Exelixis Inc (EXEL) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Exelixis second quarter 2007 financial results conference call. My name is Antoine, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Charles Butler, Director of Investor Relations. Please proceed, sir.

Well, thanks, everyone for joining us for our Q2 2007 earnings call. Joining me on today's call is George Scangos, our CEO, who is calling in from a different location today. And have joining me here in South San Francisco are Frank Karbe, our Executive Vice President and CFO, and Mike Morrissey, our President of R&D. Before I turn the call over to George, let me make our forward-looking statement disclosure. Please note that the following discussion contains certain statements that are forward-looking, including without limitation statements relating to our estimated future financial revenues and expenses; our estimated future balances of cash and cash equivalents; marketable securities; investments held by Symphony Evolution and restricted cash; our business development plans; the future development and potential efficacy of XL647, 784, and 880 and other Exelixis compounds and pipeline and the submission of XL784, 880, 184, and further compounds to GlaxoSmithKline or the timing thereof; and the timing of the initiation of clinical trials and availability of data for 184 and 820. Words such as believe, anticipate, expect, intend, promising, aim, plan, will, can, would, could, should, continue, potentially, and similar expressions are intended to identify forward-looking statements. These statements are only predictions and are based on our current expectations.

Forward-looking statements involve risk and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risk and uncertainties, which include without limitations risks related to our dependence on and relationship with GlaxoSmithKline and Symphony Evolution; risks related to our need for additional financing, including our ability to enter new collaborations, continue existing collaborations, and receive milestones and royalties derived from future products developed from research developments under collaborative agreements; the potential failure of XL647, 784, 880, 184, or any of our other compounds to demonstrate safety and efficacy in clinical testing; our ability to complete and initiate clinical trials at the referenced time; our ability to conduct clinical trials sufficient to achieve positive completion; and our ability to successfully invent and develop additional compounds. These and other risk factors are disclosed under Risk Factors in our quarterly report for the quarter ended June 30, 2007 and our other reports filed with the Securities and Exchange Commission. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made in this discussion to reflect any change and our expectations with regard there to or any changes in events, conditions, or circumstances on which any such statements are based. With that introduction, I will turn the call over to George for his opening remarks.

Okay. Thanks, Charles. Thanks for going through all that. And thanks to all of you for joining us on the second quarter conference call. I want to take a few minutes to talk about 647. And as you all know, in the second quarter we announced we'd reach proof of concept with 647 and had submitted the data package to GSK. And about two weeks ago we announced that GSK had declined to license 647 and that Exelixis retained rights to the compound. I'll repeat now what I said then. I believe this is the best possible outcome for Exelixis and I view this as a key transformational step for us as we mature as a company.

Why do I say that? And why is it more than just lip service? Well, first, 647 is an exciting compound and has potential in multiple types of cancer. Just to remind everyone, the data from the proof of concept trial will be submitted at -- will be presented at the International Association for the Study of Lung Cancer meeting in Seoul the beginning of September. So Exelixis now has a later stage compound with promising signs of efficacy in non-small cell lung cancer. We'll owe GSK a residual royalty of 3%, but we're free to develop the compounds alone or to find a partner. We believe that 647 has the potential to be a best in class compound and also has the potential to be combined with other targeted therapies and with chemotherapy. We intend to move 647 rapidly into pivotal trials and our initial focus will be on non-small cell lung cancer. And Mike will discuss the clinical development strategy for 647 in a few minutes.

Second, 647 is the just the first of several of our compounds that we expect to reach proof of concept and move into later stage trials in the near future. Remember that the GSK is structured so that we will remain rights to at least seven of the ten compounds that are moving forward as part of the collaboration. Since we expect to submit two additional compounds to them this year and additional compounds if necessary next year, it's likely that we'll retain rights to some of them, as well. The next compounds to be submitted are likely to be 880, 784 this year, and XL184 in the first half of next year. Remember what we've said all along is the important issue for us is not whether or not GSK selects a compound. The important issue is the quality of the data of that compound.

Third, I think some of Exelixis's proprietary compounds outside of the GSK collaboration are making rapid clinical process and some of those could also interlay the (inaudible). That's why when I say that retaining rights of 647 is a transformational event for the company, I mean it's the beginning of the next era for the company, when several of our compounds move into later state development at the same time we continue to bring new compounds forward. That's an important next step for Exelixis as we move towards our goal of becoming a fully integrated company that brings high quality new compounds to cancer patients.

