Exelixis Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

There are 11 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Exelixis Second Quarter 2024 Financial Results Conference Call. My name is Towanda, and I'll be your operator for 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, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations.

Operator

You may begin.

Speaker 1

Thank you, Twanda, and thank you all for joining us for the Exelixis Q2 2024 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO Chris Senner, our Chief Financial Officer P. J. 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 Q2 2024 and the June 30, 2024. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles.

Speaker 1

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. 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 SEC, 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 about limitations, 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.

Speaker 1

And with that, I will turn the call over to Mike.

Speaker 2

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a very busy and productive second quarter across literally all components of our business, especially in commercial, regulatory and development, and we're thrilled with our momentum that's driving us into the second half of twenty twenty four. We continue to execute on key priorities for important future value drivers and discovery, development and commercial and remain steadfast in our focus 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 key highlights for the quarter, including first, strong financial performance with top and bottom line growth driven by the strength of the cabozantinib franchise globally.

Speaker 2

Momentum in the cabozantinib business continued in the Q2 of 2024 with growth in demand and revenue both quarter over quarter and year over year. CABOMETYX maintained its status as the leading TKI for RCC in the U. S. With Q2 2024 cabo franchise net product revenues growing 16% quarter over quarter compared to Q1 2024 and 7% year over year compared to Q2 2023. Global cabozantinib franchise net product revenues generated by Exelixis and its partners grew to $618,000,000 in the Q2 2024.

Speaker 2

The $150,000,000 commercial milestone we earned from Ipsen in the 2nd quarter is emblematic of the continued strength of the cabo franchise on a worldwide basis. The robust net product revenue and total revenue for the quarter along with continued expense discipline drove our net income growth as well. As Chris will highlight later in the call, we had a very good second quarter and look forward to continuing the momentum in the second half of the year. 2nd, building off the strength of cabo's leadership position in RCC, we're excited about the opportunity for new indications like NET to drive future cabo growth and believe it could be another area where Exelixis has the potential to grow into a market leader.

Speaker 3

Our

Speaker 2

cabo sNDA submission based on the cabinet data was accepted with standard review and a PDUFA date in early April 2025. XL's top priority is to advance the net indication from a clinical and regulatory perspective and launch as soon as possible pending approval. As you'll hear from Amy, the planned Phase 3 of ZANZA in net underscores our commitment to establish a leadership position in this underserved population and provides another therapeutic opportunity to improve standard of care for patients with NET. TJ will also highlight recent market research, which helps frames our excitement for this indication. 3rd, we continue to advance our industry leading pipeline with a focus on generating differentiating clinical data that will improve standard of care for patients with cancer.

Speaker 2

Our success in building the cabo franchise provides a roadmap to maximize clinical and commercial success for molecules in our pipeline. Advancing potential new cabo indications and expediting Zansa clinical developments with both existing and new pivotal trials remains our top focus. We continuously evaluate our pipeline to ensure we are disciplined in our investments and that they align with emerging data and the evolving treatment landscape. In that context, we've decided to discontinue XB-two as it is unlikely to improve upon the tissue factor targeting ADCs already approved or in the clinic. We believe there are higher value and therefore higher priority opportunities with ZANZA in NET and potentially other GU indications that drive us to reallocate resources to support these activities.

Speaker 2

The cabo lens sets a high bar for clinical differentiation and ultimate commercial success and we're mindful that investments in programs that are unlikely to improve standard of care does little to create value for patients or shareholders. We're optimistic in our progress with XL-three zero nine, XB-ten and new candidates in our pipeline, which we expect to advance quickly. 4th, the strong financial performance this quarter and our continued financial and pipeline discipline allows us to be both strategic and opportunistic in capital deployment. While we expect business development and clinical collaboration discussions to continue throughout 2024, our strong financial performance this quarter with record levels of net product revenues and total revenues allows us to pursue another $500,000,000 share repurchase program on top of the $1,000,000,000 of shares we bought over the last 15 months. Finally, there's nothing new to report on the cabo ANDA litigation.

Speaker 2

As in the past, we will not speak to any specifics today and it's a statement of the obvious that the upcoming ANDA ruling 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. So with that, please see our press release issued an hour ago for our Q2 2024 financial results and an extensive list of key corporate milestones achieved in the quarter. And I'll now turn the call over to Chris.

Speaker 4

Thanks Mike. For the Q2 of 2024, the company reported total revenues of approximately $637,200,000 which included cabozantinib franchise net product revenues of $437,600,000 CABOMETYX net product revenues were $433,300,000 and included approximately 6.6 $1,000,000 in clinical trial sales. Gross to net for the cabozantinib franchise in the Q2 of 2024 was 27.6%, which is lower than the gross to net we experienced in the Q1 of 2024 and is generally in line with our expectations. This decrease in gross to net deductions in the Q2 2024 is primarily related to lower Medicare Part D, co pay assistance and 340B expenses. Our CABOMETYX trade inventory decreased by approximately 300 units when compared to the Q1 2024 to approximately 2 point weeks on hand.

Speaker 4

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 approximately $195,000,000 of license revenues for the Q2 of 2024. The largest contributor to our license revenue is the $150,000,000 commercial sales milestone we recognized in the Q2 as a result of Ipsen's achievement of $600,000,000 in cumulative net sales of cabozantinib cabozantinib in its related license territory over 4 consecutive quarters. Additionally, we recognized approximately $41,000,000 of license revenues from the royalties we earned from Ipsen and Takeda on their sales of cabozantinib in their territories. Our total operating expenses excluding restructuring charges for the Q2 of 2024 were approximately $361,000,000 compared to $363,000,000 in the Q1 of 2024.

