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

Thank you for being here today at the 2025 Citi Biopharma Conference in Boston. Happy to have with us this afternoon. our good friends from Exelixis, Michael, I guess you could just introduce yourself and the company. I'm sure anyone listening to this already knows who you are and knows about the company. But any words?

It's great to be here and just a beautiful day in Boston. I really appreciate the opportunity to come chat with you and your -- all your colleagues here today. Yes. So I'm Mike Morrissey, Chief Executive at Exelixis. We're a cancer-focused commercial company that really is dedicated in our mission to improving the standard of care in the treatment of cancer for patients with cancer. And we're excited about having a leading molecule in kidney cancer called CABOMETYX, cabozantinib, by its generic name, and have some interesting -- a lot of great data there and certainly a strong commercial platform to be able to get that to patients. The newest news this year is around the NET indication that came online at the end of Q1, and we launched in Q2. And obviously, our story, certainly aspirationally is to go beyond cabo and to build a pipeline of franchise molecules, essentially. The learnings from cabo and building that franchise over the last decade, I think, has really set us up well to be able to build a multi-compound multi-franchise business in the future with zanzolitinib, that next molecule up in a variety of pivotal trials as well as in a deep pipeline of both small molecules and biologics. So we have big goals, big dreams for the company and being able to take standard of care to the next level for patients and thrilled to be able to talk about that today.

And in a lot of ways, for years, Exelixis the constant has been cabo, and it's been growing and growing and kind of growing incrementally, adding new indications over time. And it's shown a lot of endurance, so to speak. Could you tell us about how it started from COMETRIQ, cabozantinib and ultimately, how you incrementally grew the franchise and where things stand today, you're still growing the franchise, but also there's the intellectual property. Kind of exploration...

Yes, for sure. Yes, it's -- in some ways, it's a classic story in the biotech business, the journey to discover novel innovative matter in a way that, again, moves the needle for patients. The cabo story goes back to the mid-2000s when we asked, I think, a number of very simple questions around what drives tumor resistance to anti-angiogenic therapy, namely VEGF modulation. What is the -- what are the key drivers for resistance in tumors. And if you look at the data at the time with bevacizumab with some of the small molecule VEGFR targeting TKI, sunitinib, pazopanib, axitinib, there was some really, I think, interesting emerging themes around the idea that tumors will drive redundant pathways to VEGF to get around VEGF inhibition. And those revolve primarily around the RTK, the receptor tyrosine kinase MET and AXL and the relatively simple, but I think very elegant approach that we had at the time, the hypothesis was that if we could inhibit VEGF and MET and AXL as the primary growth drivers for not just the tumor but also the tumor vascular or the growth and the resistance mechanisms, then we would be able to basically build a better molecule. That could both be antitumoral and as well as anti-angiogenic. Along the way, we've learned more about cabo and that class of molecules in terms of its impact on a variety of other signaling pathways that are involved in tumor immunomodulation as well as other types of tumor growth signals that has really packed a lot of punch into that molecule and that scaffold. So that was the original impetus for actually designing the molecule that we made. We started out looking at the lowest of low-hanging fruit that was medullary thyroid cancer with COMETRIQ at the time. We had a capsule formulation, and that was based upon some very interesting signals we saw even in the first handful of patients in Phase I. It's a very rare tumor type. We ran a pivotal trial in that. That was clear big win from a PFS point of view. And that was after a couple of big failures in prostate cancer. You'll recall back in the early 2010, '11 time frame, we saw some pretty compelling activity in prostate cancer, both in terms of directly inhibiting tumor growth with prostate, either primary tumor or metastases, but also very interesting activity in the bone scans in the bone mets that most prostate cancer normally targets. So the interesting point is that didn't actually work that we ran 2 pivotal trials in prostate cancer. Both of those failed. On top of that, we had discovered cabo as part of a collaboration with GSK. They gave it back to us. They didn't want it. Then we partnered with BMS based upon some additional data we had in GBM and other tumor types. They did a little bit of work and gave it back to us. So it was a twice rejected failed pivotal trial in prostate cancer molecule that didn't look always the best that had somewhat of a tarnish profile. And if you'll recall back in the -- this goes back ancient history in the 2014, 2015 time frame. We shrunk the company down. We focused on one last shot in renal cancer. We were down to less than 100 people. I think we had 80 people in the company that covered basically the RCC trial and then the minimal G&A that we needed to be able to run the business. But that worked, right? The METEOR trial was -- not only was it a success in RCC, but the trifecta of winning in an overall survival and progression-free survival and response rate was the first time a molecule actually did that in RCC. So it set -- in some ways, it set a whole new standard for not only small molecules, but at the time, other modalities even like checkpoint inhibitors, which obviously improved survival, didn't hit PFS right away. So we were up and running in the 2015 time frame when that -- in July of 2015 when that METEOR trial read out and had that momentum then to move forward and then added indications beyond that in terms of second-line liver cancer, differentiated thyroid cancer. And then really, most importantly, we collaborated with BMS with nivolumab in a study that was called a CheckMate 9ER that was looking at cabo plus nivo versus sunitinib head-to-head. And again, one across the board in terms of response rate of PFS and overall survival. I think the key there is that we looked a little bit lower dose instead of starting at 60 milligrams, started at 40 milligrams in that combination. And the impact on quality of life was significant. We actually had quality of life benefit as well as compared to sunitnib. So that profile was very compelling. We had a leading second-line share up until then, I think our revenues in 2019 were in the $700 million, $750 million range. And we thought that was a great way to then really double down and build the business. And over the last 4 or 5 years, revenues have tripled based upon the strength of that data and based upon our ability to, I think, really educate docs on the opportunity in the first-line and second-line level. So a great story. Company and the employees showed tremendous resilience. And this is a game that we play that kind of borders on, got to have the right data, but you never have enough data, you also have to believe in what you're doing and believe in the possibilities of what small data sets can offer in terms of aspirationally trying to improve the outcome for patients. So a great team effort. Certainly, navigating COVID and all those challenges were a big part of the early '20s. And here we are today in the middle of 2025 with cabo. The net indication, as I mentioned, is certainly a very important part of the story. I'm sure we'll talk about that more. And then we have this pipeline with Zanza and other small molecules, other biologics that we're super excited about. But cabo is the driver. We have the lens by which cabo provides insight into us more broadly that we use every day and certainly frames our idea of what success could look like.