Now I know that some of you have concerns about our ability to finance all of this activity and to carry out the work without dropping the ball. Those two issues are related and let me address them head on. First, our highest priority will be on our later stage compounds. These are the compounds that will drive the value for Exelixis and which have the potential to reach the market at the earliest state. We now have the expertise inside the company to carry out these later stage trials. And as a reminder, among others in the past quarter we've hired two VP level members to the clinical development team from GSK and Novartis with significant late stage oncology clinical development expertise. In terms of financing the later stage trials, there are many options available to us. We're entertaining partnering discussions around 647, and we're especially interested in regional partnerships that will lead us right to North America and potentially Europe, as well. We already have received inquiries from several companies that are interested in 647, and we're contacting others that we believe will be interested. Obviously a partnership around this compound could bring in substantial cash. We can also obtain financing for development of 647 as well as some of our earlier compounds from a variety of other sources. As I've said many times, if the biggest problem we have is how to finance the late stage development of multiple compounds with good data, we'll be in great shape.

Of course those financial issues for 647 are not immediate, and since over $40 million left in Symphony and a portion of which will be used for the near term development of 647. As our other compounds move through clinical trials and reach proof of concept and as the ownership of those compounds is clarified, we'll make data driven prioritization decisions. We'll put our own resources behind compounds with excellent data that have substantial market potential. By continuing to partner some of our other compounds, we'll both offload some of the work and bring in additional cash to fund the development of those compounds that we've retained. This is the same philosophy that we viewed successfully until now and we expect to continue that strategy.

So the decisions around 647 obviously were the most visible recent developments for Exelixis, but I also want to point out that we did a few other things in the second quarter. First, we finished enrollment in the Phase II proof of concept trial for 784 at the end of June. We currently are following the last few patients during their 3-month treatment period. The trial will be complete at the end of September and we expect to have the data from the trial in mid October. These data will be the basis for submission to GSK for their decision and an abstract describing the trial has been submitted to the meeting of the American Society for Nephrology in San Francisco from October 31st to November 5th. We advanced two new compounds into clinical development, XL765, which inhibits PI3k and mTOR, and XL019, which inhibits JAK2. We presented data at ASCO (inaudible) XL880, and we continue to make good progress on the proof of concept Phase II trial for that compound, as well.

We made excellent progress on a number of our other compounds and are seeing some interesting activity in some of the trials. Data will be presented from many of the compounds at the URTC meeting in October. And of course, in addition to the POC trial with 647, we initiated a Phase II trial for 647 in non-small cell lung cancer for patients who relapsed following a response to an EGF inhibitor who have the T790M form of the EGF receptor. So we're now accompanied with an exciting later stage compound and a rapidly advancing pipeline with interesting data for compounds that could provide benefit to patients across the broad array of tumor types. So we're all excited about the next several months as we prepare to release Phase II data on several compounds, explore new business development opportunities, and continue to develop interesting compounds that we believe have significant potential. This is, I think in my view, one of the most exciting times for the company since I've been here. So let me now turn the call over to Frank, who will discuss the quarterly financials and our business development plans, and then Mike will provide an R&D update before I come back to make a few closing remarks. Frank?

Thank you, George. I will start with the financial results for the second quarter, and will then spend some time at the end to talk about our financial outlook for the remainder of the year, as well as to give you an update on our business development activities to further advance our pipeline. Let me now first turn to the financials. Another reminder where we're putting our financial results on a GAAP basis only. As usual the complete press release with our results can be accessed through our website at Exelixis.com.

Let me begin with revenues. Revenues for the second quarter were $29.3 million compared to $27.2 million for the comparable period in '06. The increase in revenues from '06 to '07 was primarily due to revenue associated with the new collaboration agreements with Bristol-Myers Squibb for oncology and Genentech for the core development of XL518. The increase was partially offset by revenue in Q2 last year, related to a milestone achieved at the time under a collaboration agreement with Helsinn. Research and development expenses for Q2 were $56.3 million compared to $47.4 million for the comparable period in '06. The increase from '06 to '07 reflected primarily the increased development expenses associated with the continued expansion of our clinical trial activity and the advancement of our compound through preclinical development. General and administrative expenses for Q2 were $11.2 million compared to $10 million for the comparable period in '06. The increase from '06 to '07 was primarily due to stock based compensation expense and personnel expenses to support our expanding operations. Net loss for Q2 was $28.6 million or $0.29 per share, compared to $24 million and also $0.29 per share for the comparable period in '06. Cash and cash equivalents, short-term and long-term marketable securities, investments held by Symphony Evolution, and restricted cash and investments totaled $253 million at June 30th '07 compared to $263.2 million at December 31st, '06.