Speaker 4

The sequential decrease in these operating expenses was primarily driven by lower licensing and clinical trial costs offset by higher commercial and general and administrative expenses in the Q2 of 2024. Provision for income taxes for the Q2 of 2024 was approximately $67,000,000 compared to a provision for income taxes of approximately $12,000,000 for the Q1 of 2020 4. The company reported GAAP net income of approximately $226,100,000 or $0.77 per share on a fully diluted basis for the Q2 2024. The company also reported non GAAP net income of approximately $246,000,000 or $0.84 per share on a fully diluted basis. Non GAAP net income excludes the impact of approximately $20,000,000 of stock based compensation expense net of the related income

Speaker 5

tax effect.

Speaker 4

Cash and investments as of June 30, 2024 were approximately $1,400,000,000 During the Q2 of 2024, we repurchased approximately $259,000,000 of Exelixis shares at an average price of $22.23 completing the $450,000,000 share repurchase program authorized earlier this year. Through this $450,000,000 program, we retired 20,300,000 shares at an average price of $22.17 When combining the March 2023, $550,000,000 share repurchase program and the January 2024 $450,000,000 share repurchase program, we repurchased and retired approximately 46,500,000 shares. Additionally, Exelixis announced today that the company's Board of Directors has authorized the repurchase of up to $500,000,000 of the company's common stock through the end of 2025. This is our 3rd share repurchase program authorized since March 2023. And finally, turning to our financial guidance for the full year.

Speaker 4

We're increasing our total revenue guidance and SG and A expense guidance. We are increasing our total revenue guidance due to the recognition of the $150,000,000 commercial sales milestone from Ipsen in the Q2. Additionally, we are increasing our SG and A guidance due to the pre launch costs associated with preparing the commercial organization to launch the potential net indication. Please see Slide 14 of our Q2 earnings presentation for further details. With that, I'll turn the call over to Amy.

Speaker 6

Thanks, Chris. I'm happy to share our progress across our pipeline with you all today, starting with cabozantinib and an exciting status update on our filing activities with the Phase 3 cabinet study in neuroendocrine tumors or NET. As Mike mentioned, we are pleased to report that Exelixis' filing for a supplementary NDA for cabozantinib in pancreatic or extra pancreatic neuroendocrine tumors has been accepted by the FDA with a target PDUFA date of April 3, 2025. The FDA also granted orphan drug designation to cabozantinib in pancreatic NET. As a reminder, the Phase 3 cabinet study evaluated cabozantinib 60 milligrams daily versus placebo in patients with previously treated advanced or metastatic pancreatic or extrapancreatic neuroendocrine tumors, which I will refer to as PNET or EP NET respectively.

Speaker 6

By way of background, NETs sometimes referred to as carcinoid tumors are a diverse group of malignancies that arise from neuroendocrine cells of various organs. While previously thought to be fairly uncommon, there has been a marked increase in the incidence over the past 20 years and in 2024 approximately 15,000 people in the U. S. Will be diagnosed with this tumor type. Well differentiated neuroendocrine tumors develop most commonly about 55% of the time in the GI tract, followed by lung at approximately 25% and pancreas just under 10%.

Speaker 6

They may also arise from other tissues like prostate, breast, thymus and skin. To date FDA approved therapies have been directed at stimulating somatostatin receptors and inhibiting angiogenesis. Somatostatin analogs were first approved for the treatment of symptoms related to functional tumors and subsequently to delay disease progression. More recently somatostatin analogs have been used to deliver radioligand or radionuclide therapy to somatostatin receptor expressing tumor cells. Lutetium LUN-one hundred and seventy seven DOTATATE or Lutathera is an SSTR targeting beta emitting radioligand indicated for use in somatostatin expressing gastroenteropancreatic NETs, that is tumors of the foregut, which includes the pancreas, the mid gut and the hind gut.

Speaker 6

NET is considered a highly vascular tumor and angiogenesis inhibitors have proved useful in its treatment. Sunitinib is indicated for use in PNET, everolimus is indicated for use in PNET and in non functioning GI and lung NETs. Putting these indications together, there are a number of neuroendocrine tumors that are not covered by these labels. For example, not all patients with a neuroendocrine tumor are candidates for Lutathera because their tumors may not express sufficient levels of SSTR to be eligible. Furthermore, Lutathera is not approved in patients with LungNet, a population representing nearly a quarter of all NET and importantly a population that was included in cabinet.

Speaker 6

As presented by Doctor. Jennifer Chan of the Dana Farber Cancer Institute at ESMO last year, one out of 5 of the patients enrolled into cabinet with EP NET had lung NET. NETs can be functional or non functional and everolimus is not indicated in functional carcinoid tumors. Patients with functional NET were included in the CAVNET trial representing 32% of EP NET and 16% of PNET patients. Functional NETs secrete bioactive molecules leading to symptoms like flushing, bronchospasm, diarrhea and blood pressure fluctuations that can cause significant morbidity and reduced quality of life.

Speaker 6

Advanced or metastatic nets carry a poor prognosis. This was reflected in the relatively short investigator assessed progression free survival of approximately 3 months on placebo in either the PNET or EPNET cohorts from the cabinet study again as presented by Doctor. Chan at ESMO in 2023. We're excited to announce that the final PFS results by blinded independent central radiology review, the primary endpoint of the cabinet study will be presented during an oral proffered paper session at ESMO 2024 Congress in Barcelona next month. One last thing to point out about cabinet is that this Phase 3 was designed and executed by the NCI funded Alliance for Clinical Trials in Oncology.