So at this point, clearly, you issued guidance this year, $2.25 billion to $2.35 billion. Obviously, the driver of that is RCC. How much room is there left in RCC first in the renal cell carcinoma? And then towards that end, one of the things I think investors have kind of been trying to get their hands around is what is the net opportunity? How significant is it?

Yes. So let's talk about the base business first, right, because RCC is a big part of it, but it's not all of it. Certainly, the -- we started the year with a midpoint of guidance for net product revenue, not total revenue, which you mentioned, but net product revenue of $2 billion plus or minus [ $50 million ] was the range. We had a super strong first quarter, and we raised that midpoint from $2 billion to $2.1 billion. And that's a majority of the base business, a little bit of net built in there, but it's the majority of the base business. Question is how much more can we grow, right? And as you would imagine, we've been getting that question every year, every quarter since, I would say, the middle of 2022, right? Because if you look at the longitudinal data across most oncology molecules, small molecules, biologics, whatever in the commercial setting, you normally hit that kind of peak share peak plateau revenue within 4, 5, 6 quarters. That's what you normally see. And with cabo in the first-line setting, that's been very different, right? We have been growing quarter after quarter after quarter. In fact, if you look at Q2 '25 versus Q2 '24, we grew 4 points in market share, which is pretty incredible and really just speaks to, I think, the quality of the data, the quality of the team, the energy and the urgency and the intensity by which we educate physicians. We understand the market dynamics really well. We have just phenomenal analytics in terms of understanding prescribing trends for cabo for other molecules, where we're strong, where we're weak and we have -- we're a big small company. So we have this nimble approach to being able to shift priorities and resources really, really quickly. It's just -- it's a conversation between whatever the topic, whatever the part of the organization me and the department head and then maybe a small cadre of people and off we go. So it's a phenomenal way to maneuver in a very dynamic environment where in the RCC space, we're competing with the big guys, right, with the BMS and with Merck and with Pfizer and with Eisai, the list just goes on and on. So we need to be at the top of our game every single day. And we have it, and that needs to continue, and that will continue. So how do we grow in the future? We keep doing what we do what we've been doing, and we keep asking the hard questions and then we maneuver effectively what's the limit? I don't know. I wouldn't give -- I wouldn't feel comfortable giving you a number because I don't think there is a limit. So in the first-line setting, we probably have a 25% market share. So there's room to grow there in the second and second plus line setting, we're probably in the 45-plus percent market share, so there's room to grow there. So the question is just how do we maneuver in those two different opportunities? How do we move more upfront because obviously, we have a much longer duration of therapy and the stacking potential is a real phenomenon here. Compounding works, right? When you talk about patients being on drug for 13, 14, 15, whatever months. So that really drives important benefit for them and for us, too. So that's the that's the focus, and we have a sales team that's committed. And I would argue best-in-class to making sure that we maximize the value of that opportunity every single day. On the net side, net is -- it's super interesting for us. We've been in that space with collaborators. In fact, Jennifer Chan is here at Dana-Farber, she ran a Phase II study in net with a handful of 35 or so patients years ago, generated some really interesting Phase II data we saw PFS in the 15-, 20-month range. That was really compelling and really out of the box from what you would normally see with a small molecule everolimus sunitinib, whatever. So that prompted her to work with the Alliance cooperative group to run a pivotal trial called Cabinet, two different -- actually, two different trials in one [ run-in. ] One in pancreatic NETs, one in EP or extra pancreatic net kind of part of the bundled in with the same overall trial. That read out positive for PFS in both of those "cohorts", all the filing data has been released. Public papers have been published. Filings have been done. So -- and we got approved in that here in the U.S. at the end of Q1, and I think in the EU right around ASCO, maybe a little bit after ASCO. So that was actually a really, really good approach where through a very strong collaboration with our academic colleagues we're able to bring the first new molecule to the METs space in 10 years. There hasn't been an approval in that since 2015, 2016. So that's pretty exciting, too. The opportunity there, we think, is significant. By our math, if you look at the oral therapy basket, which is basically comprises everolimus, sunitinib and CAPTEM and those are all generic now. So you use contemporaneous pricing, you use cabinet-type duration. That basket is about $1 billion in value. So we would like to be able to capture as much of that as we can. And we have the mindset and the mandate to go out and do that. So we launched at the very end of Q1, had a real strong start to Q2. Again, first quarter is mostly new patient starts, not a lot of refills in a couple of months, but that's gotten off to a great start. We're seeing things grow I think, at a pretty good pace in Q3. So we're off to the races. But again, using 9ER as an example, to go from launching in basically January of '21. So what we saw in Q2 of '25, that kind of a ramp it's been dramatic in some ways, but it's also been a steady grind to get market share built up and to get patient stacking and those kinds of things. It just really reinforces the kind of value you can bring if you just stay in there, execute perfectly, have the right team that can engage and just get the job done.