I'd now like to comment briefly on our financial outlook for the remainder of the year. Our previous financial guidance for the full-year 2007 remains unchanged. We therefore continue to expect revenues in the range of $120 million to $135 million. We continue to expect operating expenses in the range of $260 million to $290 million, including stock-based compensation and other non-cash charges of approximately $20 million. And as it relates to our cash, cash equivalents, short-term, and long-term marketable securities, investments held by Symphony Evolution, and restricted cash balance at the end of '07, we still expect those to exceed $200 million. I would further characterize the projected year-end cash balance as a conservative number. As in previous years, we are very active on the business development front as we are moving into the second half of the year, and I expect us to bring some of these discussions to a successful close before the end of the year.

Let me give you an update on our business development activities, because they play an important role in addressing the questions George mentioned earlier about our financial capabilities and our bandwidth to carry out the work required to keep our pipeline moving forward expeditiously. As it relates to XL647, we intend to further develop and commercialize the compound ourselves at least in North America. We recognize, of course, that we do not currently have the abilities to aggressively develop and commercialize the compound on a global scale. And we have therefore initiated discussions with the aim to obtain a regional partnership for XL647 for geographies outside North America. And we envisioned the economics embedded in such a deal to defray a significant portion of the development expenses and/or contribute substantially to the buyback of the compound from Symphony. As it relates to the earlier part of our pipeline, I would like to remind everyone that we have filed seven INDs over the last 12 months. Four were for compounds entirely outside of our GSK collaboration -- one of which, XL518, has since been partnered with Genentech. All of these compounds are in active Phase I clinical trials, and for three of them we own 100% of the commercial rights. We are currently evaluating the development paths for these assets and we are entertaining multiple discussions with both pharma companies as well as financial sponsors with the aim of securing funding for the further development of some of these programs before year-end.

Let me talk a little bit about Symphony at the end. As you know, XL647 is part of our clinical development financing arrangement with Symphony. Because we are now not obligated to transfer the program to GSK, there's no need to exercise our buyback option with Symphony at this point. Our arrangement with Symphony was signed in June of 2005 and has a 4-year term. More importantly, at the end of the second quarter, we still had $44.7 million remaining in Symphony Evolution, which we will use to advance the clinical programs embedded in this financing arrangement. I know that many of you are thinking about how and when we might exercise our buyback option with Symphony. And as you think about that, keep in mind that we can repay Symphony in either cash or shares of our common stock, or a combination thereof at our discretion. In addition to XL647, also remember that our deal with Symphony includes XL784 and XL999, both of which are part of our GSK collaboration, but have not yet been presented to GSK for development election. And finally, take into consideration our objective to partner XL647 outside North America and that the economics embedded in such a deal could be applied to us repaying Symphony. So the bottom line of all of this is that we have a great degree of flexibility in seeking funding for our operations, and in fact, many different alternatives to secure the bandwidth to keep everything moving forward. And with that, I'll turn the call over to Mike, who will provide an update on our clinical programs.

Okay. Thank you, Frank. As George indicated, the second quarter was marked by tremendous progress across a variety of clinical programs ranging from filing INDs and initiating numerous Phase I trials to advancing compounds to POC and beyond with XL647. It's been a great team effort by the R&D organization, and I'd like to thank everyone for their combined talents and efforts to move the entire pipeline a big step forward. I'll start the R&D update by making a -- by taking a few minutes to summarize the progress we've made advancing our lead compounds and then wrap up with a brief overview on our earlier stage programs. I'll first start out with XL647. We are very excited to have XL647 in our hands and have refocused our internal R&D resources to rapidly advance this compound into a full development program, including pivotal trials and non-small cell lung cancer in broad Phase II program and a variety of other oncology indications as either a single agent or in combination with a number of targeted therapeutics. There are exciting opportunities to advance XL647 in the pivotal trials in first, second, and third line non-small cell lung cancer populations. We'll share the details of these studies once we've reached an agreement with the FDA and ex-US regulatory authorities.

Let me be absolutely clear at this time about the goals of our pivotal trial program. We will attempt to both prove the superiority of XL647 to currently approved agents in randomized pivotal trials as well as to assess the opportunity for XL647 in non-small cell lung cancer patients for whom current therapies are ineffective. As I said two weeks ago as we announced the GSK decision, we have been preparing for this outcome and the R&D organization is extremely focused on completing the background work that will allow us to initiate pivotal trials in non-small cell lung cancer. These activities broadly include four main components: manufacturing drug product, initiation of extended toxicology studies for registration, finalizing the study design for pivotal trials and the Phase II program. and selecting the dose and schedule to be employed for the pivotal trials. We have initiated a process to select a highly regarded CMO with the capability to prepare large scale batches of XL647 to support both pivotal trials and potential commercial introduction. In addition to preparing to move forward with the chronic toxicology studies to support registration and preparing for regulatory discussions with the FDA and ex-US regulators, we are working closely with our key investigators and advisory board members to finalize the various Phase II and III trial designs.