Speaker 6

That is CAVNET was not an Exelixis sponsored trial, but rather was conducted under a collaborative research and development agreement or CRADA with the NCI. Studies like CABINET underscore the importance of building strong relationships with the academic community. Such studies at a maximum can support labels and new indications and at a minimum can provide meaningful information to inform further development. The NET KOL community recognized the need for additional effective therapies and understood the potential for cabozantinib to realize that need. The data from cabinet provides important information to ensure that as many patients with NET either based on site of origin or in functional or non functional status and regardless of SSTR expression to potentially gain access to an effective therapy.

Speaker 6

The data should also support approvals outside the U. S. And we're pleased that our partner Ipsen has already indicated interest in filing cabinet in their territories. So as you can infer, we're very excited about the data generated from cabinet and we'll work closely with the agency towards an approval. The next study I'd like to discuss is CONTACT-two, our randomized open label Phase 3 study evaluating cabo plus atezolizumab versus a second novel hormonal therapy in patients with metastatic castration resistant prostate cancer who have measurable extrapelvic soft tissue disease.

Speaker 6

In January 2024 at ASCO GU, Doctor. Neeraj Agarwal of the Huntsman Cancer Institute presented results from CONTACT-two showing a significant improvement in progression free survival meeting 1 of the dual primary efficacy endpoints of the trial. The safety profile of the combination reflected the known safety profile of each single agent and was consistent with the tolerability profile of approved IOTKI combinations. The final overall survival analysis for the study has been completed. While OS and the ITT continue to favor the combination of cabo plus atezo, it did not reach statistical significance.

Speaker 6

We look forward to presenting these final data including key subgroups at a future medical meeting and intend to submit an sNDA to the FDA later this year. Finally for cabo, I'll briefly cover COSMIC-three thirteen, our Phase 3 trial evaluating the triplet of cabo, nivo and ipi versus nivoipi in frontline intermediate or poor risk renal cell carcinoma. We previously reported the primary endpoint of PFS by blinded independent radiology committee, which showed a hazard ratio of 0.73 and a p value of 0.01 favoring the triplet. At the final analysis, the experimental arm did not demonstrate an OS benefit over the control arm, a key secondary endpoint. Based on this OS result and the evolution of first line RCC treatment landscape since the study was initiated in May 2019, we have no plans to file this study for label extension.

Speaker 6

Data from this study will be disclosed at a future time. I'll now discuss our development stage assets starting with zanzolitinib. First, I'm pleased to announce that we have completed enrollment in STELLAR-three zero three, our pivotal Phase 3 study evaluating the combination of ZANZA plus atezolizumab versus regirafenib in patients with non MSI high, non DMMR metastatic and refractory colorectal cancer. The primary endpoint in this study is overall survival in the non liver MET or NLM patient population. If positive, we will then evaluate survival in the ITP population that includes patients with and without liver mets.

Speaker 6

The sample size for both NLM and liver mets patients was capped to ensure adequate numbers of events in each of these analyses. The survival analysis is event driven and we are currently estimating the study should read out in 2025. Taking into account that survival in NLM patients is longer than it is in those with liver mets. STELLAR-three zero four, our Phase 3 trial evaluating the combination of ZANZA plus nivolumab versus sunitinib in frontline non clear cell kidney cancer has dual primary endpoints of progression free survival and objective response rate, both as assessed by a blinded independent radiology review. For this study, we are on track to complete enrollment by mid-twenty 25.

Speaker 6

STELLAR-three zero three is our sorry, STELLAR-three zero five is our registrational trial evaluating 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 initiated late last year and the team has made substantial progress with site activation and patient enrollment. The progress we are seeing reflects the external excitement about the potential for this regimen to offer patients a chemo free treatment option. We know that this type of tumor is sensitive to both I O and VEGF inhibitors like zanzalitinib and even in light of the recent failure of lindatinib plus pembrolizumab, we remain confident that combining the right TKI with IO could improve patient outcomes and we believe in zanzolitinib's differentiated profile to accomplish as much. As for future additional studies with ZANZZA, our immediate priority is to launch a new pivotal study, STELLAR-three eleven, evaluating zanzolitinib versus everolimus in patients with advanced neuroendocrine tumors whose disease had progressed on a somatostatin analog.

Speaker 6

The study design leverages the comprehensive body of data generated by cabozantinib in this disease setting as well as important feedback from our network of investigators looking to bring additional effective therapies to their patients and in earlier settings. Exelix has built a strong footing in RCC with cabozantinib and we intend to extend that leadership into the next space. First with the filing of CAPNET and now with this initial study of zanzalitinib. The net space is reminiscent of where we started in RCC years ago when the METEOR and cabozant studies read out. Our assessment of the market, which you'll hear more about from PJ, leads us to believe there is similar potential for ZANZZA in net to that which we realized for cabo in RCC.

Speaker 6

We intend to initiate this study early next year with the goal of establishing Zanza as the preferred first oral therapy in advanced neuroendocrine tumors. The enthusiasm we have received from investigators on this trial design strengthens our conviction of the potential for Zanza to offer a meaningful advance to this ever increasing patient population. Taken together, we've demonstrated a calculated yet diverse development program for Zanzolitinib that has the potential to grow its value proposition across a variety of disease settings. 2025 will be an important and exciting year for ZANZO with data readouts across key programs including maturing data in the expansion cohorts in STELLAR-one and 2. We are constantly assessing other development opportunities for zanzolitinib and we'll update you on those plans as we make progress.

Speaker 6

I'll now provide a quick update on our XB002 and XL309 programs. XB002 is our tissue factor targeting ADC that carries the modified orastatin payload. XB002 is being evaluated in the Phase 1 JUUL-one hundred and one study across various tumor types as a single agent and in combination with nivolumab. Based on available data, we have come to the conclusion that XB002 is unlikely to improve upon tazotumab vedotin or other competitor tissue factor targeting ADCs currently in development. Therefore, we are stopping further development and we'll proceed with study close out of TUEL-one hundred and one.

