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

Welcome to this next fireside chat with Exelixis. With us today, we have Mike Morrissey, President and CEO. Mike, welcome. Thanks for joining us again.

Great to be here, Michael. Thanks for the invite. Before we begin, I'll be making forward-looking statements. So please see our SEC filings for a description of the risks that we face in our business.

Sounds good. Great. Thank you, Mike. So Mike, there are a lot of moving parts at Exelixis. You have the commercial story with CABOMETYX. You have recent and upcoming data card flips for zanzalintinib, your key pipeline product, and you have an evolving early-stage pipeline. And so before we jump into Q&A, could you just provide us with a quick introduction and contextualize where Exelixis stands as a company today?

I'd be happy to. Thank you. Good morning. Good to see you again. Great to be here, kind of a rainy day in Boston. So I'll hopefully provide some illumination. Yes. So let's talk about Exelixis. Let's talk about earnings that we had last week, kind of set the stage for all the other topics and where we're going as we close out '25 heading into '26. We're a midsized commercial stage biotech company focused exclusively in oncology. We have kind of ridden the roller coaster of ups and downs over the last 25 years, the last 10 years in terms of how we've been able to navigate the discovery, clinical, regulatory and then commercial landscape within oncology. It's been really illuminating and I think very important to think about where we came from to kind of frame where we're going, right? But again, Q3 call was last Tuesday, had a really strong quarter. We did $543 million in net product revenue. Majority of that is the base business, driven by the success we have in kidney cancer. Really excited about what's happening with NET. We'll talk about that, I'm sure, throughout the next few minutes. NET's gotten off to a great start. So their second full quarter marketing based upon the approval we got at the end of Q1. The vector looks strong. I think we grew 50% Q-over-Q. We have a greater than 40% market share in terms of new patient starts, clearly, the molecule of choice in the oral therapy segment, which after a couple of months of launch is, I think, pretty impressive. And we think we'll exceed $100 million in sales. So it really kind of gets -- kind of frames the opportunity that we've got. Total revenues for the quarter were a little bit shy of $600 million global revenues for the brand between us and our partners was $750 million, $760 million. So really blockbuster status. We have 7 indications in the label, obviously. So a great platform to be on. But again, we're never content. We're never satisfied. Our goal is to build a pipeline of franchise molecules using the lens from cabo to be able to help us navigate how we do that. We think zanza is the next one up, and we've got a deep pipeline that will, I'm sure, talk about today in a lot more detail at R&D Day in a few weeks to kind of frame where that's going. But we're looking for -- we're looking to build one franchise after another. That's how you build value for patients. Obviously, if we do that successfully, our shareholders will also value -- accrue value from that as well. And it's all about the right molecules, the right trials, the right combinations, the right indications, right lines of therapy in a way that we can with very disciplined expense management and very focused on returning cash to shareholders as an important priority, continue to build the business. So we're thrilled to be here and thrilled to be working as an organization to help patients with cancer.

Great. Maybe just a couple of follow-up questions. So the net launch for cabo is going well, as you mentioned, you talked about this $100 million incremental additional sales this year for the full year. Maybe talk a bit more about what you're seeing in terms of how cabo is used in neuroendocrine tumors in the first few months in the market? And then also from a prescriber perspective, are these mostly -- talk about sort of the footprint there. Are these mostly prescribers that have already used cabo in other indications? Or are there perhaps new prescribers that specifically focus on GI tumors?

Yes. So across the board, again, we've had, I think, a really successful launch. As you're familiar, the CABINET data covered a pretty broad population of patients. It accrued. It enrolled over 6-plus years and standard of care was evolving in that time. So when I think about all the different subsets of patients and clinical phenotypes and past therapies, I think we cover the vast majority of those different ways of kind of treating patients. So in terms of prior therapies, in terms of tumor of origin, a site of origin, in terms of how these patients present with their disease, we really cover all the bases. So I think what happened is in the -- I'm going to sneeze here, I could feel it coming, so I apologize in advance. The opportunity for cabo is to really cover as wide a swath of potential opportunities as possible because we've just covered so many of those kinds of patients in the trial. And we're seeing that in the commercial setting. In terms of prescribers, there's a healthy mix of academics and in the community because this is a very indolent disease and these patients can live a long time. You see a good mix of that distribution in the field. And that, to be quite frank, is one of the reasons why we want to left shift and expedite kind of building out the entire GI sales force now with the opportunity to launch 2 drugs potentially in 2 different indications in successive years. We want to maximize the kind of the area under the curve for NET as much as we can before the CRC opportunity potentially comes online. And then if and when that happens, then put all of our focus there, right? So it makes a lot of sense to be able to do that. And it's an incremental build for us. But our commercial team is so strong and so strong. So just finally integrated into the organization, it's a relatively easy build to be able to get that done and get that moving fast. So we're excited about net. Not satisfied again, but can certainly see a lot more growth there going forward, and that's the goal.

