Exelixis Inc (EXEL) 2003 Q3 法說會逐字稿

At this time I would like to welcome everyone to the Exelixis third quarter earnings conference call. (OPERATOR INSTRUCTIONS) Ms. Green, you may begin your conference.

Good afternoon and thanks to everyone for joining the Exelixis management team on our third quarter 2003 financial results conference call. Present during this call are George Scangos, President and Chief Executive Officer; Geoff Duyk, Chief Scientific Officer and President of Research and Development; and Kristine Wall, Senior Director of Finance and interim Chief Financial Officer.

Following this introduction George will provide perspective on the quarter, Christine will review the company's financial performance for the quarter and provide guidance for the fourth quarter of 2003 and then George will provide additional commentary. We will then open up the call for question.

Please be advised that the following discussion contains certain statements that are forward-looking including without limitation answers to questions at the end of the formal remarks. These statements are only predictions and are based upon our current expectations.

Forward-looking statements involve risks and uncertainties about actual results and the timing of events could differ materially from those anticipated in our forward-looking statements as a result of many factors. These include our ability to enter into new collaborations, continue existing collaborations and receive milestones and royalties derived from future products developed from research efforts under collaborative agreements; the rate of growth, if any, in license and contract revenues; the timing and level of expenses associated with the growth of proprietary programs; the ability to successfully identify and develop compounds against proprietary cancer targets; the amount and timing of investments in manufacturing and clinical development of our rebeccamycin analog, which is currently a Phase II clinical study; ad the timing of the filing for an investment in our proprietary small molecule IND.

These and other risk factors are discussed under "Risk Factors" and in our Quarterly Report on Form 10-Q and other SEC reports. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard (indiscernible) or any change in events, conditions or circumstances on which any such statements are based.

Now I will turn the call over to George Scangos.

I'm happy to report to everybody that the state of the company today is strong. Third quarter performance I think reflects significant productivity and accomplishments in all aspects of our business. In the third quarter we made meaningful progress in advancing and expanding our pre-clinical and clinical pipeline, we fulfilled our obligations to our partners and cultivated new strategic opportunities for the Company. At the same time we reduced our expenses in all non-essential areas and significantly exceeded our goals relative to controlling expenses without impacting any of our programs. We believe that 2003 is shaping up to be another good year and another important year of maturation and growth for the Company.

I will talk more about more about growth later, but right now I will turn the call over to Kristine Wall to review the quarter's financial results.

I will start with an overview of our financial performance for the third quarter of 2003 and then provide guidance for the fourth quarter of this year.

As in the past, we're reporting results both on a GAAP and non-GAAP basis. Non-GAAP results include the restructuring charge (technical difficulty) to stock compensation expense and amortization of intangibles.

Exelixis delivered a strong performance in the third quarter, especially relative to expense reductions. We reduced operating expenses from the second quarter of 2003 levels, including non-cash and restructuring charges, by 1 percent or about 400,000. Our guidance for the quarter had anticipated an increase of 5 percent or less. We have maintained a high degree of vigilance relative to cost containment and our efforts in the third quarter clearly had a positive impact.

Our revenue as compared to the second quarter of 2003 decreased slightly by about 4 percent or 570,000. The decrease was due primarily to the timing of milestone payments and to the May 2003 termination of our collaboration with Protein Design Labs, partially offset by an increase in compound shipments under our CombiChem collaboration. For the

third quarter of 2003 on a GAAP basis we reported a net loss of 25 million or 35 cents per share compared to a net loss of 22.9 million or 41 cents per share in the third quarter of 2002. For the third quarter of 2003 we recorded a non-GAAP net loss of 24.1 million or 34 cents per share. This compares to a non-GAAP net loss of approximately 22.1 million or 39 cents per share in the third quarter of 2002.