Speaker 6

Data from the study will be disclosed at a future time. XL-three zero nine is our small molecule USP-one inhibitor currently being evaluated in advanced solid tumors in a Phase 1 study as a single agent and in combination with olaparib, a Part onetwo inhibitor. The mechanism of action of XL-three zero nine and potential to combine with PARP inhibitors provides optionality for a robust development program in a variety of solid tumors not necessarily restricted to tumors that harbor BRCA-one, two mutations. And the team is making great progress with enrollment including patients into the combination cohort. We're actively assessing how we might prioritize expanded development of this particular compound.

Speaker 6

As I approach my 1 year anniversary later this month, I have to say I'm proud of the progress the teams have made in advancing our diverse clinical programs. We are well poised to continue providing physicians and patients new and important therapeutic options. I look forward to sharing additional updates with you as we move through the second half of this year. I'll now turn the call over to Dana.

Speaker 4

Thanks, Amy, and good afternoon, everyone. Today, I'm giving a brief update on our progress in the Q2 of 2024 toward our goals for preparing for IND filings and for advancing new compounds to develop a candidate status. On the IND front, we've continued to make good progress on all of our pre IND programs and we remain on track to file up to 3 this year. As you saw in the press release, we filed the IND for XB-ten in the Q2 and the Phase 1 trial is now underway. XB-ten is a 5T4 targeted antibody drug conjugate that carries the cytotoxic antitubulin payload monomethylorastatin E and uses smart tag linker payload technology, which results in a more stable and homogeneous ADC compared to earlier generation technologies.

Speaker 4

XB-ten is the 1st custom ADC that our internal teams designed and built with participation by our collaboration partners and brought to the clinic and the principal investigators of the Phase 1 study are quite enthusiastic about the potential for this molecule to address significant unmet need for patients with tumors that express 5T4. So we look forward to efficient execution of this study. The second IND to file this year is for XL-four ninety five, our small molecule inhibitor of PKMIT1. Inhibition of PKMET1 is synthetically lethal in the context of increased cyclin E levels, which occurs across a wide range of tumors. We're progressing toward IND filing and acceptance by the FDA for the XL-four ninety five in the very near future.

Speaker 4

So we look forward to getting that Phase 1 study underway soon. 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. Our IND enabling activities for XB-six twenty eight are progressing on schedule to support filing the IND later this year. I'm also pleased to give a brief update on XB-three seventy one, our tissue factor targeting ADC that utilizes SmartTag technology to conjugate a topoisomerase inhibitor payload to the antibody. We continue to be enthusiastic about the potential for XB-three seventy one to differentiate from tislelizumab vedotin in the clinic, primarily because of the topoisomerase inhibitor payload, which is a completely different mechanism of action and could give us reach into indications like colorectal cancer that express tissue factor that are typically insensitive to microtubule inhibitors.

Speaker 4

GLP tox and other IND enabling activities for XB-three seventy one are well underway and we expect to file the IND in 2025. In terms of new development candidates, we expect to achieve our goal of at least 2 this year with some exciting new programs, including a small molecule inhibitor targeting PLK4 and a novel antibody drug conjugate program. And with that, I'll turn the call over to P. J.

Speaker 5

Thank you, Dana. The Q2 of 2024 was a strong quarter as the team continued to execute at a high level, which has resulted in CABOMETYX continuing to be the number one prescribed TKI and RCC. Additionally, CABOMETYX in combination with nivolumab has achieved its highest market share to date and remains the number one TKI I O combination and first line renal cell carcinoma. With regards to prescriptions, CABOMETYX TRx volume grew 6% year over year in Q2, 2024 relative to Q2, 2023. Furthermore, the business remains strong both in terms of demand and new patient starts both of which were at an all time high for CABOMETYX in the 2nd quarter.

Speaker 5

CABOMETYX continued to perform well from both the marketplace and competitive perspective. AVOMETYX again led the TKI market basket with TRx share increasing to 41%. As we have discussed previously, the first line RCC market is extremely competitive. In Q2, the 7th full quarter in which CABOMETYX plus nivolumab remained the number one prescribed TKI plus IO combination in first line RCC. In Q2 CABOMETYX plus nivolumab reached its highest share ever in first line RCC.

Speaker 5

This share increase drove higher new patient starts and demand for CABOMETYX. In particular, we are seeing strong growth in the community oncology setting. Furthermore, long term data from the CheckMate 9ER study now with a minimum 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. Beyond first line RCC, CABOMETYX is performing well in other segments including 2nd line RCC, 2nd line HCC and 2nd line DTC. Looking forward, commercial team is excited about the positive results from the CABINET trial in neuroendocrine tumors, particularly now that we have a PDUFA date.

Speaker 5

Neuroendocrine tumors comprise a large and heterogeneous patient population. As patients become metastatic and progress, treatment options become limited. The only oral targeted therapy options are sunitinib and everolimus and there has not been an approval in the U. S. For an oral agent in NET since 2016.

Speaker 5

There is a strong unmet need for new options for patients who have progressed on systemic therapy. In 2025, there will be approximately 9,000 second line plus drug treated patients in the United States. Approximately 80% of patients are SSTR positive and in lung NETs that percentage is much lower, approximately 44% being SSTR positive. Most NET patients will receive multiple lines of therapy in part due to the more indolent nature of the disease relative to other solid tumors. We've conducted preliminary market research, which reveals that oral therapies account for approximately 50% of the utilization in this market in the second and third line plus settings.

