Exelixis Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2024

There are 17 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to Exelixis First Quarter 2024 Financial Results Conference Call. My name is Towanda, and I'll be your operator today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Robert Sravarnin, Director of Investor Relations.

Operator

Please proceed.

Speaker 1

Thank you, Towanda. Thank you all for joining us for the Exelixis Q1 2024 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO Chris Senner, our Chief Financial Officer BJ Haley, our Executive Vice President of Commercial Amy Peterson, our Chief Medical Officer and Dana Aftab, our Chief Scientific Officer, who together will review our progress for the Q1 2024 ended March 31, 2024. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website for an explanation of our reasons for using such non GAAP measures as well as tables deriving these measures from our GAAP results.

Speaker 1

During the course of this presentation, we will be making forward looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding discovery, product development, regulatory, commercial, financial and strategic matters. Actual events or results could of course differ materially. We refer you to the documents we file from time to time with the Securities and Exchange Commission, which under the heading Risk Factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners and the level of costs associated with discovery, product development, business development and commercialization activities. With that, I'll turn the call over to Mike.

Speaker 2

All right. Thanks, Veront, and thanks to everyone for joining us on the call today. Exelixis is off to a strong start in 2024 and had a productive Q1 across all components of our business. We're pleased to see both revenue and demand growth for the cabozantinib franchise in the U. S.

Speaker 2

And globally. Top priority is to move the needle for patients and shareholders by advancing cabozanza and the rest of our exciting pipeline to improve the standard of care for patients with cancer. We have a lot to cover today, so let's jump right into it with the key highlights for the quarter including first, we saw a strong performance of the cabozantinib business in the Q1 of 2024 with continued growth in demand and revenue year over year compared to Q1 2023. Even with typical seasonal headwinds that were further magnified by the implementation of the IRA, CABOMETYX maintained its status as the leading TKI for RCC in both the first line IOTKI market and the second line monotherapy segment. Q1 2024 cabo franchise net product revenues grew 4% year over year compared to Q1 2023.

Speaker 2

Highlighting its role as a worldwide leading TKI, global combos and fit franchise net product revenues generated by Exelixis and its partners grew approximately 9% year over year in the Q1 of 2024 compared to Q1 of 2023. As discussed previously, we're excited about the potential for additional cabo growth with the new indications on the horizon that PJ and Amy will discuss shortly. Chris will review our full Q1 2024 financial results in his prepared remarks. 2nd, we continue to advance our industry leading pipeline across all stages of preclinical and clinical development. Our top priorities for 2024 are to advance potential new cabo indications for NET and metastatic CRPC and expedite ZANZZA clinical development with both existing and new pivotal trials as well as potential new combination strategies.

Speaker 2

XB-two cohort expansion remains a clear focus for us and XL-three zero nine continues to generate exciting momentum in the synthetic lethality space. Finally, we're thrilled with our progress in advancing new candidates in discovery and preclinical development, targeting a range of solid tumor indications that comprise an IND pipeline of both small molecules and biotherapeutics, which we expect to evolve quickly over the next several years. 3rd, final reply briefs for the 2nd MSN ANDA trial were submitted in February and we continue to expect ruling in the first half of twenty twenty four. While we will not speak to any specifics today, this remains a critical milestone for the company and the cabozantinib franchise. Exelixis will continue to vigorously protect our intellectual property rights with respect to cabo and our other differentiated molecules we pursue on behalf of patients with cancer.

Speaker 2

Finally, 4th, we expect business development activities to ramp up significantly as we gain clarity on the outcome of the patent litigation. Importantly, we're exploring options to collaborate with other organizations in cost and compound sharing arrangements in a manner similar to our prior cabozantinib checkpoint combination endeavors. In addition, we are carefully reviewing the competitive landscape on an enterprise wide level to identify additional later stage assets that we believe through our unique cabozantinib lens fit into our GU and GI oncology focused drug development and commercialization platform. So with that, please see our press release issued an hour ago for our Q1 2024 financial results and an extensive list of key corporate milestones achieved in the quarter. I'll now turn the call over to Chris.

Speaker 1

Thanks Mike. For the Q1

Speaker 3

of 2024, the company reported total revenues of approximately $425,000,000 which included cabozantin and franchise net product revenues of $378,500,000 CABOMETYX net product revenues were $376,400,000 and included approximately $6,000,000 in clinical trial sales. Gross to net for the cabozantinib franchise in the Q1 of 2024 was 32.9%, which is higher than the gross to net we experienced in the Q4 of 2023, but overall in line with our expectations. This increase in gross to net deductions in the Q1 of 2024 is primarily related to higher Medicare Part D and PHS expenses. Historically, we have experienced higher Medicare Part D expenses in the Q1 of the year due to many Part D patients moving through the donor hole at the start of the calendar year. Our CABOMETYX trade inventory decreased by approximately 3 50 units when compared to the Q4 of 2023 approximately 2.4 weeks on hand.

Speaker 3

As I mentioned on our Q4 earnings conference call, experienced a trade inventory build in the Q4 of 2023 of approximately 1,000 units and that we had observed an inventory drawdown in January. As discussed previously, Exelix took a 2.2% price increase on January 1, 2024. This price increase is more than offset by higher gross to net deductions during the Q1 of 2024. Also, while we don't provide quarterly revenue guidance, we do see some seasonality in net product revenue trends, where Q1 net product revenues have historically been lower than the following quarters in a year. If you analyze the last 7 years of Q1 net product revenue and compare them to the reported annual net product revenues of the same year, in many of those years, the 1st quarter net product revenues are in the range of 21% to 23% of our annual net product revenues.