Could you talk a bit more about this expansion into the GI space? Sort of how big is this additional build as you put it, in terms of your marketing infrastructure relative to your existing?

Yes. So we're not going to go into details for competitive reasons. Look, we have -- we've always viewed our ability to navigate and compete commercially with the idea that you can't go in half baked, especially in something like kidney cancer and expect to hold your own with all the big players with half a team, right? So we've from the beginning, from the outset, invested heavily and appropriately to be able to compete, right? So now adding another component to our sales force and some more marketing people here, comm ops people there, market access over there. It's an incremental build based upon the foundation. So we can do that, I think, in a very cost-efficient, time-efficient fashion. But the opportunity for growth is significant because then we cover that much more of the field, and we set the stage for future success with other indications as we go forward, too. So it's the right move. And the idea, I think we've really reframed the opportunity we didn't get a lot of credit back in the day when we were launching renal and certainly around the time of 9ER that we could compete. And the fact is with the right team and the right attitude and the right energy, you can move the needle, and we've done that now.

Maybe on that, so in neuroendocrine tumors, you spoke about a $1 billion TAM in the U.S. How much of that do you think you'd be able to capture before LOE in 2030?

Yes. So we haven't given that number yet. And again, from a competitive point of view, probably isn't wise to do that, at least not right now. But look, we want to be able to make cabo available to every appropriate patient when their physician thinks it's the right time for them and the patient, obviously, feels it's the right time for them to access and oral therapy. And we think if that -- when it comes to that, we would like cabo to be at the forefront of their mind, and I think we've done that to a large degree. You mentioned before about prior prescribers. We talked about this a lot on past calls, past investor meetings. 80% of the net prescriber population has used cabo in the past. So they know how to use cabo. They know how to dose adjust. They know what to look for to maximize kind of that experience for the patient in terms of both efficacy and tolerability, quality of life. So we feel really good about that. And we can track -- I won't go into the details, but it's pretty easy for us to track who's writing for NET based upon kind of their phenotypic approach to how they dose. And it's just -- it's a really important way to be able to help them talk to new prescribers about some of the things to look out for, right? So in a very compliant manner. So we're feeling really good about how that's going and having that much more momentum and kind of manpower in the field here can only help accelerate things as we go forward for sure.

Makes sense. All right. Then maybe shifting over to zanza, which is a key pipeline product for you. I think we all recently saw the data at ESMO in colorectal cancer, which were obviously positive.

Say that again, it was positive, right?

Yes, it was very positive. When we speak with docs, though, they really like using Lonsurf and bev, at least the ones that we speak with. And so as their go-to third-line CRC standard of care. And so maybe talk a bit more about how you and your team will detail zanza and atezo, specifically in the third-line setting.

Yes. How many docs do you talk to? How many KOLs? Yes, how many?

Fair amount.

