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

Great. So welcome to the next session. My name is Eva Fortea. I'm one of the biotech analysts here at Wells. We have with us today, Andrew Peters, SVP Strategy; and Chris Senner, CFO of Exelixis. Thanks so much for being with us today.

Yes. Thank you for the invite.

Great. So maybe we can just start our chat with kind of lay of the land, last 12 months, next 12 months for Exelixis.

Yes, I can start, and Andrew can kick in. So yes, we continue to -- currently in 2026, we're in the process of we launched the NET indication last year. We're continuing that process of penetrating the market from a NET indication perspective and also from an RCC perspective. And then the development of zanza continues to be at the forefront of what we do. So it's a big part of what the company is -- as we look into 2027, it's a big part of what our expectations for the outlook for the company.

Yes. So just kind of to add on that, and just as a reminder, Chris and I are going to be making forward-looking statements today. So please see relevant risks or relevant disclosures around risks to our business. But I think Chris kind of said it well in that 2026 is this interesting transition period for the company as we're continuing to execute, grow cabo and really use that kind of financial success that we have with our base cabo business to then invest in zanza not only kind of ahead of our potential launch in colorectal cancer later this year, but also kind of expand the breadth of that development so that as we kind of exit the decade in 2031, kind of the LOE of cabo, that handoff to not only replace that cabo revenue, but growing it is really kind of the focus of the company. And then either between our early-stage pipeline or being opportunistic around business development, enable that third, that fourth, that fifth program so that we can really scale as a company. And that's really kind of what we're focused on is kind of maximizing the value of cabo, while really starting to invest in a really important time in the zanza franchise and then kind of being opportunistic in investing appropriately within our own internal program, looking externally and then again, making sure that we're doing the right thing for our shareholders and looking towards things like share buybacks as well. So really exciting time at Exelixis.

Great. So maybe let's start talking a little bit about the cabo franchise, and it's been incredibly successful. How should we be thinking about growth from here?

Yes. I mean from an overall cabo franchise perspective, we set out a $3 billion, what success could look like number. And we still feel like that's an achievable number based on everything we know today. And so the RCC indication is part of that, also that growth, but also NET is a big part of that growth as we look into '27, '28 and '29.

Got it. So maybe just touching upon the -- kind of like what drove the reduction in guidance and kind of like the second quarter revenue for cabo?

Yes. So we talked about it on the call to a large degree. But when we looked at the overall kind of the pace of the NET indication, we saw that as we drove into the community with our expanded field force, we saw that the kinetics around how patients -- some patients move from therapy to therapy, we saw that was a little bit slower than we originally had projected. And so in a more indolent disease like NET versus other solid tumor malignancies, they don't get scanned as often, right? So the kind of the solid tumor -- for some of the patients and other solid tumor malignancies, they get scanned every 3 months. And from a NET perspective, a neuroendocrine tumor perspective, it could be -- for some of these patients, it could be a longer period between scans and also sometimes a longer period between therapies. And so that's what we noticed in the market. We don't see a change in our overall outlook for the total potential, but it's just going to be a slower ramp than we originally projected.

Yes. I mean I think the best way I think about it is really kind of more of a temporal dynamic than anything. It's kind of that gap between new patient market share and total market share. So P.J., our Head of Commercial, kind of talked about this on the call with 47% or so new patient market share. As patients, as Chris said, are coming in for scans, if they do need to come on to a new therapy, increasingly, they're going on to cabo. But that time course on when that new treatment decision happens is just a little bit slower, especially in the community because of either the scan interval or is there a treatment break between these because, again, unlike a lung cancer or most other solid tumors, that slower growing disease that's just inherent in neuroendocrine tumors makes that kind of decision point or part where the new bottle is dispensed, just temporarily a little bit slower. But again, the focus from our perspective, that leading indicator is new patient market share. We're confident that those patients are there. We're increasingly successful in kind of converting those new patients. It's more kind of a temporal dynamic than anything around when that kind of switch occurs.