At September 30, 2003 cash, cash equivalents, short-term investments and restricted cash totaled approximately 218.6 million compared to 222 million at December 31, 2002. The cash balance as of September 30th included 74.6 million of net proceeds from the Company's follow on public offering, including the underwriters' partial exercise that of the over-allotment option completed in July 2003.

For the quarter ended September 30, 2003 total revenues were approximately 12.4 million compared to 10.4 million for the same period of 2002. The increase in the third quarter of 2003 compared to the third quarter of 2002 was driven primarily by revenue from our October 2002 corporate collaborations with GlaxoSmithKline, partially offset by the May 2003 conclusion of our collaboration with Protein Design Labs.

Research and development expenses for the third quarter of 2003 were 32.3 million, including stock compensation expense of 100,000, compared to 28.8 million, including stock compensation expense of 400,000 for the corresponding period of 2002. The increase in the quarter from the 2002 levels was driven primarily by an increase in personnel and activities related to advancing our clinical and pre-clinical development programs. These activities included connecting the Phase I trial of XL 784, advancing a new series of development candidates led by XL 647 and XL 999 through pre-clinical testing and advancing other pre-clinical programs in anticipation of filing additional IND applications, manufacturing of those compounds to support pre-clinical studies and expanding our development capabilities to support an expanding clinical pipeline. These costs were partially offset by a decrease in operating costs associated with the expansion of our proprietary compound library.

General and administrative expenses for the third quarter of 2003 totaled approximately 4.5 million, including stock compensation expense of 100,000, compared to 4.4 million, including stock compensation of 300,000 for the equivalent period of 2002.

In the third quarter Exelixis implemented a worldwide restructuring of its research and development organization designed to reallocate resources and enhance the efficiency of its operation. The restructuring includes a net reduction in force of approximate 5 percent, which is comprised of a reduction in the Company's personnel in South San Francisco and at the Company's subsidiary in Tubingen, Germany, offset in part by a planned expansion of our discovery and development groups to increase the number of lead optimization teams and expand pre-clinical and clinical development activities. We anticipate that the reduction in force will conclude in the first quarter of 2004 and that the expansion will be accomplished by year-end 2004.

As a result, during the third quarter the Company recorded a restructuring charge of 606,000, comprised primarily of involuntary termination benefits. In addition, the Company plans to record additional expense associated with this restructuring through the first quarter of 2004 of approximately 1.5 million.

With respect to financial expectations for the fourth quarter of 2003 compared to the third quarter, we expect our revenues to increase (indiscernible) 5 to 10 percent, largely due to an increase in compound deliveries under our CombiChem collaborations and fulfillment of partner obligations resulting from milestone payments. We expect our operating expenses, excluding non-cash and restructuring charges, to increase by 5 percent or less as we continue to actively manage expenses while focusing our efforts on advancing pre-clinical and clinical programs.

With respect to guidance for the full year of 2003, we anticipate that our expenses will increase by 13 to 15 percent, which is a significantly lower rate than our original guidance of 18 to 25 percent due to cost control measures that we have implemented throughout the Company. Our revenue guidance of a 15 to 20 percent increase remains reasonable.

We are revising our cash burn guidance upward by a modest amount due to the unpredictable timing of finding potential new collaborations before year end. We anticipate that our cash burn in 2003 would be between 88 and 93 million, pending the completion of certain anticipated collaborations in the fourth quarter.

Our cash and investment (technical difficulty) is expected to exceed 205 million, not including proceeds from additional (indiscernible) with GlaxoSmithKline.

Now I would like to turn the call back over to George.

Let me first update everyone on the progress of our pipeline, and then I will provide some comments on the Company's performance and our prospects for the future.

First, XL 119; we made a lot of progress in planning for the Phase III trials of XL 119 in patients with bile duct tumors in September. Many of you know we're pleased to reach an agreement with the FDA on the design in the Phase III trial for 119 by the special protocol assessment process. We now have a formal written agreement with the agency concerning the design of the clinical trial, clinical end points, studies conduct, data analysis and other clinical trial issues. Of course the final approval of the compound still requires that we demonstrate specifically significant efficacy and safety. We anticipate the trial could be initiated in the first half of 2004 and our development group is working hard on all those preparations.