Okay. Trade secret. There you go. Yes. Well, we talk to hundreds, if not more. We get very good reaction to the data. We have really strong interest in using that regimen from the standpoint of, number one, arguably longest median overall survival certainly compares with all the caveats of cross-trial comparisons compares well with other leading doublets in that space. The trial details, in particular, matter when you kind of look at these things, again, with all the caveats, which everybody does, there are certain attributes around zanza, atezo that I think are really, I think, really exciting and really potentially very enabling. The one thing that we keep hearing time and time again in all of our market research is that physicians and patients are looking for an opportunity to use non-chemo-containing regimens and to access checkpoint inhibition to help attack their disease. And I think that's something that we've got, and we're excited to be able to appropriately navigate going forward as we go through our filing and our review and eventually hopefully get a label and can talk about and educate docs about the data. So the ITT population one, the nivolumab population is a dual primary endpoint. We're still accruing overall survival events there. All the data was in the ESMO presentation in the Lancet paper, came pretty close at the interim. So again, we have to run that experiment all the way through if we're fortunate enough to win in that population as well, and that would be another strong message to be able to send as we go out and potentially market the drug post approval. So we're excited about that. We think it's a very, very important first step. Right now, it's at least by our take, it's a $1 billion opportunity in the U.S. We think that could grow considerably with better therapies, with more contemporaneous pricing, maybe better duration as well. So it wouldn't surprise us to see this segment grow over time. And then again, in the theme of building franchises because that's what we do, moving up in therapy. This post-chemo adjuvant study that we're going to start early next year. It will be STELLAR-316. We think is a really, really cool idea, addresses a large population of patients who are at high risk for progression post adjuvant chemotherapy that we think we could help a lot as well. So the whole idea of building a franchise cabo or like we're doing with zanza across tumor types, across combinations, across lines of therapy, but then also come in with other molecules for colon cancer that we're excited about, whether it be 628, our bispecific for PD-L1 and NKG2 or for, say, XB371 tissue factor with exatecan payload, really reinforcing the idea that we can go the other diagon or the other dimension to be able to find franchise wins as well.

Right. So with the -- I think you talked about the NDA submission by the end of this year. What are your plans for ex U.S. or rest of world commercialization for zanza?

Yes. So we're going to navigate that carefully and be very thoughtful about how we do that. Obviously, there's lots of moving pieces in terms of ex U.S. issues. So we'll take our time and do that in a very thoughtful, pragmatic manner. Where we're at today versus, say, where we're at in 2015, 2016 with the cabo situation couldn't be more different. So we have to do the right thing by patients, the right thing in terms of the business, and we're going to figure that out over the next few months.

Okay. And then yes, maybe just trying to understand some of the other opportunities for zanza. You just mentioned the adjuvant colorectal study that you announced on the earnings call. Maybe just talk about the thought process behind going just into that specific setting, just contextualize the opportunity perhaps relative to other treatment settings in colorectal.

Yes, sure. So when we think about the opportunity, right, any opportunity, we think about the unmet medical need, the competition in terms of what's happening in that space, where standard of care is and really the upside in terms of the -- how the epi in terms of the number of patients could transform into value creation if we're successful. So I think this is one example where when you think about how CRC has evolved over the last several years, this is the one open space in terms of a post-adjuvant setting where a pretty healthy number of patients who get surgery and then get adjuvant chemotherapy post surgery in the first-line setting are at high risk for progression, right? So patients who are not metastatic after surgery then have by various technologies, in this case, looking at ctDNA and their MRD status have the ability and the opportunity to actually -- they're at high risk for progression. And if you could impact that with a molecule like zanza, either by itself or in combination with a checkpoint inhibitor, could bring not only great value to them in the short term in terms of blocking that progressive step, but potentially over many, many, many months, right? That's the opportunity. And obviously, we have to not prove that. But the idea that surgery and chemotherapy, unfortunately, is not curative, gives us an opportunity to move into a space that is right now wide open with thousands of patients who you can basically select with a molecular test to be able to say, okay, out of all these patients, this fraction of them, and it's a pretty healthy fraction of patients over time could be impacted. So we're excited about that. Again, if we've proven survival with a late-line metastatic setting in third line plus CRC with 303, then the idea of taking that approach and the zanza part of that by itself and maybe on top of a checkpoint inhibitor moving that up where the tumor volume is so small, you can't measure it radiographically. I think it's a great way to, again, build value for patients potentially and if we're successful, build value for shareholders.

Okay. Then maybe just a question on non-clear cell RCC was really your next card flip on zanza in the first half of next year. What is the size of that opportunity perhaps relative to clear cell RCC?

Non-clear cell RCC is -- about 15% of overall RCC population in the U.S.

So just clear, 15%.

Yes, 15%. choking here in my water.