Speaker 3

We took this seasonality impact into account when preparing our annual net product revenue guidance of $1,650,000,000 to $1,750,000,000 which we are reiterating on today's call. As a reminder, clinical trial sales have historically been choppy between quarters and we expect this to continue in future quarters. Total revenues also included $47,000,000 in collaboration revenues including approximately $40,000,000 of royalty earned from Ipsen and Takeda on their sales of cabozantinib in their territories. Our total operating expenses excluding restructuring charges for the Q1 of 2024 were approximately $363,000,000 compared to $398,000,000 in the Q4 of 2023. The sequential decrease in these operating expenses was primarily driven by lower drug discovery and general and administrative expenses in the Q1 of 2024.

Speaker 3

In January 2024, we announced the restructuring of our business, which included a headcount reduction of 174 FTEs. The total cost of this restructuring in the Q1 of 2024 were approximately $33,000,000 which includes severance and employee related costs, asset impairment and contract termination costs. Provision for income taxes for the Q1 of 2024 was approximately $12,000,000 compared to provision for income taxes of approximately $18,000,000 for the Q4 of 2023. The company reported GAAP net income of approximately $37,000,000 or $0.12 per share on a fully diluted basis for the Q1 of 2024. Company also reported non GAAP net income of approximately $52,000,000 or $0.17 per share on a fully diluted basis.

Speaker 3

Non GAAP net income excludes the impact of approximately $15,000,000 of stock based compensation expense net of the related income tax effect. Cash and investments for the quarter ended March 31, 2024 was approximately $1,600,000,000 During the Q1 of 2024, we repurchased approximately $191,000,000 of Exelixis shares at an average price of $22.08 We remain committed to fully executing on the 4 $50,000,000 share repurchase program we announced in January 2024. Combining the 2023 2024 share repurchase program, we will return $1,000,000,000 to our shareholders by the end of 2024. This level of cash and investments supported by our ongoing cash flow from operations provides Exelixis with the flexibility to invest in internal R and D activities to pursue external business development opportunities to expand our pipeline and allows us to return capital to our shareholders through our $450,000,000 share repurchase program. And finally, we are reiterating our full year 2024 financial guidance, which is detailed on Slide 14 of our earnings presentation.

Speaker 3

And with that, I'll turn the call over to P. J.

Speaker 4

J. Haley:] Thank you, Chris. In the Q1 of 2024, team continued to execute at a high level, which has resulted in CABOMETYX continuing to be the number one prescribed TKI in RCC and second line HCC. Additionally, CABOMETYX in combination with nivolumab remains the number one TKI plus IO combination in first line renal cell carcinoma. With regards to prescriptions, CABOMETYX TRx volume grew 4% year over year in Q1, 2024 relative to Q1, 2023.

Speaker 4

In the same period, the TKI market basket was flat. Furthermore, the business remains strong both in terms of demand and new patient starts. CABOMETYX continued to perform well in the Q1 from both a marketplace and competitive perspective. AlboMedix again led the TKI market basket in TRx share at 40%. As we have discussed previously, the first line RCC market is extremely competitive and Q1 was the 6th full quarter in which CABOMETYX plus nivolumab remained the number one prescribed TKI plus IO combination in first line RCC.

Speaker 4

Furthermore, long term data from the CheckMate 9ER study now with a minimum of 4 years follow-up was presented at ASCO GU this year and continues to reinforce the leadership position that CABOMETYX has in the RCC marketplace. Looking forward, the commercial team is excited about the positive results from the CABINET trial in neuroendocrine tumors as well as the CONTACT 2 trial in metastatic castration resistant prostate cancer, which Amy will discuss in some detail. Neuroendocrine tumors comprise a large and heterogeneous patient population. The patients become metastatic and progress, treatment options become limited. The only oral therapy options are sunitinib and everolimus and there has not been an approval in the U.

Speaker 4

S. For an oral agent in NET since 2016. There is a strong unmet need for new options for patients

Speaker 5

who have progressed on systemic therapy.

Speaker 4

There are approximately 8,000 incident second line plus drug treatable patients annually in the U. S. Approximately 20% of these patients are SSTR negative and in Lung NETs that percentage is higher with 40% to 60% being SSTR negative. Most NET patients will receive many lines of therapy in part due to the more indolent nature of the disease relative to other solid tumors. We have conducted preliminary market research, which reveals that oral therapies account for approximately 50% of the utilization in this market in the second line plus setting.

Speaker 4

The cabinet study had a diverse population including pancreatic, extra pancreatic and lung NET patients. SSTR positive or negative patients as well as previously treated with Lutathera. Regulatory approval for cabinet would potentially position cabo to help a broad range of net patients. Metastatic castration resistant prostate cancer is a large market with significant unmet medical need where the primary therapeutic options remain novel hormonal therapy, chemotherapy and radioligand therapy. There is a significant unmet need in this patient population particularly for patients progressing on an NHT and who wish to delay chemotherapy.

Speaker 4

Many patients receive an NHT before they become metastatic and castrate resistant. Cabo plus atezo represents a potential option for many of these patients with novel mechanisms of action and convenient administration in the metastatic CRPC setting. Furthermore, the commercial organization would be well positioned to leverage the RCC team infrastructure to achieve synergy in a new GU oncology indication. In summary, regulatory approval in these additional indications with significant unmet need would provide the opportunity for continued growth for CABOMETYX in the coming years. I would also add that the commercial team is extremely excited about the progress in the pipeline particularly zanzolitinib as we look forward to having another product to help patients with cancer.

Speaker 4

With that, I will turn the call over to Amy.

Speaker 6

Thanks, P. J. Today, I'll provide a high level update on our clinical stage pipeline. The team is continuing the momentum across all of the programs we highlighted during our R and D Day last December with laser focus on execution for the cabozantinib franchise as well as for our clinical pipeline. Our pipeline is broad, both in terms of modalities and targets representing a variety of development opportunities, which combined with our robust translational and clinical development capabilities provide an exciting and high potential platform for growth.