At the same time we have submitted an application to the FDA for orphan drug status. (indiscernible) id the sponsor of the Phase III program and if the IND becomes active we will apply for fast-track status.

At the same time we continue to work with the National Cancer Institute to plan additional Phase II exploratory studies in various genotypes (ph), and we continue to enjoy a high level of support from the NCI for these development activities.

We're all some actively engaged in several business development discussions relative to XL 119 that could expand our development of commercial strategies, especially in Europe or Asia. There's considerable interest in this compound from a variety of sources and our business development group is actively pursuing those partnering leads.

XL 784 -- Phase I safety trial of 784 is continuing. We've completed the clinical dosing phase and to date the compound appears to look safe. We're in the process of assessing the pharmacokinetics and pharmacodynamics of the compound. We're also continuing to explore its therapeutic utility outside of cancer, specifically in cardiac and renal disease. We anticipate being in a position to determine the next development steps during the first quarter of 2004, by which time we expect to have both the Phase I trial and pre-clinical studies concluded and fully evaluated so that we will be better able to assess the compound value within our pipeline portfolio and determine what additional resources we should devote to its development.

XL 647 and XL 999, our two pre-clinical anticancer compounds, are continuing to (indiscernible) towards IND status. We are excited about these two compound, and each has demonstrated extremely potent anti-tumor activity in a broad range of general models. We're targeting an IND submission for 647 in the first quarter of 2004 and an IND submission for 999 in the second quarter, assuming we don't encounter any obstacles in the GLP toxicology study.

At the same time we have very interesting additional pre-clinical programs that are advancing rapidly. We anticipate that one additional compound will reach development status before the end of the year and an additional compound will reach development status in the first quarter of 2004.

Our gene-to-drug engine is currently operating in high gear. If all goes according to plan, we could initiate two new clinical programs in the first half of 2004 and be moving toward additional IND filings in early 2005. We remain on our trajectory on advancing from a high throughput screen with high-quality programs to IND in two years or less, which we believe is considerably faster than the industry average. All of this work represents significant focus and productivity throughout our R&D organization, and we're well on our way to meeting our goal of filing multiple INDs per year and generate an interesting and potentially extremely promising cancer pipeline. We really are excited about the status of those compounds right now.

In just a few months, on the business development side, we have put together a terrific commercial operations team under the leadership of Steve James. And that team is already moving aggressively to strengthen and diversify business development and corporate development strategy. Today we have active negotiations underway with both pharmaceutical and agricultural companies for a variety of interesting collaborations. And we're in active discussions relative to partnering 119. We're exploring opportunities to leverage assets in therapy to areas (ph) outside of our current partnership that could represent very interesting commercial opportunities for the Company.

Obviously these discussions, especially the more recent ones, take time to mature. Nevertheless, we're optimistic that we will achieve our business development goals for this year and we're working hard to get those done. Our goal is to manage our partnering activities such that we can continue to perform in a very high level in and our current partnerships, continue to pursue development of our own proprietary programs and derive appropriate value outside of our current commitment. We think all of this is feasible and we should provide a solid platform for partnering activity for the remainder of this year and extending into 2004.

In the meantime, I think we continue to enjoy a high level of productivity and collaboration within our current partnerships, and we believe that we're on track relative to deliver those milestones for each of those partnerships.

Keeping our partners happy, establishing new collaborations with good financial terms, replenishing our cash, controlling expenses all are important contributors to our ability to meet our financial goal. In the third quarter and throughout the year we've done well in these areas. By this time next year we anticipate initiating two new clinical programs and having additional compounds advancing towards IND status. As we successfully advance compounds into the clinic, our costs will increase. However we have been able to balance our expenses and obligations through collaborations and through responsible fiscal management.