When you talk about the basket of these different oral therapies out there are there pockets where a preference where each one gets used? And towards that end, which do you see one as being a kind of a lower-hanging fruit to go after those particular populations versus the other? Or is it much more complicated?

Yes. Well, I'm not sure it's more complicated. I think everybody, like every physician, every treater has their own preference based upon personal experience. The feedback that we're getting, and this is from, again, formal market research, from talking to docs from kind of anecdotal feedback is that people are really excited about cabo. And why is that? Number one, the cabinet data with all the caveats of cross-trial comparisons, and we should never do that. Everybody does it. And the data looks certainly very compelling based upon people's experiences with kind of real-world data with other compounds. So there's a high level of enthusiasm based upon the CABINET data. It's been presented a couple of times. We had a New England Journal of Medicine paper. So it's certainly very been very well documented publicly and very well received. Secondly, cabo has been around long enough where a lot of people have used it in their practice already. So by our analysis, about 80% of the current net prescribers have actually written a cabo script in the past 6 to 9 months, right? So there's a high level of experience with cabo and real comfort with how to use it, what dose to use, how to watch for adverse events, how to manage through that because it's been so well utilized and so successful in other indications: renal cancer, liver cancer, thyroid cancer and so on. So it's not a brand-new drug. It's just a new indication, right? And then finally, and I think really importantly is there's just a level of interest in the opportunity for patients. Every patient who has advanced metastatic NETs, right? It's an indolent disease, but they all need therapy, right? And they're all on an active therapy. So the rate-limiting step is basically patients progressing on their current therapy. And we've been told by get market research, talking to docs, kind of anecdotal feedback that cabo is #1 on their list all things being equal to try when their patients progress on their current therapy. So in some ways, rate-limiting step is just we have more patients coming up for the next drug, right? And the way CABINET was run, and partly, I think it's just because it took a while to enroll. It's a U.S.-only study run by the U.S. cooperative group. It enrolled over, I think, about a 6-, 7-year period. So every possible framework of patient experience in terms of prior therapies, tissue of origin age the demographics were probably as wide as it could have been. So the physicians really have a very good basket of information to choose from based upon how their individual patients progress. And we probably have data there in some shape, manner or form CABINET. So all in all, we're getting off to a great start. We're super excited. We have a strong GI team that's in place that covers thyroid, covers liver and now covers NET with support from the GU team. And certainly, as zanza comes online, again, the first opportunity there is going to be in GI and CRC. So if we can double down and build another -- either part of that GI team or augmented to that to be able to help us get the word out around NETs. So much the better.