Speaker 5

The currently available options do not have broad evidence across all disease characteristics including site of origin, grade, SSTR status and functional status. Also in market research, physicians do not view the toxicity profile of these agents in a favorable manner. Furthermore, as I mentioned previously, majority of NET patients will receive many lines of therapy sequenced throughout their treatment course. There is a lack of optimal sequencing data in the setting, particularly in patients previously treated with Lutathera. All of this taken together underscores the significant need for a contemporary dataset that is broad in its applicability to address the unmet medical need for this heterogeneous patient population.

Speaker 5

Turning to the CABINET trial. The study had a broad and diverse population that included patients regardless of site of disease origin, tumor grade, prior Lutathera, SSTR status or functional status of the tumors. As we conduct market research and hear from KOLs about the cabinet data, we are pleased with the feedback that we are receiving. Physicians cite the study design is positive and it covers a broad range of net patients that they see in their practice as well as the fact that it is a contemporary data set and is inclusive of patients who have received Lutathera. In market research, the efficacy data of LUCABINET is viewed favorably by prescribers in terms of progression free survival, overall response rate and disease control rate.

Speaker 5

Most physicians in the research have experience with cabo in RCC, HCC or DTC. These oncologists cite their experience with CABOMETYX in other tumors as a positive, particularly when it comes to comfort with dose modification and toxicity management. The feedback and research clearly demonstrate the regulatory approval for CABOMETYX based on the CABOMETY study would have the potential to help a broad range of net patients and address an unmet medical need. The potential opportunity in neuroendocrine tumors fits very well Exelixis' existing commercial infrastructure and capabilities. Oncologists are the primary treaters of advanced neuroendocrine tumors and our analysis indicates that the majority of net treaters have prior experience using CABOMETYX and are already being called on by our sales force for our labeled indications.

Speaker 5

Synergies also exist across other commercial functions such as marketing, market access and commercial operations. Hence, potential launch of cabo and net would not require significant incremental investment. Launch planning in preparation for the opportunity in neuroendocrine tumors is well underway and our team is excited by this endeavor. CABO franchise is entering the second half of twenty twenty four with significant momentum in our currently improved indications and a potential regulatory approval of CABOMETYX and NET would provide the opportunity to continue the growth and momentum in the coming years. Furthermore, the commercial team is enthusiastic about the progress in the pipeline, particularly with zanzolitinib as 2025 is coming into focus as an important year for the compound as you heard from Amy.

Speaker 5

We are motivated to expand the cabo franchise to a kinase inhibitor franchise with ZANZZA having the potential to help patients in tumors where cabo has demonstrated activities such as NETs and RCC as well as new tumors such as colorectal cancer, so we can continue to help more patients with cancer. With that, I will turn the call back over to Mike.

Speaker 2

All right. Thanks, P. J. I'd like to close our call today by reflecting on an event we recently held that serves as an important reminder about why we are dedicated to the work we're doing at Exelixis every single day. We had the honor of hosting kidney cancer patients and advocates, Laura Esteller and Katie Coleman for a special panel discussion where they shared insights about their kidney cancer journey and the significant ripple effect the connections and information shared from peer to peer support and efficacy can have on people impacted by a devastating cancer diagnosis.

Speaker 2

Their powerful stories of hardship, resiliency and an unwavering patients we serve and reminds all of us that together we can make a meaningful difference in the lives of people affected by cancer. So with that, I want to thank the entire Exelixis team for their efforts to support our discovery, development and commercial activities. We had a very strong first half of twenty twenty four and are on track for this year to be a critical one for our science and the patients we strive to serve now and in the future. The XL 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.

Speaker 2

Thank you for your continued support and interest in Exelixis. And we're now happy to open the call for questions.

Operator

Thank Our first question comes from the line of Michael Schmidt with Guggenheim Securities. Your line is open.

Speaker 7

Hi, this is Paul on for Michael. Thanks for taking our questions. Just for cabo and thinking about expectations for possible labeling in NET, Looking at the CABINET study, patients have seen around 2 to 3 median lines including somatostatin analog and other treatments. How are you thinking about how the label might reflect prior lines of therapy in terms of second line versus third line plus? And any other thoughts about the label that you could share would be super helpful?

Speaker 7

Thank you.

Speaker 6

Thanks, Paul, for the question. I can't really share much in terms of the label. We're deep in the response to the agency. We're very excited about the fact that they've accepted the filing, and are marching towards an approval date of April 3, 2025. We think that this study allows a fairly broad label for NET pancreatic, extra pancreatic, prior SSTR, yes or no, functional yes or no.

Speaker 6

How that actually pans out in words will remain to be seen.

Operator

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

Speaker 8

Hi, this is support on for Greg. On the business development opportunities and collaborations that Exelix is exploring, does that include potential acquisition of late stage assets that fit with the DUTI portfolio that was indicated in the previous quarter? Any color on the collaboration would be helpful. Thank you.

Speaker 2

Yes. Thanks for the question. It's Mike. Yes, look, we're as we mentioned last quarter, we're very interested in looking at late stage assets in the GUGI space. Obviously, I can't go into details right now about that, but it's certainly a primary focus for us.

Speaker 2

Anything we can do to add late stage compounds to our portfolio would be I think the real benefit for potentially patients, shareholders and the company. So that's where our focus is right now and stay tuned as things evolve throughout the second half of the year.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Asthika Goonewardene with Truist. Your line is open.

Speaker 3

Hey, guys. Thanks for taking my question. Just want to say congrats on the progress and the beat on Cabo sales quarter. So I have another question for you. It's unfortunate contactor do not hit on OS.