Speaker 6

Today, I'll share the progress we are making towards executing on our clinical trials across the development pipeline and on our potential regulatory submissions for cabozantinib. So let's start with cabozantinib and cabinet. This is a Phase 3 study that evaluated cabo versus match placebo in patients with previously treated advanced or metastatic pancreatic or extrapancreatic neuroendocrine tumors, which I'll refer to as PNET or EPNET respectively. The study was conducted by the Alliance For Clinical Trials in Oncology and data was presented by Doctor. Jennifer Chan at ESMO 2023.

Speaker 6

The study had 2 independently powered cohorts, 1 for PNET and the other for EPNET. Notably, the PFS hazard ratio for each cohort strongly favored cabo with hazard rates of 0.27.45 in the PNET and EPNET populations respectively. The safety profile of monotherapy cabo was consistent with its known profile and no new safety signals were identified. This initial analysis was based on local assessments with limited data available from the Blinded Independent Radiology Committee or BERC. The compelling results triggered an IDMC recommendation and Alliance decision to stop enrollment, unblind the study and allow patients to crossover from placebo to cabozantinib.

Speaker 6

The final analysis by Burke will be shared at a conference later this year and support our intention to file in the coming months. As P. J. Mentioned in his section, we are very excited about the potential to bring cabozantinib to patients with neuroendocrine tumors. The cabinet data are quite impressive and robust and if approved support cabo as a potential new standard of care in a population that is in dire need of effective treatment options.

Speaker 6

Turning now to CONTACT-two, our randomized open label Phase 3 study of bravo plus atezolizumab versus second novel hormonal therapy or NHT in patients with castration resistant prostate cancer and measurable extrapelvic soft tissue disease. We believe the data from this study support favorable risk benefit to patients and our intent to file. Remember, this is a unique study population given the requirement for measurable disease, which we deliberately chose to ensure a robust assessment of PFS by BERC. Contact had dual primary endpoints of PFS by BERC and OS. We anticipate having the final OS analysis in the coming months.

Speaker 6

So what does a dual primary endpoint mean? It means that for a study to be considered positive from a statistical standpoint, we only have to hit on one of the endpoints. Doctor. Neeraj Agarwal presented the significant and robust PFS results at ASCO GU. The PFS hazard rate in the pre specified PFS population was 0.65 with a p value equal to 0.0007, so statistically significant, hence a positive study.

Speaker 6

The PFS hazard rates, medians and Kaplan Meier curves in the ITT population by burp were nearly identical to that in the PFS population. This was also true for PFS according to the PCWG3 criteria, which includes bone imaging also assessed by BERC. A PFS benefit was observed in all subgroups, notably in those with the poorest outcomes that is in patients with liver metastases and in patients who've already received both an NHT and docetaxel. At this analysis, OS demonstrated a trend favoring caboatezo. Contact-two enrolled a uniquely aggressive clinical subset of mCRPC, one that is typically highlighted for having the worst prognosis, which is reflected by the limited activity with second NHT.

Speaker 6

The toxicities reported with cabo plus atezo were higher than those with second NHT and this is not surprising given NHTs are very well tolerated, especially in those who've already contact 2. The tolerability profile of caboateza was consistent with the known tolerability profile of each monotherapy agent and with the doublet from other studies as well as with other approved IOTKI combinations. Putting this together and based on the input we've received from many in the GU oncology community from patient advocacy groups and patients, we firmly believe these findings represent an acceptable risk benefit profile and we are committed to filing this year. So there's quite a lot of excitement with cabo in 2024, but I'm going to turn now to zanzolitinib where our excitement continues to grow. Our Phase 1 studies have multiple expansion cohorts in a variety of tumors and combinations.

Speaker 6

Data generated from these cohorts has and will continue to support our expanded development for ZANZZA. At the IKCS Conference and R and D Day last year, Doctor. Monty Pal presented promising data with ZANZZA monotherapy where compelling and durable responses were observed in 32 patients with treatment refractory clear cell kidney cancer, all of whom had received prior IO and the majority of whom are 81% had received prior VEGFR TKIs, including 51% who previously received cabo. The ORRs of 38% in the ITT and of 24% in patients who had received prior cabo are very encouraging, especially given that Zanza shares the target kinase profile cabo but a shorter half life, which you will hear about in more detail from Dana and which seems to result in differential partitioning into tissues including tumor tissue potentially explaining the emerging differentiated activity and tolerability profile. We're not the only ones excited about ZANZO's potential.

Speaker 6

The GU community was very receptive to the data presented at IKCS and discussions around collaboration opportunities are ongoing. Turning now to our pivotal studies. We currently have 3 Phase 3 studies with ZANZZA and we're evaluating additional pivotal studies including opportunities for collaboration with other companies. Our most mature study is STELLAR-three zero three. This study will evaluate the combination of ZANZZA plus atezolizumab versus regorafenib in patients with non MSI high, non DMMR metastatic and refractory colorectal cancer.

Speaker 6

The primary endpoint is OS in the population of patients without liver mets or NLM followed by an evaluation of OS in the ITT population should OS in the NLM population be statistically significant. So this is not a dual primary endpoint. The sample size for both NLM and LM patients is capped to ensure adequate number of events in each of these analyses. Of this combination, especially in patients without livermets has resulted in rapid uptick in enrollment and enrollment to the Liberumet cohort is basically complete. Enrollment to the NLM cohort should be complete in the coming months.

Speaker 6

STELLAR-three zero four is our Phase 3 trial, which compares the combination of ZANZZA plus nivolumab to sunitinib in patients with previously untreated metastatic non clear cell kidney cancer. This has dual primary endpoints of progression free survival and overall response rate. OS is a secondary endpoint. The probability of success of a study is a key strategic lever when we consider how to prioritize our portfolio. Given that VEGFR TKI's work in non clear cell kidney cancer, that TKI IO combos work in non clear cell kidney cancer, that cabo monotherapy beats Sutent in kidney cancer and that ZANZZA has a best in class potential for a VEGFR TKI, we believe this study has a reasonably high PTS.