Got it. With that, we'll jump over to zanza. I have to tell you, I always call zanza, and I'm thinking Sansa Stark, GOT fans out there, terrible joke, I apologize, but I had to say it.

Late in the day just but...

You're going to hear me refer to as zanza and...

It sounds very elegant. So just have at it. So...

We talk zanza, we've had some data recently. Could you update us as to -- this is clearly, a major product. It's kind of the next generation of cabo. There's differences actually before we even getting the data, how is it different than cabo?

Yes. So Zanza was designed to phenocopy cabo's intrinsic inhibitory activity. Any multi-targeted molecule, it's actually really hard to tease out what's driving the antitumor anti-vascular kind of pro-inflammatory activities when you're hitting a number of RTKs at the same time, right? So we didn't want to mess with that because while we have, I would say, pretty strong hypotheses and pretty strong beliefs about why things are happening. We don't actually exactly know because it's a pleiotropic agent across. Really, every relevant pathway and cell type and kind of covers the entire tumor microenvironment in a way that is potentially good. So we wanted to keep the inhibitory activities similar between cabo and zanza. We did that through in vitro assays through pharmacodynamic assays approve that early in the clinical setting as well. So we have a good sense of being able to kind of, again, reinforce the attributes of cabo that we think are important. The one downside from cabo that we've heard over the years is that it's a long half-life, 4- to 5-day half-life in man. Complicates dose reductions, which are invariably going to happen with a VEGFR targeting molecule. That's true for biologics. That's true for small molecules. You have to find the right dose, and you actually have to individually titrate every patient for their best dose based upon physical characteristics metabolizing enzymes, any other kind of our predisposition that they might have. So doing that might involve with cabo 7 to 10-plus day old while the molecule kind of washes out. And then do you restart? Do you move to another molecule, et cetera. So very early on, very simple, but again, very elegant approach here was to simply introduce a metabolic liability into the cabo scaffold that was basically -- we could fine-tune the half-life. And we made a variety of different molecules, and we had a very, I think, clever and kind of very exhaustive design and SIR analysis to be able to pick the zanza modification out that gave us about 1-day plus or minus half-life. So that makes -- potentially makes all those kinds of things much easier to then operate in terms of dose reductions and adverse event management. So that was the whole plan. So -- and like you said, we've had -- I think we've got some pretty compelling data over the last like couple of years now in kidney cancer. Myotherapy combination with, say, checkpoint inhibitors like nivolumab in RCC where we see a very good activity, very good duration, good response rates, good tolerability, low discount rates, all those kinds of things you want to see. And then we had some data at ASCO GI earlier this year in third line plus colorectal cancer, which is the population that we're studying in STELLAR-303. That allows us to feel good about kind of the overall activity profile and adverse event profile in that tumor type while we were doing the STELLAR-303 study, that's the first pivotal trial to enroll and to read out in late June, where we had positive top line results in the ITT population against regorafenib, and that was in combination -- zanzalintinib in combination with atezolizumab versus rego head-to-head. So notable in that it's the first successful trial against an active control head-to-head that's been done in the space, to my knowledge forever, right? There have been 4 of the pivotal trials that have failed over the last block of time, two checkpoint WAG 1 combinations that failed. There was atezo, cobimetinib, so a MET inhibitor trial that failed and then len/pem versus standard of care failed as well. So notable that you think late line, something here is going to work. The reality is the bar has been super, super high. And you've seen the standard of care increase over time, too, which is certainly part of the challenge as patients get -- as physicians and patients have more experience with any standard of care if that gets better. So the bar actually doesn't stay static to where the first approval was, but it actually grows over time. And you've seen this in liver cancer and renal cancer and others. So it's a moving target to a certain degree. But we're thrilled with that and hoping to have the data out to share, both in terms of presentation and publication soon waiting to see when abstracts get submitted and actually say when they get accepted, they have been submitted and have a sense on kind of what's going to happen in terms of presentations and stuff. So we got a lot of questions about that today and people want to know when this is coming out, and the answer is just stay tuned. When we have an accepted abstract that we have details to share, we'll be talking about that. ASAP.

For those particular conference, what are the deadlines of the...

It's a good question. I don't actually know. It's a good question.

So wait [indiscernible] and we can back into time. There's also the head and neck. Can you tell us about that experience?