Speaker 3

We're hopeful it still gets approved. And if it does, what is the level of confidence that not having OS will not be detrimental to uptake? If I can squeeze a quick one a quick side question in here. Can you just give us a little bit more color on the update on the recruitment to CELLA-three zero five? I know you said site activation is going well, but there's just quite a lot of other clinical trials underway in the setting.

Speaker 3

I just want to get a little bit more color from you if you can provide on how patient enrollment is going. Thanks.

Speaker 2

Yes. Thanks, Ashokal. Can you take that first question on cabo commercial for prostate potentially?

Speaker 5

J. Haley:] Yes. Thanks for the question. We're really excited about the data. And I think there's a significant unmet need out there as we've talked about previously.

Speaker 5

Certainly, wouldn't want to get ahead of ourselves in talking about potential uptake in the market etcetera. But like I said, we're excited about that data. Right now, as I mentioned in my remarks, we're really excited about and focused on the near term neuroendocrine tumor launch, which is really our top priority in addition to maintaining our current in line business. So our focus is there at the moment.

Speaker 6

Great. Amy? Sure. Thanks for the question, Ethoca. I'll answer first a little bit more high color on CONTACT-two, very excited.

Speaker 6

The study was positive. We hit on PFS. We hit no matter different ways that you assess PFS and subgroups. PFS has been the basis of approval even in the setting and prostate cancer there's precedent. We believe that what this offers is something to patients who really have high unmet need.

Speaker 6

For example, patients with liver mets and we presented the subgroup at ASCO GU. These patients really don't have much in terms of available effective therapies to them. When we pulse the external community on their excitement about the data, they actually are very excited to potentially have something that they can reach for relatively easily. It's not chemo, the tolerability profile of cabo, atezo, they're comparing it to chemo, not to second NHT and they're actually very excited about the potential to have this in their armamentarium. We'll see, how things go with regard to our filing.

Speaker 6

As far as an update on 305, we're aware of the lead, but I can't really say much more than that.

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 4

Hey, thank you for providing the update and congrats on all the progress. For the new three-one-one study of ZANZA and first line net, Can you talk about how you're weighing the use of single agent ZANZA versus combination approach? And would you consider running a head to head trial of ZANZZA versus cabo? Thank you.

Speaker 6

Thanks, Jay. Great questions. So at this point in time, we're focusing on, the ZANZZA head to head versus everolimus, which we think is a reasonable therapy to offer patients in this line. We have to maintain equipoise whenever we design a study so that the physician is okay talking about each option that they have. We are interested in combination.

Speaker 6

However, at this point in time, it's a little bit early days. We would have to assess the safety, tolerability of any combination before we could initiate a Phase 3 study. We believe that this is the first of probably multiple trials that will run-in this space. So stay tuned. We'll look at combinations as well.

Operator

Thank you. Please stand by. Next question. Our next question comes from the line of Yaron Weber with JPMorgan. Your line is open.

Speaker 9

Hey, guys. This is Joyce on for Yaron. Thanks for taking our question. On Constek-two, I was just wondering if you will be performing subgroup analyses in patients by high risk factors similar to what you did for PFS, for example, in liver meth patients. And whether you hope to learn from anything there on the OS separation and what drove the overall OS to not be statistically significant?

Speaker 9

Thanks.

Speaker 6

Yes. Hi. Thanks for the question. So we're looking forward to sharing the data. We did provide subgroup analyses at GU ASCO both according to PFS and according to OS, which we would intend to update.

Speaker 6

We're very interested in what subgroups may benefit the most from this combination as well as potential subgroups that may not have as much benefit, right? It's all about risk benefit when a physician is deciding who to treat. And so we look forward to providing an update. Stay tuned for when that happens and looking forward to have more discussion on this in the future.

Operator

Thank you. Will you stand by 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. So maybe a quick one for me. Just curious about your reaction on the standard review. I was shocked about the FDA's decision to not give you breakthrough when I read

Speaker 7

the press release. Secondarily, I'm curious about kind of the overlap in potential for cannibalization. Just looking at the STELLAR-three eleven study and also the CABINET study population, there is an example before with NETTER 1, that the FDA gave them a really broad label. I'm just curious about the broad label and its potential implication to the STELLAR-three-one study. Thank you.

Speaker 2

Hey, Andy, it's Mike. I'll take those. So look, we're thrilled to have as always any sNDA or NDA accepted and a PDUFA date out there. It allows us to focus the team in terms of both the review and then any kind of additional launch readiness that we have to do. So I think both Amy and PJ did a great job of framing that.

Speaker 2

So we're thrilled to be where we're at right now with cabo and nets and certainly very excited about moving Zanza forward in that direction 2. In terms of future markets when 311 reads out if that's positive, we're very confident we can navigate the opportunities we have there. Obviously, a lot depends on data labels and those kinds of things that we just don't have right now. So stay tuned. Obviously, as things go forward, we'll be able to talk about that more.

Speaker 2

But we're kind of at the starting block right now with our ability to start navigating nets. And we think as everyone talked about today, this is a really, really important area for us to dive into. And we've been successful in renal and I think with the right level of focus and discipline and hard work, we can hopefully make the same thing happen with nets too.

Operator

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

Speaker 3

Hi, good afternoon and congrats on the top line beat here. And thanks for taking my question. My first question is more strategic. Can you just speak on your the M and A strategy and maybe the urgency versus the new $500,000,000 stock buyback that you just authorized? Just how do you think about the 2?

Speaker 3

Does that mean the M and A strategy is maybe more long term or you don't have something in the crosshairs as of this very moment? And then my second question is just about the discontinuation about XB-two. If you could just remind me that, that has no real cost whatsoever to your ADCs, right, because they are completely different toxins, constructs and from a different collaboration. Thank you.

