Exelixis, Inc. ($EXEL)

Hello again, everyone. I'm Etzer Darout, senior biotech analyst at Barclays. It's my pleasure to have Exelixis with us. With us today, we have Senior Vice President of Strategy and Investor Relations, Andrew Peters. Thank you so much for joining us. And I'm sure folks are familiar with the Exelixis story, but maybe it'd be helpful to maybe just start with some introductory remarks, and then we'll go into Q&A.

Sure. Thank you again for the invite. Always like being in Miami this time of year, even though the weather in California is also nice this week. As a reminder, we're going to be making some forward-looking statements today. So please see disclosures around relative risks in our business in our SEC filings. So Exelixis is a commercial oncology company, really built around our lead molecule, CABOMETYX, cabo which is a tyrosine kinase inhibitor that targets VEGF as well as a whole host of others, Met, Axl, MER, the TAM kinases, really kind of designed to be a best-in-class molecule across a wide range of indications. It's approved in kidney cancer, liver cancer, thyroid cancer and now neuroendocrine tumors. And so it's really kind of provided the foundation and a lot of the insights is to what we do at the company, both from a research and discovery perspective, but importantly from a strategic perspective as well. And I'm sure I'll get to that a little bit later. We did $2.123 billion in net product sales last year. We've guided roughly $2.4 billion or so at the midpoint for this year and kind of the cabo business continues to hit on all cylinders commercially. Behind that, we have kind of our next-gen, what we think of as a truly best-in-class and optimized TKI that comes on the heels of cabo called zanzalintinib, which kind of takes the core essence, the special sauce, so to speak, of cabo and further optimizes it, most notably around half-life and kind of PK and some of that. So zanza is in 7 pivotal studies right now with plans to initiate additional studies hopefully soon. And we also had on the first positive pivotal data from that program readout last year, and we have a PDUFA date from FDA in December. Beyond that, we have a whole host of both small molecule and biotherapeutics in our internal portfolio. And then kind of lastly, more in my purview is as we think about where do we want to be in 5 years and how do we really grow value, it's treating more patients with more medicines, helping them live longer and shifting that standard of care in oncology. And so as part of that, our financial success that we've had with cabo enables us to both invest internally, invest externally. And then we've been embarking kind of on a series of share buybacks as well to make sure that we understand, we think our stock is cheap candidly. So yes, so that's kind of a little bit of an overview of the company and happy to kind of go wherever.

Yes. Maybe first on that top line guidance that you talked about. What do you see as sort of the key levers around top line guidance? I mean I think the positive, I think, over the last couple of years has sort of been the neuroendocrine franchise. And if you think about just in general about sort of top line and then the guidance and you think about sort of what are the pushes and pulls as you see it?

Yes. So as we talked about kind of on the last earnings call, the really growth drivers for next year are pretty simple. It's continued momentum in the base business around RCC and then continuing to kind of execute on the NET launch. Both of those, as we expect both for 2026 and beyond are kind of really drivers going forward. So I think I'd focus there.

Right. And then as far as sort of maybe the last part that you talked about, just in terms of BD and the potential to sort of maybe look at the external environment for potential assets. I guess what are you seeing in the marketplace that you think could potentially generate value, not necessarily assets, but just maybe indications or specific profiles that you think could be additive to what Exelixis has already built with this commercial platform?