Speaker 6

Investigators are also excited about this combination and enrollment is ongoing in multiple countries. STELLAR-three zero five is our Phase twothree trial, which will evaluate zanzolitinib in combination with pembrolizumab versus pembrolizumab alone in patients with untreated PD L1 expressing advanced or metastatic squamous cell carcinoma of the head and neck. This study was activated late last year and we are full steam ahead into site activation mode. Given the emerging favorable activity and tolerability profile of ZANZZA and its mechanism of action that results in an immune permissive environment, we believe this combination of ZANZZA plus pembro could result in improved outcomes versus single agent pembro and has the potential to offer patients a chemo free option. Of course, we are intrigued by the LEAP-ten data and just as we did with STELLAR-three ten, we'll make necessary or appropriate modifications STELLAR-three zero five to increase the probability of success.

Speaker 6

We are always evaluating data from ZANZA and cabo studies, emerging data from our competitors and the evolving treatment landscape to inform the design and initiation of the next pivotal studies for ZANZA, an asset that we believe has potential for best in classes of VEGFR TKI with commensurate improved activity in patients that ultimately transfer into value for our shareholders. I'll now briefly touch on our early clinical pipeline assets XB-two and XL-three zero nine before passing the call over Dana. XB002 is our tissue factor directed antibody drug conjugate incorporating a modified orastatin as a payload. Enrollment into the cohort expansions in the JUUL-one hundred and one study is robust and as the data matures will allow us to understand the initial benefit risk profile. We will provide updates when we have data maturity.

Speaker 6

Finally, last and certainly not least is XL-three zero nine, which we are very excited about. Dana will talk more on why we remain optimistic about this particular USP1 inhibitor. So in the interest of time, I'll just state that dose escalation cohorts are enrolling and we hope to open combination cohorts with PARP inhibition a little later this year. In summary, we're advancing a robust pipeline of clinical stage molecules while maximizing the potential benefit to patients from our flagship asset cabozantinib in high unmet medical need indications. We remain very optimistic about what we can do for patients who despite significant advances still need better treatment options.

Speaker 6

And with that, I'll turn the call over to Dana.

Speaker 7

Thanks, Amy, and good afternoon, everyone. Today, I'm giving a brief update on our progress in the Q1 of 2024 toward our goals for preparing for IND filings and for advancing new compounds to development candidate status. And then I'll wrap up with some preclinical updates on our USP-one inhibitor XL309 and our next generation VEGF receptor tyrosine kinase inhibitor, zanzolitinib. On the IND front, we are making good progress on all of our pre IND programs and are on track to file up to 3 this year. The first one we expect to file this year is for XB-ten, our 5T4 targeted antibody drug conjugate that carries the cytotoxic antitubulin payload MMAE.

Speaker 7

IND preparation is wrapping up soon, so we expect that one to file around mid year. The second IND we expect to file this year is for XL-four ninety five, which is a small molecule inhibitor of PKMIT1 that shows synthetic lethality in the context of increased cyclin E levels, which occurs across a wide range of tumors. IND preparation is progressing and we are on track to also file this one around mid-twenty 24. The 3rd IND we expect to file this year will be for XB-six twenty eight, our bispecific antibody that targets PD L1 along with NKG2A and displays NK cell engager activity in preclinical models. The GLP tox study for XB-six twenty eight is now complete and manufacturing and other activities have us on track for IND filing in the Q4 of 2024.

Speaker 7

Each one of these programs has a solid rationale for generating differentiating data in the clinic. So we're excited to get these INDs filed and to get the trials up and enrolling quickly. In terms of new development candidates this year, we are currently on track to achieve our goals of at least 2 this year with some exciting new programs including a small molecule inhibitor targeting PLK4, which is synthetically lethal in cells with amplified TRIM37 and a novel antibody drug conjugate program. Both of these programs represent 1st or best in class approaches with potential to generate differentiating results in the clinic. So we're certainly pleased that we remain on track for putting these additional assets into the preclinical pipeline this year.

Speaker 7

So now I'd like to shift gears a bit and describe some exciting preclinical data we generated for 2 of our small molecules in the clinical pipeline. I'll start first with a brief update on XL-three zero nine and then describe some preclinical data we've generated comparing zanzolitinib and cabozantinib. We recently tested the combination of XL-three zero nine in the selective PARP with the selective PARP-one inhibitor, saruparib, in the preclinical breast cancer xenograft model, MDAMB436, in which the BRCA1 gene is mutated. The data we generated with the combination showed that at doses of both compounds that alone showed minimal tumor growth delay, when given in combination resulted in very strong tumor regression that persisted for at least a month after dosing had ceased. The other data I'm sharing with you today, I think will help to shed more light on the underlying basis for an emerging benefit risk profile for zanzolitinib that appears to be improved compared to cabozantinib.

Speaker 7

You may recall that zanzolitinib retains the target kinase profile of cabozantinib, but with a PK profile that's more optimal for dose adjusting to manage tolerability. And as you just heard from Amy, we're seeing what appears to be an overall improved benefit risk profile with ZANZZA with responses in some patients who progressed on cabo and lower rates of certain AEs with ZANZZA such as hand foot syndrome, diarrhea and fatigue. We now have some preclinical data, which we think help to explain these differences between the two molecules. First, we've continued to explore potential differences in the biological target profiles of the compounds and both were recently run side by side in the same experiment in a PRISM screen at the Broad Institute. This is a large scale diverse cancer cell line screen that determines the effects of compounds on cell viability across approximately 900 distinct cell lines representing over 45 cancer subtypes.