Speaker 2

Yes. Thanks for the question. I think I'll take them both just to keep things kind of straightforward here. So look in terms of BD, we're focused on finding assets that we have a high degree of conviction in relative to, again, the way we view things through the cabo lens in terms of development, regulatory, commercial, what it means to be successful clinically and commercially. So that's the conviction that we have in late stage assets is the most important thing.

Speaker 2

We have obviously a very successful molecule in cabo. We're generating lots of free cash. We think we can do both in terms of having the dry powder to keep buying back shares as we've announced today and doing the appropriate level of BD if we have the conviction in the asset. So what's rate limiting is that conviction. It's not really how we're going to pay for it.

Speaker 2

Okay. So it's a very important part of our story. We're not desperate. We're not going to go out and do a silly deal. We have to have that fundamental belief that whatever we do in terms of transactions will lead to value for patients and shareholders.

Speaker 2

That's the main driver. In terms of XB-two, yes, as you said, and Dana, I think referred to this really well, 371 continues as well as XV010, which just entered into the clinic and other assets in there in that class of molecules. So we're excited about our ADC approaches. We've got a lot of different irons in the fire and data drives the process. So that's we've always been we've always said that, we've always behaved that way and that will continue going forward.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of David Lebowitz with Citi. Your line is open. Check to see if you're on mute, David.

Operator

David Lebowitz, your line is open.

Speaker 2

Sorry about that.

Speaker 3

Thank you for taking my question. Could you speak to the launch preparedness for treating neuroendocrine tumors, given that it's not overlapping as much with renal, how much of an extra lift does this represent for the team?

Speaker 2

Yes, David, thanks for that question. We covered that pretty extensively on the call. P. J, you want to give the 1 minute summary real fast?

Speaker 5

Yes. Thanks, David. I think we've got a good handle on this. It's not much of a significant lift. It's more or less incremental as we've said from a resourcing perspective.

Speaker 5

We see a strong overlap in net treating physicians with our current customer universe that we call on because we're calling on GI specialists already with HCC and then we have a very strong presence in community oncology. So, I think there's a couple of things there. One is that, it's not a significant incremental resourcing request and the others we're well positioned to take advantage of it. Okay. Thanks, P.

Speaker 5

J.

Operator

Thank you. Our next question comes from the line of Jeffrey Hung with Morgan Stanley.

Speaker 8

This is Michael Riad on for Jeff Hung. Thank you for taking our question. For cabinet and neuroendocrine tumors, you noted that 5 year survival rates trend down when going from GI to lung to pancreatic. Given that, but also given the cabinet was stopped early due to the compelling efficacy, how long into the treatment course do you want to go into with STELLAR-three eleven to see sort of the competitive landscape? Thanks so much.

Speaker 6

Hi, Michael. Yes, thanks for the question. I think we're still refining the study. We hope that Xanda, if the study ultimately is positive, would be would effectively be the preferred first oral treatment in patients who have advanced or metastatic neuroendocrine tumor. So in that sense, it's looking pretty early on.

Speaker 6

In the treatment setting, we know that median progression free survival in this setting can be up to 22 months as observed with Lutathera. So we're hoping that we'll beat Eberolimus and that we can establish Danza as the preferred.

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 8

Hey guys, thank you for taking my questions. I think you largely answered it. But as I was thinking about net and the opportunity with cabo and how it differs ultimately with ZANZZA. It sounds like with cabo, you're kind of in that 3rd, 4th line of treatment absent some of those segments you highlighted like net lung. But it's really with the second, third line study that you have with Danza where you can really open up the market opportunity and see a dynamic like an RCC where you can get some patients stacking.

Speaker 8

And I know you mentioned 22 months PFS with Luda. What would be your expectation for like whatever alignments will do in this setting just to try to get some sense of how long these patients are staying on therapy in sort of the second, third line setting? Thanks.

Speaker 2

Yes. Jason, it's Mike. Thanks for the question. I guess I would challenge your assumptions about where you think cabo will land. It's clearly the patient population that was studied in cabinet is a broad population.

Speaker 2

I won't go into all the details again now just for sake of time, let's see the kind of label we get and let's use that to benchmark kind of where cabo goes relative to the initial our initial foray into the net population. So stay tuned on that. I guess in terms of Zanza, I think the challenge there and the opportunity there is to go head to head against an active control. And I think that's the in our view, that's the main focus of what we're hoping to do with Stelmar-three eleven. In analogy to what we do with METEOR back with cabo and RCC against everolimus as well or even cabozun with sunitinib.

Speaker 2

So about it from that point of view. Obviously, if you fast forward, that leaves out positive. We've just beat the kind of go to 1st small molecule oral therapy. It puts us in a very different position than what cabo could have based upon the cabo label. So lots of moving pieces, don't want to speculate, you could see how this might evolve.

Speaker 2

Let's get the cabo label first and then we'll get STELLAR-three eleven going with again high priority, really pleased with the progress that the development team has made over the last year and be able to kind of streamline processes, a sense of urgency and focus. Kudos to Amy and her team for kind of getting us back to where we've been in the past. And we'll address all these issues with more data and time as we go forward. Thank you.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Akash Tewari with Jefferies. Your line is open.

Speaker 1

Hey, this is Amy on for Akash. Thanks so much for taking our question. So in terms of the net opportunity, do you think this can get to $1,000,000,000 over time? And how are you thinking about the size of the Nets market relative to RCC long term?