Let me comment a little bit on the restructuring that we did earlier this year. We implemented the restructuring at the end of the third quarter because we wanted to bring the organization into balance and to maximize our efficiency so that we can meet or exceed our goals while we maintain tight control over expenses. The restructuring reflects the ongoing maturation of the Company and strengthens our ability to focus our investment in programs that directly advance our business goals. In rebalancing the organization we retained our substantial biological capabilities, which are the core of the Company, and enhanced our ability to aggressively grow our pipeline. I believe that as an organization we (inaudible). Our employees are fully committed to meeting the goals and delivering on our promises.

Let me comment a bit on our CFO search. Our recruitment is in its final stages, and we anticipate we will be in a position to have a new CFO on board in the very near future. We have talked with a number of really outstanding people and have narrowed down the search to two candidates. Each of the final candidates has a set of complementary or let's say kind of strengths and skills that are complementary to our current executive management group and would bring intelligent and fresh perspective to the operational and strategic aspects of the Company. Equally important, each of the candidates I think would be a good, strong collaborative member of our team and a great external representative of the Company and a strong contributor to helping Exelixis advance to its next phase of evolution as a Company. I am very pleased with the outcome of the search and anticipate bringing an excellent new member of our senior management team on board in the near future.

Finally, I just want to say a few words about Geoff Duyk's decision to leave his position of the Exelixis' Chief Scientific Officer and pursue other professional opportunities. First, I want to take this opportunity to publicly thank Geoff for his remarkable contributions to building Exelixis. Our over six years Geoff and I worked closely together to move Exelixis forward, and Geoff deserves much of the credit for getting the Company to where it is today. Over those six plus years Geoff and I worked remarkably well together. Geoff is a valued colleague and friend.

Geoff devoted several years of his life to helping to build Exelixis and at this point in his career he would like to pursue other opportunities. We decided to make the announcement of his departure public at this time so that Geoff is free to pursue other opportunities publicly and the Company can move on with its business with clarity. We will miss Geoff, I will miss Geoff personally, but I have to say that it is to his credit that the organization that he helped build can now carry on largely unaffected by his departure. I really want to wish Geoff all the best in whatever he decides to do next, and I don't know exactly what that will be, but I'm sure that whatever it is Geoff will do it extremely successfully.

At the same time, Greg Plowman, Mike Morrissey, Jeff Latts -- our respective heads of research, discovery and development -- are all very senior, experienced people and they have expressed their absolute commitment to working together and with the rest of the management team to continue to build Exelixis into a meaningful cancer Company. We're working together, and with the assistance of Frank McCormick, who I am delighted to welcome as a senior adviser to the R&D organization, we intend to continue to build a great company that can truly make a difference in the lives of people with serious diseases.

I'm sure that many of you know Frank McCormick, who is the Director of the University of California San Francisco Comprehensive Cancer Center and a David A. Wood Professor of tumor biology and cancer research at UCSF. Frank was the founder of Onyx and was instrumental in the development of the 9006. In an earlier life Frank was VP of Research at Chiron. I've known Frank for many years, dating from the initiation of the Bayer-Onyx collaboration when Frank was at Onyx and I was a Bayer. The rest of the management team and I look forward to look working closely with Frank as we continue to move our exciting pipeline of the compound forward.

So let me now turn the call over to Geoff who will make a few remarks as well.

Thanks George. I just wanted to take this chance to thank both you and the Board for the remarkable opportunity you offered me to help work with you all to build this Company, and I am as bullish as I was on day one as I am today. I also appreciate personally your guidance and counsel during the period of time I have been here, as well as many members of the Board. I also would like to thank my colleges within Exelixis, without whom I think the success we have had would not have been possible. I also think we owe a tremendous debt of gratitude to our partners who have been true partners in the relationship, and also take chance to thank the several hundred people it seems at this point that have actually sent me e-mails or voice mails congratulating me or questioning what I am doing next. I do appreciate those and I may be out of sight for awhile but I think everyone should simply stay tuned.