Yes. I mean the way that I think about the company and kind of the way we think of -- we've described ourselves externally as we're kind of a big small company. And what we really mean by that is unlike kind of our larger peers, we've chosen to be particularly focused in solid tumors and even within solid tumors, GI and GU oncology. So within kind of those franchises, so to speak, we think that we're scaled, we're optimized, we're experts, and we're leaders in RCC, NET, CRC. We want to continue to build out around those. And I mentioned kind of the cabo story and how it is a through line through everything we do. When we think strategically about the company, we use something that we call the cabo lens, which is what are the learnings as to why is cabo successful? How do we continue to double and triple down in the areas that we have been successful? And how does that create value ultimately for all of our stakeholders, for patients, for shareholders, for employees, et cetera. And so kind of within that GI/GU landscape, that's kind of very much where we focus. As it relates to kind of what's external, kind of accurate outlook is biotech is a tough business. And I think we have to kind of go in eyes wide open as we're looking both at our internal portfolio as well as externally. The math will say that most things just don't work. And so our job as drug developers is to try and find those needles in a haystack, so to speak, that are going to be those programs that ultimately help patients. One of the things that we've learned kind of again in that cabo lens is that the reason we've been so successful commercially isn't because we're the ace VEGF TKI on the market, it's because we've been able to generate differentiating data and shift that standard of care -- shift that Kaplan-Meier curve to the right. That's why cabo is used. And so when we look externally to try and identify those opportunities that can supplement our portfolio, that's really the lens that we're looking at is program X at another company, something that we truly believe has the potential to become a new standard of care? If not, it's not for us. We're not going to invest in it. So we're pretty disciplined on that front, and we're going to continue to be so.

Great. And Merck disclosed a couple of belzutifan data sets at ASCO GU for patients with renal cell carcinoma. Maybe just from your perspective, what you view sort of the read-throughs are for cabo and maybe even for zanza as you think about potential non-clear cell -- potentially other RCC indications for that program.

Yes. So kind of before during and after that conference, we had spent a lot of time with clinicians who are treating patients trying to understand the dynamics around the data. And one of the things that kept coming up is this question of that all patients and physicians have when they're trying to understand new mechanisms, new combinations in particular is, is it better to combine? Or is it better to sequence? And oftentimes, kind of the best way to answer that is really through just the simple question, is there an overall survival advantage? From our perspective and a lot of the feedback we heard from RCC treaters is essentially, if you take kind of a second-line TKI program, 10, 11 months PFS followed by the belzutifan monotherapy data from LITESPARK-005 with 5-, 6-month PFS, kind of that absolute PFS is actually similar, if not a little bit longer than what LITESPARK-011 saw, plus you layer on kind of the added toxicity of the combination and the fact that with the combination, you also lose what we've heard pretty consistently is a big driver of belz use is the so-called TKI break. So a lot of these patients will have been on a prior TKI for the past 24 months sometimes. And so all drugs have adverse events and TKIs have a particular set, TIF targeting agents have a different set. And so what kind of that sequenced approach with belz has historically offered is providing patients kind of an active modality with a little bit of a different tolerability profile and that's kind of been an important part of why that program has been so successful. So the question then becomes, if you're not really gaining a lot from a PFS perspective, you're adding tolerability issues and you're kind of limiting your ability to offer patients that TKI break, that's somewhat of a challenging dynamic, and that's why our experience was there wasn't a ton of robust enthusiasm for it. The second dynamic that's actually come up around Exelixis and the data is for those physicians and patients who do ultimately decide that, that combination is probably best suited for them in the second line, what it means is we'll probably see a little bit more frontline share for cabo/nivo. The reason for that is as physicians are kind of looking at all the arrows in their quiver, so to speak, on how to help patients along their journey with RCC, if they have a sense that they're going to give len/belz in the second line, they probably won't use a len-based regimen in the first line. And we've been trying to drive kind of that frontline share for the last 3 years. And so if len/pem isn't an available first line, they'll probably go to cabo/nivo. So net-net, I think kind of the overall results of the [indiscernible] were a little bit of a net positive for us, but we'll see.

Right. Maybe shift gears to zanzalintinib with a PDUFA for third line plus CRC in December. How are you thinking about maybe incremental sales force? And how much of the existing sales force for RCC can you leverage?

Yes. So taking a little bit of a step back, one of the things that we've increasingly talked about over the last couple of years is aspirationally our goal to be reasonably balanced 50-50 between, say, GI and GU. Obviously, that was kind of kicked off with the CABINET data and our launch for cabo in NET. But we certainly think with zanza coming in, CRC to expect to kind of fully build that out. And so what we did and what we announced at the end of last year was an increased size of our commercial organization, our sales force, specifically around kind of the NET opportunity to really kind of maximize and put our foot on the gas to make sure that we're doing everything possible to kind of target those patients and really maximize that opportunity. But what it also does is kind of that GI focus enables us to really have a lot of organizational and operational boots on the ground, so to speak, to prepare as much as we can ahead of the potential launch later this year.