Got it. Have you shared your assumptions on like peak opportunity in the NET space for cabo? And kind of like how has your launch ramp changed or your assumptions on launch ramp changed?

Yes. I think we've talked about net being about $1 billion indication from an oral perspective at contemporary pricing, and we still believe that's the case. And as Andrew was talking about, we're -- the new patient share that we're picking up is around that 45% range, and that's a good leading indicator of our penetration. And also, what we're starting to see, too, is the actual stacking of prescriptions for patients, and that's a big part of the longer-term success as those patients build on cabo, then there'll be potential higher revenue.

Yes. So it's kind of the dynamic again, the way that we think about it is that aspirationally $1 billion TAM, our goal is to capture as much of it as possible. That's kind of the endpoint. That shape of the curve, how we get there is a little bit dependent candidly on kind of this dynamic around new patient starts, et cetera. But at steady state, as that total market share and new patient market share kind of converge, I think that's where that endpoint number becomes more important.

Got it. Very helpful. Maybe just switching gears a little bit to Handa's tentative approval under cabo-like therapy and kind of like how does that change your view on the competitive landscape for cabo?

Pretty minimally. I think as a generalizable statement, 505(b)(2) products in the absence of clinical data haven't been successful commercially. I think kind of the best known 505(b)(2) product is ABRAXANE. And utilization of that product was really driven by large, robust randomized data sets showing that there's a meaningful clinical improvement of the product versus, say, the reference. Absent of that, given the dynamics around non-AB-rated, non-interchangeable, nonsubstitutable. The -- just the inherent challenges of the 505(b)(2) products around labeled risk, market penetration due to having to go out and build a commercial organization without data, all historically have really made these products largely unsuccessful from a commercial perspective. And so I think the short answer candidly is we don't view the 505(b)(2) products as a meaningful commercial risk to our CABOMETYX business. And our focus is really on 2 things: ensuring patient safety, are these 505(b)(2) products ultimately good for patients, and that was kind of at the heart of one of our concerns about that program. And then second is ensuring our intellectual property and asserting our IP rights when appropriate.

Got it. And how should we be thinking about the IP property until the end of the decade? Is there anything there that is concerning? Or when should we be thinking about loss of exclusivity and just erosion of sales for cabo?

Yes. I mean I think one of the truisms in biopharma is the more successful you get, the more legal problems or legal challenges you'll face. And so our -- we run our business with the assumption around cabo generics emerging January 1, 2031. That's when we've announced settlements with Teva, Cipla, others around kind of a true cabo generic. Between now and then, obviously, there's always litigation. There's always things like last week or a couple of weeks at the end of last month, we won on appeal with MSN. But 1/1/31 from our planning purposes is probably the best date to use.

Got it. Very helpful. Okay. So maybe switching gears a little bit to zanza. We got the non-liver met STELLAR-303 analysis. How confident are you in securing an all-comers label come December?

Yes. I mean we based the filing on the ITT population or the filing was the data from the ITT population, which is all comers. And so I think that's what drives our confidence. The data that we presented at ESMO of last year and subsequently published really shows that consistency of benefit of the doublet across all of those different subpopulations. The non-liver met outcome really is probably the result of probably not enough power in that specific subpopulation. But just as a reminder, kind of that ITT group was inclusive of both patients with and without liver mets. And so our filing reflects that.

Got it. What has been the feedback from doctors from all the data that you've shared so far? And what percentage of patients have -- don't have liver mets? And what -- how are you thinking about like penetration in the?