Speaker 3

The results we got back from the screen

Speaker 7

showed the compounds were remarkably similar in terms of their ability to impact cell viability, which largely confirms the hypothesis that the key biological target profiles of cabo and Zansa are essentially the same. Given the similar target profiles, we hypothesized that a potential rationale for the improved profile we're seeing in the clinic with ZANZZA might be related to differences in tissue drug concentrations between tumors and normal healthy tissue when compared to cabo. Therefore, we conducted tissue distribution studies in both rats and mice and observed that compared to cabozantinib, zanzolitinib showed higher free drug concentrations in tumors and lower free drug concentrations in normal tissues. This translated to more potent on target activity for inhibition of MET in tumors by ZANZZA. These results were a bit surprising as we had not expected such differentials in tissue partitioning between these two molecules, but the results certainly are consistent with and I think help explain the apparently improved benefit risk profile that's emerging with Zansa in the clinic.

Speaker 7

So with that, I'll turn the call back over to Mike.

Speaker 2

All right. Thanks Dana. I will close by highlighting that 2 long standing Exelixis executives are retiring after serving our company for nearly 2 decades. First, Peter Lamb, EVP of Scientific Strategy was with Exelixis for nearly 25 years. And as you all know, made an outsized impact on our drug discovery efforts to ensure we are keeping pace with the evolution and growth of the company.

Speaker 2

To ensure we are keeping pace with the evolution and growth of the company. On behalf of the entire Exelixis team, I'd like to thank both Peter and Laura for their friendship, dedication to Exelixis and most importantly commitment to cancer patients on a global level. We wish them all the best as they start their retirement. So with that, I want to thank the entire XL team for their efforts to support our discovery, development and commercial activities. We're off to a great start in 2024 and expect this year to be critical for our science and the patients we hope to serve in the future.

Speaker 2

We built and are constantly fortifying Exelixis as a big small company with all that we do every hour of every day. The Exelix's team is highly motivated to exceed expectations and our mission to help cancer patients recover stronger and live longer. We look forward to updating you on our progress in the future and thank you for your continued support and interest in Exelixis and we're happy to now open the call for questions.

Operator

Thank you. Our first question comes from the line of Joe Catanzaro with Piper Sandler. Your line is open.

Speaker 7

Yes. Hi. Thanks for taking my questions and appreciate you taking time here. So I'm wondering if you could elaborate a bit on your earlier comments in the events of a positive outcome with regards to MSM patent litigation and sort of interest in looking for later stage assets in GU, GI oncology. I guess, how would you define later stage?

Speaker 7

Is this sort of modality agnostic? And what size deal do you think you could execute with the balance sheet and clarity around the cabo revenue tail? Thanks.

Speaker 2

Yes, Joe, it's Mike. Thanks for the question. Yes, this isn't really a new approach. We talked about this earlier in the year as we were implementing the restructuring, focusing our BD efforts on later stage assets in terms of new modalities that are either in or entering pivotal trials as well as their focus on helping us find collaborations with Danza and other molecules in our pipeline to collaborate on in terms of cost and or compound sharing arrangements. So, look, we're very interested in building a pipeline.

Speaker 2

We've got

Speaker 1

a great

Speaker 2

discovery, development and commercial organization and late stage assets fit well into that overall approach. Whether they be already in pivotal trials or about to enter, we think we can add a lot of value as we go forward. So wouldn't want to comment on size, wouldn't want to comment and certainly on individual targets where modality agnostic in terms of small molecules and biologics. We have, I think, a very good eye for good data and good compounds. Again, the cabo lens, if you will, really informs that and talked about that at R and D Day back in December.

Speaker 2

So we're all in, in terms of finding potential assets to be able to bring into our pipeline and that will continue as we go forward.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Jason Gerberry with Bank of America. Your line is open.

Speaker 5

Hey guys, thanks for taking my questions. So mine, I just wanted to follow-up on the NDT commercial opportunity slide. I'm just curious how you guys think an indication like that could ramp. The second line incidence, it's a decent sized number. I just wonder about the availability of an established oral TKI, which wasn't studied head to head against if that creates a barrier at all or might slow the launch versus the launches we're accustomed to seeing like TechMate 9ER, just given the need to potentially retrain physicians or educate them about your data?

Speaker 5

Thanks.

Speaker 4

Yes. Hi, Jason. This is P. J. Thanks for the question.

Speaker 4

I'd say we're really excited about the data that Amy went into a little more detail on. As I mentioned, we've kind of conducted some preliminary market research. We certainly had some advisory boards. I guess what I'd say at a high level is, there's a lot of enthusiasm for the data. I don't think there'll be anything significantly different than prior launches.

Speaker 4

You mentioned 9ER in terms of kind of trajectory or uptake or sort of retraining physicians per se. I think they're very comfortable, obviously with TKIs and even in this setting. So we think this is a really nice opportunity potentially should we receive approval. For cabo, as I spoke to, I think the broad population that was studied with regards to pancreatic, extra pancreatic, site of origin, tumors including lung, which is a little bit different from some of the other agents, which weren't studied as broadly as well as the fact that are studied in SSTR positive and negative, as well as kind of having a modern data set, which included a lot of patients treated with Lutathera before the study really gives us the potential to be broad and I think in a sense very user friendly for oncologists who are really looking for something new in this setting.

Operator

Thank you. Please standby for our next question. Our next comes from the line of Michael Schmidt with Guggenheim. Your line is open.

Speaker 8

Hey guys, thanks for taking my questions. I had one for Amy on STELLAR-three zero five. And so just wondering, how the enrollment criteria in the study compared to that from KEYNOTE-forty eight or LEAP-ten? To what degree you feel like you may need to adjust the trial based on the LEAP-ten data that was presented recently? And what your confidence level is in demonstrating a positive overall survival trend, which was obviously not the case in LEAP-ten?

Speaker 8

Thanks so much.

Speaker 6

Yes. Thanks for the question, Michael. It was very interesting to actually get a chance to see the final the results from the presentation earlier this year in terms of LEAP-ten. Notably, an ORR and a PFS that favored LEN PEM, but an OS that didn't. And an interesting duration of response with monotherapy PEM favored over the doublet.