And so one of the, I guess, incremental updates that we'll get for STELLAR-303 is CRC data in patients with and without liver metastases, an update there. What does that ultimately contribute to the opportunity for zanzalintinib in this late-line setting initially? And then also, how common is that sort of testing done in CRC patients where this is something where physicians can easily adapt in terms of their diagnosis of CRC?

Yes. So I guess that the liver met, non-liver met dynamic is it can often be just kind of observational. Does the patient have a metastasis in the liver. So it's actually something that's quite common. As it relates to the overall profile, I guess, the important dynamic to keep in mind is that the data that read out last year reflects kind of the ITT population. So it's inclusive of both patients with liver mets and non-liver mets. What we're waiting for later this year is really the fact that at the time of that primary analysis, the number of events for the non-liver met patients was relatively immature, somewhat of a kind of obvious dynamic given that patients who have metastases in liver tend to have much worse prognosis, given the physiological impacts of just what that metastasis would represent. So not surprising that you see kind of a different temporal dynamic. But what's also important is the data that kind of came out at ESMO as well as published afterwards was really that we don't see a meaningful difference in effect size across any of those populations, liver met, non-liver met, prior VEGF use, et cetera. And so I think that was actually honestly a pleasant, I don't want to say surprise, but really a pleasant update for us because it shows that the combination of zanza/atezo is really active across all patients. So that's kind of the important dynamic. Why we're looking forward to the data later this year is, again, somewhat of a statement of the obvious. When our commercial team goes out into the market and sees physicians and kind of starts to have those conversations, it's a much more powerful message when you can candidly show, here's a Kaplan-Meier curve with the ITT, here's the liver mets and here's the non-liver mets and really show kind of overwhelmingly that patients live longer if they're on the doublet versus kind of the current standard. And so that's kind of why we think it's so important is it further adds to the story of why we're so excited about zanza in the setting.

Great. And for STELLAR-316, you've decided to go into adjuvant CRC. Maybe what data points that you're looking at, whether externally or internally that sort of prompted the move into that earlier line setting?

Yes. So this is one that I'm particularly excited about, and I think I'm kind of proud that Exelixis is really at the forefront of the science here. Kind of the incentive, one is, as I mentioned earlier, kind of this franchise view of the world, we really want to kind of invest and broaden our presence in CRC, not only with zanza, but with the rest of our pipeline as well. But as we started to look at kind of the CRC landscape and say, okay, we have a positive Phase III study in a late-line population. We understand now that kind of this tumor type is particularly sensitive to zanza, what can we do with it? And kind of at the same time as that, a lot of data started to emerge around kind of this ctDNA positivity and what that means from a patient's perspective. And so Natera has the Signatera test and they published pretty extensively around what it means from the patient's perspective when they're ctDNA positive or ctDNA negative. So unfortunately, for about 20-ish percent of patients who, after what we call definitive therapy because there's slight little differences between colon and rectal. But broadly speaking, after kind of that adjuvant treatment, if they ultimately do become ctDNA positive, what that means is they have a reasonably high rate risk of recurrence in actually a relatively short period of time around the order of 5, 6 months, 6 months or so. The other unfortunate kind of reality for those patients is the current standard, if you do test positive ctDNA is watch and wait. There's essentially nothing we can do for these patients until their tumor eventually comes back and progresses. And so the combination of all of those things basically let us realize, well, there's this huge unmet need that we have the opportunity to kind of identify patients who are likely to recur, who are also likely to be sensitive to our drug, zanza and basically design a study to help them. And so when we look at the design of the 316 study as well as kind of the operational dynamics around working with Natera, it's something that I'm particularly excited about because unlike a normal standard Phase III study where you open up 1 million sites and kind of screen a ton of patients and hope that, that funnel ultimately delivers it, the ability for Natera to kind of help us and work with us to help identify those patients that could be potentially eligible for the study from an operational perspective, that's pretty interesting. And then similarly, we have the ability to offer these patients an option, whereas right now, it's watch and wait. And so it enables us as a company to run a placebo-controlled study in oncology, which again helps us kind of define that new standard of care and really help patients. So that's kind of the key dynamics there.