Speaker 2

Yes, Amy, thanks for the question. I mean, that's the key question. Obviously, we're not going to answer that today. We need to see the label and how that looks. I think it's safe to say and we're all talking about that in different contexts today that we think NET is underserved.

Speaker 2

We think the opportunity in terms of the incident patient population, the prevalent patient population, the long time these patients kind of factor or kind of go from one therapy to another. This could be a real opportunity to help those patients longitudinally with cabo, with ZANZA, potential other combinations as we go forward. So we are excited about this. We're not going to give numbers today. Certainly, as things go forward, we see the label, we have a better sense of being able to frame the initial market opportunity and maybe more importantly, the bigger opportunity as we go forward over the next few years could be really interesting.

Speaker 2

So stay tuned, great question. Come back in a few months or quarters once we get approval and we'll be happy to talk about that. Okay?

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Alex Bulox with Barclays. Your line is open.

Speaker 8

Hey, good afternoon. This is Alex on for Peter Lawson at Barclays. Thanks for taking our question. I just had a quick one on the USP-one program. I was wondering if you had any comments on development from competing programs.

Speaker 8

We've had some discontinuations in the space and also some data at ASCO. I'm curious if any of these developments impact in any way your clinical development strategy with this asset? Thank you.

Speaker 2

Yes. Thanks for the question. Dana, you want to cover that one?

Speaker 4

Sure. Yes. Thanks for the question, Alex. We obviously were very attentive to the data presented on the KSQ Roche molecule at ASCO as well as to the discontinuation of the Tango molecule. So first of all, we remain extremely enthusiastic about XL-three zero nine.

Speaker 4

It has a unique scaffold. It is a different compound than either the KSQ or the TANGO molecule. And as we noted previously at the R and D Day event, last December, we presented a lot of data showing how our molecule differentiates from the KSQ compound. What was shown at ASCO was primarily with that compound was primarily a PK limitation. And that is exactly what we predicted from our preclinical data given their poor solubility and some other issues with their compound.

Speaker 4

So we believe that our compound is differentiated from that in the preclinical data and we're very eager to share the first clinical data when they're available to hopefully show that we aren't in fact differentiating from that from that compound. But we remain very enthusiastic about our compound to differentiate from anything that's been out there so far.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Suneet Loganithyan with Stephens. Your line is open.

Speaker 3

Hi, everyone. Thank you in advance for taking my question and congrats on the strong cobble quarter and all the pipeline progress. In regards to COSMIC-three thirteen, was that program kind of considered the last opportunity to really further tap into the first line RCC population? And then is there a path to exceeding 50% to 60% market penetration by taking share away from with another strategy? And then what would be a marketing strategy here to kind of show growth in the near term for CABOMETYX and first line RCC?

Speaker 2

Yes. Piyush, do you want to take that one?

Speaker 5

Yes. Thanks for the question. I would say 3013, we certainly did significant market research on it. We just didn't see a risk benefit profile going forward that was really going to raise the bar relative to the current combinations, in particular cabonivo as I mentioned, the leading first line IOTKI combination now for 7 quarters and our market share has continued to grow. And in fact, as I mentioned in my prepared remarks reached the highest point thus far in this quarter.

Speaker 5

So, we're pleased about that. Our data resonates very well with customers and our team is executing at a high level. So, we're optimistic that we could potentially drive further market share growth there with Cabo and Evo.

Operator

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

Speaker 6

Great. Thank you very

Speaker 3

much. Appreciate the opportunity. There have been a lot of detailed questions about the pipeline. If I could just throw in 2 bigger picture questions. Broadly speaking, the pharmaceutical industry is going to be faced with the Inflation Reduction Act, IRA related adaptations to commercial models and Medicare.

Speaker 3

Everyone is trying to understand the impact on 2025 from Medicare Part D redesign. And obviously, I believe you guys have small company exemption. Can you just give us a sense for how you see Exelixis' exposure and impact including in 2025? And then secondly, Michael, the Board has included several new faces over the last 18 months, which is healthy and good to see. Just curious to know in what way those new voices may have been shaping some of the strategies going forward.

Speaker 3

It certainly seems as if execution has been very consistent, but if you can provide us with any hints about this broadened board and directionally ways that that is influencing your thinking strategically? Thank you.

Speaker 2

Chris, thanks for questions. As you mentioned, we have been successful in securing in terms of the IRA, the small biotech exemption in terms of price negotiations. So we've got that covered. And we're also, as you mentioned, been able to secure the small manufacturer phase in on the Medicare Part D. So 25 should be relatively minor relative to the way that phase in works for companies that qualify for the small manufacturer phase in.

Speaker 2

So it's going to be a relatively small, almost innocuous impact on our gross net. But we'll get into that next year. I don't want to give guidance now, but we're certainly in that ballpark where we've got that coverage. And kudos to our government affairs team and our legal team to help us get over the navigate all those issues as we've gone forward. In terms of the Board, look, we are ecstatic about the Board.

Speaker 2

It's just been a great collaboration as we've always had with the Board relative to both strategic issues, operational issues, alignment issues around how we navigate. It's a pretty hard business in terms of doing the right science, being able to navigate a lot of really important issues on the commercial side, on the clinical side, making it through COVID and kind of coming out the back end as strong as possible. So very, very strong board. We've always had a strong board that continues to be the case. You're right, different faces, different voices, different perspectives are valuable to have.

Speaker 2

And I think everybody on the management team is really excited to be able to work with this board very, very closely.

Operator

Thank you. At this time, there are no further questions. And so I would now like to turn the call back over to today's host, Susan Hubbard. Ms. Hubbard?

Speaker 1

Yes. Thank you, Towanda, and thank you all for joining us today. We certainly 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, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Exelixis Q2 2024
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