Speaker 6

So this is a different population, frontline head and neck, a little bit more frail than other patient populations. And we're interested in trying to uncover as much as we can around the dose of LEN, the dose reductions and how much that may have abrogated a patient's ability to receive full pembro dose. So we are busy deeply trying to understand that and if need be make a change to the 305 study with regard to dose in the context of a very a frailer patient population, if you will. I think that there's a differentiation between Zanza and LEN in that Zanza does inhibit the TAM kinase family, which is implicated, if you will, in favoring an immune permissive environment. So the mechanism of action of Zanza is different from LEN and because of that could very likely have a differential outcome and we believe it will.

Speaker 6

So we'll see how what ultimately needs to be changed and we'll keep you posted on those changes as they're made. Right now, the eligibility criteria for the most part are posted on clinicaltrials.gov And where we need to make an update, we will.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Gregory Renza with RBC Capital Markets. Your line is open.

Speaker 5

Great. Good afternoon, Mike and Teep. Thanks for the updates and thanks for taking the question. Mike, maybe just to ask a little bit building on the neuroendocrine tumor opportunity, certainly nicely in context with respect to cabo. But as you do think about Zansa and the combo optionality there and the white space that you have, I'm wondering if you could just comment a bit about ZANZZA in this indication.

Speaker 5

Is there opportunity and what are the potential development path as you think about combos, would potentially ZANZA and Lutatherapy be something to explore? Thanks again.

Speaker 2

Yes, Greg, thanks for the question. It's a great one. I can punt over

Speaker 6

to Amy and P. J. To opine upon. Amy? Yes, sure.

Speaker 6

As I mentioned during the call, we're always assessing what is the next best thing to think about for Zanzolitinib. We look at all things that are strategic in our assessment. So I talked about the probability of technical success. That's a big one for us to consider as well as the time it takes to conduct the study and the competitive and evolving landscape and the value proposition. And I would say that neuroendocrine tumor is high on the list for ZANZZA and we are very interested in it.

Speaker 6

I'll let P. J. Comment a little bit on the commercial.

Speaker 4

Yes. I mean, I think just at a high level, if I go back to kind of the opportunity here, certainly a large unmet medical need as I mentioned with not many new therapies, really any oral therapies being approved since 2016. So I think there's a lot of room to maneuver in this tumor type in particular. The orals, as I mentioned in my remarks and on the slide account for approximately 50% of the second line plus population. So if you think about Lutathera, for example, which is doing over $400,000,000 in revenue annually, basically in a second line plus population.

Speaker 4

They had the NETTER2 data at ASCO GI this year, but those revenue kind of predate that. So that's a pretty significant opportunity in less than 50% of that market. So I think this is a big space that's really there's a high appetite for new therapies, for new trials and really an opportunity for this market to grow over time. So I see it as very exciting.

Speaker 2

Yes, that's great, P. J. I would just add, I think the way we talk about net here and we're really excited about certainly the cabinet data and the opportunities to go forward with Zanza. We think net is similar to what we saw with RCC back in the 2014, 2015, 2017 time. And there's lots of similarities between the 2 even though they're obviously different very different indications.

Speaker 2

So we're excited about this. We hope to invest more as we go forward. Lots of opportunities with Zanza and other potential combinations. So stay tuned. As that evolves, we'll keep you in the loop.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Yaron Weber with TD Cowen. Your line is open.

Speaker 9

Hey, guys. This is Joyce on for Yaron. Thanks for

Operator

taking the question. Maybe just

Speaker 9

another follow-up on the NET market opportunity. I think you guys have previously said that the prevalent population is about 5 times the size of the second line plus incident population or about 40,000 patients. Wondering how much of that market you think you can capture or pull into this opportunity with cabo and or XANZZA? Thank you.

Speaker 4

Yes. Hi, Joyce. This is P. J. Thanks for the question.

Speaker 4

I think, as I mentioned, the 8,000 patients or those are kind of new incident patients in a given year. And as you mentioned, the prevalent population is much larger. I think, I wouldn't want to speculate before we get to label on the potential upside or where it might play out in the marketplace. But I think, when we think about 8 ks patients, etcetera, that's kind of the baseline and there certainly could be many more patients given that this is an indolent disease, where patients receive many lines of therapy, that might be kind of out there. But again, I think we need to wait till we get in the market to really get a good sense of that, but we're very confident and comfortable in the 8,000 patients as it is being a really significant potential opportunity for cabo.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Andy Hsieh with William Blair. Your line is open.

Speaker 10

Great. Thanks for taking our questions. Two quick ones if you don't mind. 1 financial one, Scientific. In terms of Medicare B exposure, Chris, do you mind reminding us your exposure there for the cabo franchise?

Speaker 10

Several companies including Gilead kind of called out the potential impact next year stemming from the Medicare Part D redesign. So that's part 1. Part 2, very provocative differential partitioning data of cabo versus VENAZA. I am curious, 1, how was that determined? Was it based on kind of radio labeling experiments?

Speaker 10

And then perhaps from a hypothesis perspective, do you have any sort of initial working in terms of why that is? Is

Speaker 3

that kind of

Speaker 10

a difference in passive diffusion or maybe transporters are involved?

Speaker 5

So those are the 2 questions. Thank you.

Speaker 2

Yes. Thanks, Andy. It's Mike. Dana, why don't you take that second question first and we'll punt over to P. J.

Speaker 2

For the Medicare Part D question. J.

Speaker 7

Juvekar:] Sure. Okay. Thanks for the question, Andy. Yes. So in terms of the partitioning, we generated data in rats, and this is really data for preparing for the mass balance studies in humans.

Speaker 7

That was the first sort of view into differential partitioning into normal tissues that we got. So that was using radio labeled drug. So of course, that measures everything, metabolites and anything else that's attached to the radioactive tracer. In terms of the tumors and actually the data that I showed on the slide came from sort of a side by side experiment in mice, where we were determining the compound concentrations by mass spectrometry and at doses that generated similar free drug concentrations in the plasma, which again were determined by doing protein binding experiments, etcetera, we saw those free drug concentrations in normal tissues and tumors and that was just one of several, representative normal tissues. So we're still generating a lot of data.