And do you have a good sense of the -- maybe the median rate or median time to progression for those patients...?

Yes, it's about 6 months, if you look at it. And that's kind of generally around pretty consistent around date of ctDNA positivity. And so that's kind of an important dynamic to keep in mind.

And for STELLAR-304, this is the non-clear cell RCC pivotal study. What conversations have you had with the FDA around sort of choosing sunitinib as a comparator versus sort of the zanza plus nivo active arm? I guess one of the things we sometimes get from the questions are having sort of a control arm where you can sort of see what the incremental benefit is of your drug in question versus sort of a completely different standard of care. Just wanted to kind of understand the dialogue...

Well, I think the challenge and candidly, one of the reasons we wanted to run 304 is it's a little bit of a new and novel dynamic in oncology where there's actually never been a randomized study in non-clear cell RCC. It's kind of this interesting area where all drugs that are approved to treat kidney cancer actually have labels that are inclusive of both clear cell and non-clear cell. And even though there's been no data really to define that. Instead, what tends to drive utilization is single-arm, unrandomized, small, sometimes even single center kind of substudies that tend to have pretty wide error bars and confidence intervals around kind of data. So it's somewhat of a tricky question to say, what does SUTENT do? What does cabo do? What does len do? What does pembro do? And so that's why in kind of the market, our experience has been that utilization is really kind of a little bit all over the map. It's a hodgepodge of a bunch of different stuff just because there is no standard of care. And so when we thought about embarking on kind of an expansion of the zanza opportunity, that was one of those things where we realized this is a chance for Exelixis to again define a standard of care, plant our flag in the ground and say, with Level 1 evidence, this is what patients should use if they have kind of the clear cell or non-clear cell histologies. And so that's kind of the background of that whole process.

Great. And for zanza with STELLAR-311 in neuroendocrine tumors, I guess one question that we're constantly being asked is the positioning of zanza relative to cabo given sort of what we've seen from cabo in that indication. And ultimately, does cabo ultimately going generic also play a role in how those sort of can coexist?

Yes. So I think the best way to kind of frame that or think about that is to kind of contrast the CABINET study with what we're doing in 311. So CABINET was a cooperative group run reasonably broad study that was placebo-controlled and had a pretty wide range of patients in their prior treatment experience. But for the most part, there were a lot of reasonably late-line patients in there. 311 on the opposite side of the end is kind of comparing zanza against that first oral option, everolimus. And so that just -- it's a different patient population, one against an active comparator versus kind of placebo. So I think our expectation for the evolution of the NET market is kind of that exact dynamic where robust -- hopefully robust data against an active comparator in a much earlier line population is in a little bit of a different category than kind of that later line placebo-controlled study. So I think that the dynamic and the difference between the 2 is really what's going to drive uptake in the future.

Right. Maybe a couple of questions on the early pipeline, one of which is XB371, your tissue factor ADC. We also see a few other anti-issue factors moving through the clinic. And how are you thinking about differentiation there, again, relative to TIVDAK relative to what else is sort of being developed?

Yes. So I think kind of the -- again, the core of that is really around our view on franchises and kind of the importance there. So TIVDAK as an example, kind of the more standard, historic Seagen MMAE [indiscernible] kind of linker technology. 371, we think, is kind of a fully optimized ADC where the antibody, for example, is noncompetitive with Factor VII, whereas TIVDAK is. So obvious implications around the coagulation cascade and potential bleeding risk, et cetera. The other dynamic coming back to the franchise point is we chose both a linker and then importantly, a warhead, which we think are particularly active and important in CRC. So that's essentially an ADC that we designed to kind of further our franchise view of the colorectal cancer opportunity because of that chemo sensitivity of the tumor and the expression profile of tissue factor in those patients. And so it's a really good example of kind of when we approach where we want to go strategically, we're trying to be particularly thoughtful around how do we execute on that, what are the best modalities and targets, et cetera.

Great. It looks like we're up on our time. Andrew, thank you so much for your participation. Thank you for our listeners as well.

Thank you.