Thanks again, George.

Thanks a lot, Geoff. Let me now open up the meeting for questions.

(OPERATOR INSTRUCTIONS) Edward Tenthoff, Piper Jaffray.

Congratulations everyone on all the progress. And Geoff, the very best to you as well. A quick question, George, if you don't mind. You had discussed with respect to rebeccamycin, looking at further commercialization opportunities I think is how you put it or development opportunities, particularly in Europe and Asia. Could you expand on that a little bit more in terms of timing, in terms of what you're really looking for from partners? And then also if you could just clarify, if I understand it you had to file a new IND because the previous IND was held by the NCI. Is that correct? And if so, is that what is sort of holding up the Phase III trial here in hepatobiliary?

That is a lot of questions rolled into one, so let me take them one at a time.

First of all, partnering -- we are especially interested in a partner that would provide both clinical capabilities and commercialization strength in geographic areas outside of North America, so Europe or Asia. So we're in discussions with companies that can help with both of those. We're not interested in cash per se, because obviously to cash in from somebody else you have to give them some product rights. So we want to make sure that the Company is better off in the long run; that the partner can help us develop markets that would be difficult for us to do on our own, as well as pick up some of the expenses of the compound going forward. That is primarily what we're looking for in a partner.

As you know, we had discussed the option of partnering with the NCI to do this trial. We have decided not to do that and to take this forward on our own. So we're basically looking for geographic strength in areas where we don't have it.

In terms of the IND, it's actually a formality. The IND is held by the NCI, as you suggested. For us to take over the Phase III trial we have to have our own IND and cross-reference all the NCI materials for their IND, so that's really pretty much of a formality. So that's not that big a deal.

And I forget what the Phase III of your question -- what is holding up the trial. Nothing is holding up the trial. We're making progress where we are in the final stages of negotiation with the CRO who will actually do a lot of the leg work once that is done, which will be in the very near future now. We'll have to start enrolling sites; we will have to get the IRB approval. And as soon as we can do all of that, we will (indiscernible).

Thank you very much.

Aaron Schwimmer, Goldman Sachs.

I just had a quick question regarding the Phase III trial. You actually answered my question already. I guess you'll be doing it internally, but what kind of R&D spending do you think there will be related to this trial? And also, I was just wondering if there are any sort of things you still have to work out with respect to the SPA?

There is nothing additional that we have to work out with respect to the SPA. The trial is designed, the design is agreed to. So that's a done deal. I didn't quite catch the first part of the question.

The expense of the trial.

The expense of the trial. We haven't given guidance on that yet. It obviously ramps up over the years, the coming year is less than it would be in subsequent years when the enrollment gets up full speed; but we haven't given any specific guidance.

David Witzke, SunTrust.

Thank you for taking my call. First question, regarding XL 119, rebeccamycin analog. With the trial design completed and agreed to by the FDA, what would a partner provide before the trial is completed, and why not choose to wait until after the trial is completed, where you can potentially capture and claim greater value?

We may do that, it depends. We're in a lot of discussions; we don't know how they're going to turn out. I think at this point it's certainly worth entertaining those discussions to see what partners can bring to the table. If partners can potentially bring the ability to get the drug more -- approved more rapidly, in other geographic areas, then we have to bring that -- take that into consideration. So I'm not trying to say we're going to sign a partnership next week, or next month. But there has been a lot of interest, and there are certain things that partners could bring that could increase the value of the compound to Exelixis. Which is why we sign a partnership.

A couple financial questions, if I can. Regarding revenue guidance, what fraction is committed funding versus new business development?

The majority of it is committed funding.

And the potential for signing additional collaborations, I guess by year-end. How active our discussions, and in what areas, and kind of -- potential size of deals.