Speaker 7

There's obviously a lot of different components that go into how drugs distribute within a living animal or person, including things like protein binding, tissue binding, which involves other components other than protein, membranes, lipids and whatnot, transporter effects, pH dependent effects. There's so many different pieces of the puzzle that go into understanding how this happens. So we're still gathering data to try to understand the full model that's driving these differences. And what I would just say is, stay tuned as we generate more data and publish those data, that will hopefully lay out the full mechanism of how this happens. But I must say that it was a surprise to us to see this happen.

Speaker 7

We had not anticipated or predicted that this would happen with these drugs a priori.

Speaker 2

Great. Thanks, Dana. P. J?

Speaker 4

Yes. So, hi, Andy. Our Part D Medicare Part D accounts approximately 40% of the business. And as you know, with regards to the IRA that will continue to evolve in 2025. So the out of pocket cap for patients will be even lower next year, around $2,000 and also it will be spread out over a monthly basis.

Speaker 4

So the thinking is that could potentially reduce the burden on patients even further.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Jay Olson with Oppenheimer. Your line is open.

Speaker 11

Hey, thank you for providing this comprehensive update and for taking our question. For Zanza, can you talk about when we should expect to see some combination data? And Bristol recently mentioned initial clinical proof of concept for Opdulog in non small cell lung cancer. What's your thinking and interest level in the combination of ZANZA with Opdualag and STELLAR-two? Thank you.

Speaker 6

Sure. Thanks for the question. I'll take that. This is Amy. So you saw on the slides, we do have a variety of cohorts that we are expanding in both STELLAR-one and STELLAR-two and in combination with PD-one in addition to other IO agents including CTLA-four and LAG-three.

Speaker 6

We will present the data when it is some of these are early line cohorts. It just takes a while because you want to get ORR, you want to get DOR, you want to get PFS. Some of them actually also have OS. They're event driven. And we just have to wait for those events before we can report on that.

Speaker 6

When it comes to interest with combination partners, I also presented the various combinations that we're doing not only IO, IO, IO, but also we have the collaboration with HIF2 Alpha and we're looking at other combinations. So I would say that we're data driven and we'll go where the combinations tell us we should go, but we are we remain open. I think that what we're continuing to identify and uncover is that the ability for Zanza to combine with all of these other agents is actually rather straightforward. That's reasonably well tolerated at full doses. And so we don't think that there's an issue in terms of ZANZO's ability to combine with any of these agents.

Speaker 6

It just has to be the decision to move forward into additional studies just has to be made upon the data that we see as it matures in the 1 and 2 cohorts.

Operator

Thank you. Will you stand by for our next question? Our next question comes from the line of Akash Tewari with Jefferies. Your line is open.

Speaker 12

Hi, this is Kathy on for Akash. I just wanted to follow-up on the Medicare Part D question that was asked earlier and specifically on how will the restructure of the catastrophic coverage component impact Cabo in the coming years? And also how does Exelixis specifically plan to mitigate these pricing impacts? Thank you.

Speaker 2

Thanks for the question. This is Mike. Yes, I certainly wouldn't want to comment on what's going to happen in the years ahead. We have a pretty good idea about what to expect relative to 2025 and beyond. So again, I wouldn't want to opine beyond what's happening in 2024 and we have a high degree of confidence that we've got that really good sense of where that's going and how to navigate those different changes.

Speaker 2

So moving to our full steam ahead and we get to 25 and beyond, we'll talk about those changes then. Okay, thank you.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Your line is open.

Speaker 13

Great. Thank you very much. Perhaps you could help us understand your prioritization of capital allocation between the share repurchases and the business development activity? I think Joe had tried to ask earlier and recognizing that you aren't necessarily thinking of sharing specifics, but it sounded as if it was contingent upon the outcome of the MSM IP decision for you to perhaps lean in more intentionally on the BD front? I just wanted to make sure I understood because you also include in your release that you plan on completing the share repurchase allocation that the Board approved for the full year 2024?

Speaker 13

Thank you.

Speaker 2

Yes. Thanks for the question, Chris. Yes, I would not certainly assume those two activities are mutually exclusive. We have plenty of cash. We're generating free cash every quarter.

Speaker 2

We've been profitable for years. I think we have the appetite to do both as Chris and others, we've all talked about previously, the share buyback between last year and year will be $1,000,000,000 The idea that we want to add additional late stage assets to our portfolio certainly makes sense in the context of growing the business in terms of both top line and bottom line growth by having a diversified offering of products that we can use in the context of our development and commercialization platform to move the needle for patients and shareholders. So we are certainly very excited about the options we have ahead of us, Getting beyond getting certainty with the ANDA is the first priority. Once we have that in place, then I think the next steps are relatively straightforward with how we want to maneuver the business. So, thanks for the question and happy to follow-up at a later time if you want.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Derek Archila with Wells Fargo. Your line is open.

Speaker 4

Hey guys, thanks for taking the question. So just I guess one from us, how do you envision the cabo approvals in both prostate and neuroendocrine tumors? How does that change the volume growth profile of cabo relative today? How much acceleration could we potentially see in the future? Thanks.

Speaker 4

Yes. Hi, Derek. This is P. J. So certainly wouldn't want to give guidance beyond this year specifically on revenue or volume.

Speaker 4

I guess I'd kind of reiterate some of my earlier comments with regards to NET obviously and CRPC for that matter both significant areas of unmet medical need. As I mentioned, net is 8,000 patients in the second line plus setting and more broadly, we have the potential to be really have a broad opportunity in that marketplace. CRPC is obviously a really large market, again, ultimately with limited treatment options with regards to primary treatment options being chemo, NHT, radioligand therapy, but you're talking about tens of thousands of patients. So we're very excited about the opportunities. And should we have the opportunity to bring them to market and help patients, we think there'll be really significant opportunity for growth.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Silvan Turcken with Citizens JMP.