And so please take a break now. Cabo actually has NCCN listing in non-clear cell as I understand it. In general, sort of yes, maybe talk a bit more about the STELLAR-304 study and how it would position zanza there relative to other treatment options.

Yes. So all the approved drugs for kidney cancer for RCC are approved for advanced RCC. The vast majority of the data has been generated in the clear cell population. There's been, to our knowledge, to my knowledge, no pivotal trial, global randomized pivotal trial that's been implemented, executed, looking at a discrete non-clear cell population. So this is the first one. Everything else is covered by the existing clear cell kind of clear cell data in the labels for advanced RCC. So we think in terms of Level 1 evidence, if we're successful here, it would be a really, really strong data set and provide foundational data to support a broad utilization of that regimen. in that non-clear cell setting.

Okay. And then with STELLA-311, you're sort of doubling down in neuroendocrine tumors with zanza as well. It's a Phase II/III study, as I understand it. Maybe just walk us through the design and the endpoints of the study and also how it would be positioned relative to cabo.

Yes. So again, in the theme of thinking about building a franchise, and this will get certainly in the NET space kind of fleshed out further at R&D Day. We want to have more than one offering here that allows us to expand our footprint, build a deeper, thicker foundation around that space to be able to, again, maximize the value of individual investments in a way that then is, if not additive, certainly synergistic, right, as what the goal would be. So think about how you could help build that market basket from a $2 billion, $2.5 billion size in 2024 to $7 billion, $8 billion, $9 billion in the 30s. And you do that with multiple compounds, multiple different lines of therapy, looking at different control arms and asking really at points of intervention as you go, how do you contribute to the patient experience in a positive sort of way. So again, this one going from cabinet, which was cabo versus placebo, going to 311, which is zanza versus everolimus, where we've been obviously in other tumor types with cabo at least very successful in defeating. So again, if you can win against an active control, that de facto puts you up on people's radar in terms of using that earlier in the process, right? So simple ideas. Some of Jennifer Chan's early Phase II data in an earlier line setting back in the day, back in the 2015, '16 time frame looks really encouraging. So to be able to do that even better with zanza is very, I think, very encouraging, and that's the goal.

Right. Then just maybe one more on zanza. So clear cell RCC, as you all know, is obviously your stronghold, your core market for cabo, and there is an opportunity for zanza. You have announced this partnership with Merck to perhaps combine with belzutifan there, which is a new mechanism drug in RCC. And so yes, just talk about potential plans there. And I know you're sort of -- I think you said you're on track to launch -- or Merck is on track to launching the studies, as I understand it. Is that correct?

Yes.

So how does a belzutifan combo fit into the evolving landscape in RCC? There's a lot of combinations that are being evaluated, especially by Merck.

Yes, sure. Well, it's a very dynamic playing field right now. It was dynamic 2 weeks ago. It was dynamic 2 years ago, it was dynamic 10 years ago, right? So -- and that shouldn't surprise anybody, right? If we're all charged with one simple task, and that's to improve the standard of care for patients with cancer. And everybody does that by themselves in combination with others, their own molecules, combining molecules from different portfolios. We've done that. Everyone's done that, right? So -- and we're certainly a leader in that space, and that will continue. We're thrilled to work with Merck here in terms of zanza and bells. We're having numerous conversations with other companies for other type assets where RCC is front and center in terms of how we could maneuver in terms of these clinical collaborations. We've talked a lot about those in the past with cabo. I mean that was a big part of the cabo story was our collaborations on the clinical side, where it was combine and conquer without sharing commercial kind of commercial rights. I've said this before, 9ER was probably in the ROI hall of fame from the standpoint of us spending about $0.25 on the dollar to run that trial and revenue went up by 2.5, almost threefold, right? So we're excited to do this again here. We want to be able to win in renal now and in the future. We want to be able to win in colon in the future. We want to be able to win in NET in the future. The way we see building value is by building these franchises within molecules and within therapeutic indications that can help more patients and drive value for our shareholders.

Right. Well, great. Thanks, Mike. So I think we'll see you next at the R&D Day.

Okay. Look forward to it. Yes, for sure.

Yes. Thanks for the time today.

You bet. Thank you. Great to be here.

Thanks.