We remain optimistic about signing additional deals before the end of the year. And the reason I (indiscernible) impact revenue very much is if it comes late in the year, and most of that revenue that we would get would be recognized next year, not this year. So that's why most of the revenue increase of the fourth quarter is due to existing deals.

So we haven't publicly stated the area, or the size. I think the only thing we said about the size is we don't expect any more GSK-like size deals this year, and we're sticking to that guidance.

And BMS collaboration, can you remind us when the research funding is scheduled to terminate; is that mid-'04?

Yes.

One final, if I can. Regarding FIN 46, have you concluded now that there is no impact from the joint ventures on your financials?

We're still evaluating that. It is not effective until the end of this year. We don't have any funding commitments to our joint venture, so if there is any impact it would likely be just disclosure versus an actual financial impact.

Thank you.

Jeff Zekauskas, JP Morgan.

The question that I've got is can you talk about the pros and the cons of filing for orphan drug status on your rebeccamycin?

Yes. The pro is we get market exclusivity. And there aren't any real cons. Do you know of any cons?

Are there also tax advantages that you would get?

Sure. There are some advantages that we get as a result of having orphan drug status, but there's no reason not to do it. I guess I don't understand the question really.

I just was inquiring into your decision-making process in pursuing that avenue. But your answers are clear enough.

Jill Friedman (ph), Pacific Growth Equities.

It is Greg Wade here. Thanks for taking my question. Regarding the rebeccamycin trial, I wonder if you can just walk us through in a little more detail now that the trial design has been finalized.

Yes. I think the trial will be a two arm awful on trial. The comparator group will be 5FU plus leucovorin versus rebeccamycin. The endpoint will be survival. And we will be looking for a minimum of two months increase in survival. The trial had two interim analyses built into it, based on if the Phase II data are recapitulated and we have a much bigger increase than two month survival, so we would expect to see that in a shorter number of patients -- in a smaller number of patients, excuse me. So there are two interim analyses built into the trial so that we -- not we, but an independent third party -- can take a look at the data and we all know whether we should discontinue the trial because we've already shown efficacy, discontinue the trial because we have no chance of showing efficacy or keep the trial going. That's what you learn with each of those interim analyses. And the trial will involve several hundred patients and take on the order of three years.

Several hundred; should we use 300 then?

In all there will be more than that, although fewer than that per arm. I don't remember the exact number.

And the power (ph) calculation to observe the treatment (indiscernible); is it 80 percent power should observe that effect?

No, it's greater than that. I don't think we have divulged all of those numbers yet.

That specific patient population, could you just describe --?

Describe the target population?

If you could just describe more specifics the patient population and exclusion criteria associated with it?

Yes. I think probably you should have a call with Jeff Latts, our clinical guy. But these are patients with bile duct tumors, cholangio carcinomas; they will have to have a certain performance status -- they will have to not be moribund; they will have a life expectancy greater than -- I forget -- some number of weeks. And they will have to have normal liver function. And so there are a number of inclusion criteria. That is only a partial list. I don't remember them all off the top of my head. But certainly if you're interested we can get you those data.

Congratulations on getting things straightened out with the FDA on that.

Patric Schnegel (ph), Mehta Partners.

On 119 again, you mention you were going to start possibly NCI sponsored trials. Could you elaborate on those? And a follow-up question to a previous question with respect to patients enrollment; I guess since you decided to go with your internal, US-based Phase III trial alone without the NCI, how do you expect enrolling to go? I was sort of under the impression it would nice to be go with the NCI because they would probably have the best access, given their centers to the patients.

Quite actually to the contrary we decided to do it ourselves so that we have control over the trial and that we can control the enrollment ourselves. And our belief -- and I think the belief of most people we talk to -- is that (indiscernible) NCI is a very capable organization. There is no question about that. They are very experienced. They do have access to the centers. I think for any project like this, which is critical to the Company we would love to have control of it ourselves (inaudible).