Yes. So I don't think that our -- the market research and kind of all of our conversations around the combination certainly doesn't focus on the liver met, non-liver met dynamic. It's much more about having an opportunity for patients to gain access to this doublet. So there's the chemo-free component of it. There's the checkpoint containing component of it. There's the fact that data -- the benefit is there regardless of prior Avastin use. It's all of those different things that kind of sum up to a high degree of enthusiasm from the patient and clinical community to potentially have a new treatment option for these patients. Coming back to the -- one of the things that I mentioned that kind of consistently comes up is that checkpoint containing dynamic. So if you think about how CRC is treated, there's certainly the academic centers, but perhaps more than other tumor types, there's a pretty large contingent of the community prescribers as well. And given that they tend to treat lung cancer, RCC, liver cancer, all these different types of solid tumors and beyond, there's kind of this inherent familiarity with checkpoints that up until now, patient watching the Super Bowl and sees a bunch of ads for checkpoints, they go to their oncologists and say, "Hey, is this something that I could be eligible for?" Until the zanza data in STELLAR-303, the answer has been no. But we think that this provides that opportunity to have kind of not only an active modality like a TKI, but also layer on that CPI component as well that I think kind of offers the best of both worlds. And if you look at our data that we've generated, certainly, there's a contribution from both of those.

Got it. Are there any specific types of patients that would particularly benefit from this approach or that would make up for this like early launch...

Yes. I mean, again, given the consistency of benefit, especially as kind of described in the forest plot, our goal, our plan is to kind of try and capture as much of that market as we possibly can. I think in the past, we've described kind of that third line plus CRC segment is about a $1.5 billion opportunity. And candidly, our job is to target as much of that as we possibly can because we think that this is a great opportunity for patients to have a new effective potential standard of care.

Got it. And you mentioned recently also the expansion of your GI sales team, not only to address the net launch, but also in preparation for your CRC launch for zanza. Maybe you can share with us kind of like the metrics there? And how should we be thinking about launch readiness?

Yes. So as you said, we -- and I mentioned earlier, too, we expanded the sales team earlier this year. We started the process late last year and pretty much everybody was on board by the end of the first quarter and started to have an impact really in the net indication during Q2 and continue to progress in Q3 and look forward to Q4. But from a CRC perspective, 303 perspective, we're launch ready. We'll be launch ready when we get approval. We've -- within our guidance, we've included our launch expenses and things like that. So we've accounted for all that. And the commercial team is getting themselves ready and understanding the market through ad boards and things like that. And as Andrew said, there's been a lot of excitement around the fact that there is a checkpoint option now, and that's a key and important part of that, especially since a lot of this, as Andrew talked about, is treated in the community.

Got it. Should we be thinking about the launch as a PDUFA comes in potential approval and then you can launch right away? Or will you be waiting a little bit for zanza's launch?

Waiting for zanza launch. No, we'll be launching right away.

Right away. Got it. And do you expect any AdComs?

Yes. It's hard to say.

Yes. I mean, I guess what we've said is if we had been asked by FDA or informed by FDA for an AdCom, we would have let you guys know. But beyond that, I can't speculate.

Very helpful. Okay. And I mean, it's still a little bit early, but what factors should drive pricing and kind of like coverage?

Yes. We haven't talked about pricing specifically, but it's been a question we've gotten in a lot of the meetings today. I mean it's -- the way we look at it is it's going to be pricing contemporary to what's happened -- what's been happening more recently in the market. And so that's kind of the approach we're looking at, and we'll look at all different metrics in order to determine the correct price, but no specific comment on pricing today.

Got it. Okay. So maybe just shifting gears towards STELLAR-304, the non-clear cell renal cell carcinoma Phase III study. Just in terms of control, what's the bar, a lot of utilization off-label of the cabo combo there. How should we be thinking about what's success in that study? Is statistical significance enough? Or should we be looking at off-label usage as the bar?

Well, it's a complicated question. I mean, just as a reminder, all drugs with approved in RCC are approved in clear cell and non-clear cell. It's kind of an interesting dynamic within the oncology world where the labels are granted based on randomized data in the clear cell space, but have broader indication statements for essentially all RCCs. So cabo, like all other drugs in RCC is approved in non-clear cell. So it's not off-label use.

Got it.