Speaker 14

On the quarter and thanks for taking my question. I just want to ask about the overlap in sales force and call points between RCC and a potential sales force for prostate cancer? And basically what I'm trying to get to is, can you tell us what's kind of the incremental cost for potentially launching Net Net and prostate cancer?

Speaker 2

Yes. Sylvain, thanks for the question. PJ, why don't you address both in terms of prostate RCC and then on the

Speaker 4

GI side net and HCC? Yes, happy to, Mike. Thanks for the question, Sylvain. So I'll start with RCC. We see really significant overlap in terms of GU oncologists, right.

Speaker 4

So whether it's in the community setting or even in academia, in particular, GU onc focus are really treating the majority of these GU indications. So again, significant overlap there, which is potentially great for a number of reasons. One, we really as I mentioned in my prepared remarks, we can leverage our existing RCC infrastructure. So, without having to invest significantly to build that for a potential prostate cancer launch. And 2, these are physicians who are very familiar with cabozantinib in RCC managing side effects, etcetera.

Speaker 4

So that could be certainly something that would be in our favor as well. With regards to NETs, a lot of these as 50% plus, really 60% plus are GI related. We have another sort of sleeve of our team, if you will, is GI focused. And there's a heavy overlap there as well with our call points both in the community as well as again in academia who are physicians who are treating NET as well as those GI tumors. So again, it's a really nice potential for us to leverage our existing infrastructure as well as launch into a market where a lot of the prescribers have existing comfort and familiarity and frankly positive experiences according to all our market research tumors, whether it's HCC, thyroid cancer, DTC or in many different settings in renal cell carcinoma.

Speaker 4

So that's certainly something we look forward to.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of David Lebowitz with Citi. Your line is open.

Speaker 13

Thank you very much for taking my questions. When you discussed the strategy ZONTA versus cabo going forward, it seems it's clearly an effort to focus on different overall indications. Does that strategy evolve in the event of an unfavorable MSM2 ruling?

Speaker 2

Yes, David, thanks for the question. Yes, I wouldn't want to we wouldn't want to speculate on that right now. So, I think we've made the commitment to evolve the overall approach in terms of how we're developing TKIs, veg up our targeting TKIs over to Zanzib. And that's still the plan going forward. We think we have what looks like to be an emerging improvement in overall activity and safety.

Speaker 2

The totality of data is still early, would suggest that. So we're all in on Zanza and there's a lot of excitement there in the community. And we're having I think a lot of very interesting productive discussions about how we might combine with Zanza. So lots of opportunity, lots to do there. So stay tuned.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Jeff Hung with Morgan Stanley. Your line is open.

Speaker 5

Thanks for taking my question. Following up on the neuroendocrine tumor prevalent population, given heterogeneity of tumors, are you planning to stratify the prevalent population to focus on specific subgroups initially? Appreciate any details you can provide. Thanks.

Speaker 4

Yes, Jeff, this is P. J. Thanks for the question. Generally, what I would say is, as we focus coming out of the gate, given that as I mentioned, we kind of really have broad inclusion criteria in our study of whether that's site of origin, SSTR receptor status, what patients have been previously treated with. We really believe we have the opportunity to go right out of the gates should we be approved and launch this very broadly.

Speaker 4

And I think that will be what we're hearing in ad boards, etcetera, very much appreciated and adopted well from a physician community perspective because they need new options for really all of these patients. And in some cases, like right now for patients who have been on a variety of therapies. So I think it would be a broad opportunity and we would certainly position it to as such.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Etzer DeRout with BMO Capital Markets. Your line is open.

Speaker 15

Hi, this is Luke Schelling on for us. Thanks for taking my question. For the prostate and NET filings, what are the key factors that are going to influence like the timing of those filings? What are you waiting on for those? And are those only going to be U.

Speaker 15

S. Filings? Are we also looking for ex U. S? And are there any other gating factors for filing those?

Speaker 6

Thanks, Lucas. This is Amy. I'll take that question. So I can't comment on what our partners are going to be doing with regard to ex U. S.

Speaker 6

Filing. CABO is in collaboration under a collaboration agreement with Ipsen for non U. S, non Japan and with Takeda for Japan. What we're focused on and what I mentioned in the call is that we needed the data by BERC in order to complete the dossier for a filing and we have the data and we're in discussions and we really are hoping to be able to submit in the coming months for the CABINET study. For contact, I also mentioned we have FINAL OS, which we're anticipating in the coming months.

Speaker 6

The study was a positive study. Statistically significant OS is not required. In order for the study to be positive. We showed a really nice trend favoring caboatezo, which I will point out given the what else is going on in prostate cancer in terms of radioligandPSMA4 assets where initially hazard ratios for OS were above 1. Novartis just announced theirs as less than 1, probably very close to 1.

Speaker 6

The fact that we had a nice trend, I think, is also supportive of a risk benefit profile that is that favors the patients. And so stay tuned. We'll let you know how conversations and filings progress with the agency.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Peter Lawson with Barclays. Your line is open.

Speaker 16

Thanks for taking the questions. Chris, just a question on the share buyback and thoughts on expanding that, especially if there's a negative outcome around IP, would that be something you would expand or accelerate?

Speaker 3

Hey, Peter, thanks for the questions, Chris. Yes, I'm not going to speculate on what we're going to do depending on the different variables around outcomes on the MSN trial. As I mentioned in our prepared remarks, we're committed to executing on the $450,000,000 We did $191,000,000 in the Q1 and we're committed to getting

Operator

rest done this year. Thank you. At this time, there are no further questions. And so I would now like to turn the call back over to your host, Byron, for closing remarks.

Speaker 1

Thank you, Towanda, and thank you all for joining us today. We welcome your follow-up calls with any additional questions you may have that we were unable to address during today's call. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Exelixis Q1 2024
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