What was the other part of that question? The other NCI sponsored trial. NCI is very interesting in this compound. They've taken a big interest in it. They have developed it up until now. They are interested, as are we, in continuing to explore the utility of the drug in other types of cancers where it has not yet been in Phase II trial, in combination trials with other drugs. So there will be a number of Phase II trials that are in collaboration with the National Cancer Institute that are done concurrently with the Phase III trial, designed to gain approval for (indiscernible).

Thank you.

Aaron Schwimmer, Goldman Sachs.

Just a follow-up on the 119 trial. I just want to clarify -- the two arms of the trial will be 5FU leucovorin versus 119 monotherapy or --?

Yes.

I see. What is the historic mean survival of the 5FU leucovorin as a patient population?

I don't know that that's been broken out. It's hard to get those data because there are no approved drugs including 5FU leucovorin for the treatment of these patients. We know that the historical numbers for overall survival are 4 months, 4.5 months, somewhere in there. And they get treated with different agents at different centers. None of these physicians we talk to are convinced that any of these therapies was doing very much for the patient. 5FU leucovorin was chosen as the competitor after discussion with an advisory panel of physicians who treat these cancers and discussion with the NCI for what would be the most appropriate. (multiple speakers) and then also discussions with the FDA as to what the most appropriate control arm would be.

Is the two month increase that you're looking to see over the historical data then?

No, we are --

Is that how you came up with your power?

No. I think if you do that you're asking for failure. When you do a controls trial going forward, the control arm of the trial usually does better than the historical data. So that historical data are 4.5 months. The patients in the Phase II trial had a mean survival time of about 9 months, so that technically is a doubling or a 4.5 months increase. We're assuming that the control patients -- or we are giving ourselves some leeway so if the control patients do somewhat better and the treated patients do a little worse we still can get an approvable drug.

So what are you assuming for the active comparator arm in terms of survival?

We haven't made all those data public yet. We will, of course, at some point. And I think we will be prepared to lay out most of the detail probably early next year. But I can tell you right now, we've assumed some increase in the level of the control group over the historical control. And we've given ourselves some leeway so that we can have some decrease in the survival relative to what we saw in the Phase II trial; not with any data that says we should be expecting that, just having a number of people around who have been involved in lots of clinical trials before. So you want to do a Phase II trial that has a reasonable chance of success, so you have to give yourself some room on both ends, which is what we tried to do here.

Thank you.

Any non-rebeccamycin questions? I guess not.

Jeff Zekauskas, JP Morgan.

This is Karen with Jeff. I'd like to ask a non-rebeccamycin question. Could you tell us a little bit more about XL 647? And is it next in line for an IND filing?

Yes. 647 and the compound right behind it, 999, are both kinase inhibitors. And they are what we called spectrum selective kinase inhibitors. They each inhibit a number of kinases. Four particular kinases in the case of 647. And those are four that we have reason to believe represent a particularly potent combination of kinases. 647 is orally active. It is extremely potent in three clinical models. Both 647 and 999 not only stop the growth of tumors in mice, but they will actually shrink those tumors. That is not seen with all compounds at this stage. And they have remarkable fast onset of activity in those models. They're orally active, both of them. And 647 and 999 are now both in GOP tox studies, which represent their last hurdle before they go on to IND status. So 647 is the next one in line, and would we anticipate filing an IND on that in first quarter.

And the timing for 999 would be like the quarter following that?

Yes, it is a couple of months behind; so 2, 3 months after 647 we will file by 999.

At this time there are no further questions.

If there are no questions, let me thank everybody for their interest, for calling in, for the questions. And just sum up by saying I think this is a remarkable time. It's hard to convey the state of the company now. Being on the inside of the company I can say I'm actually very excited about what we have coming forward, about 647, about 999, about the earlier compound. And I think being on the outside of the company all of that for those compounds that continue to move forward should become evident. I'm actually quite excited and feeling quite good about the prospects for the company. I appreciate all your interest and thank you for your attention.

This concludes today's conference call. You may now disconnect.