thanks for having us.

Thanks for joining us. Thanks, everyone.