I want to reiterate the ongoing Phase II trial and first line non-small cell lung cancer serve as our proof of concept or POC trial for the GSK collaboration. As mentioned on the call two weeks ago, the goal of the study was simple: to rapidly demonstrate POC in the context of the GSK collaboration, which you will remember we achieved in April and submitted to GSK in May. This study was designed to demonstrate objective anti-tumor activity in non-small cell lung cancer. This was achieved and the result wills be presented in the upcoming International Association for the Study of Lung Cancer study in Seoul, South Korea in early September. Speed was the key feature here. The sooner we achieved POC, the sooner ownership of the compound could be clarified and the more elaborate development plan could be implemented. This study uses a 350 milligram dose on an intermittent schedule and a multi-center open label trial with [assignment to safe design]. In a separate Phase I trial, we originally identified the MTD for continuous daily dosing as 300 milligrams and are using this dose and schedule in the recently initiated Phase II trial, and patients who initially benefited from Tarceva but subsequently progressed. Selection of the dose and schedule for the planned pivotal trials is an important consideration and will be finalized in the near future based on additional data from this ongoing Phase II trial and the ongoing daily dosing Phase I trial, in which we continue to accumulate valuable safety, pharmacokinetic, and pharmacodynamic information.

I want to emphasize that initiation of the pivotal trials for XL647 in 2008 is the number one priority for R&D. As many of you have heard in the past, we have a very flexible and agile organization that can mobilize our considerable resource and experience base to achieve our most important priorities with great speed and the highest level of quality. Execution is the key to rapidly advancing XL647 into and through pivotal trials, and this is our main focus moving forward. With that being said, XL647 is not the only Phase II compound that is rapidly progressing. XL784 is a potent dual ADAM-10 MMP2 inhibitor that we are evaluating in a blinded Phase II trial in patients with diabetic nephropathy. This trial has progressed rapidly over the last several months and is now at the stage that we can clearly define the process by which we obtain POC, [send] the diligence package to GSK, and ultimately plan to present the data at national meeting. We completed enrollment in June and we are currently evaluating the last patients for the required 3 month study period. We have developed stringent time lines to collect and unblind the data and submit the POC package to GSK in October. We've also submitted an abstract to the American Society of Nephrology annual meeting, which will be held from October 31st through November 5th in San Francisco, where we hope to present the Phase II data. We are eagerly waiting for the final patients to complete their study period this fall and to compile this data. This would represent a significant opportunity for Exelixis should XL784 demonstrate meaningful activity in patients with diabetic nephropathy.

I'll move next to XL880. As most of you know, we presented comprehensive Phase I data on XL880 at ASCO in June. XL880 is a novel small molecule that simultaneously inhibits MET and VEGFR2 -- targets implicated in tumor growth, tumor cell migration, and angiogenesis. Investigators reported at ASCO that 39 of 45 of valuable patients with measurable disease in the combined Phase I studies had a partial response, minor response, or stable disease as their best response. I think this is an impressive data set by any objective evaluation. Pathological analysis of tumor samples from four patients in the Phase I studies showed expected decreases in the phosphorylation of MET and the predicted downstream effects which were not observed in control samples of normal tissues obtained from the same patients. To date, we believe this is the only example of pharmacodynamic inhibition of MET in the clinic. XL880 was generally well-tolerated by patients in these studies and the reported side effects were treatable and reversible. We believe these results clearly demonstrate that XL880 simultaneously inhibits both MET and VEGFR2 in the clinical setting, and they provide a compelling rationale for our current Phase II development program.

We are conducting Phase II trials of XL880 on papillary renal cell carcinoma or PRC, gastric cancer, and head and neck cancer. The XL880PRC Phase II trial continues to progress. The first cohort of 17 patients with sporadic PRC is fully enrolled and the second cohort of 17 patients with activated MET mutations continues to enroll patients. Thus far, the majority of patients enrolled in the trial remain on study. We see evidence of stable disease and tumor shrinkage in many patients. If tumor shrinkage continues at the anticipated rate, based on the Phase I experience, we expect to achieve POC by the end of this summer. We are planning to present data from the Phase II PRC trial at the upcoming EORTC meeting in late October. XL184, our second MET inhibitor, continues to progress well in Phase I and we expect to initiate Phase II development program in medullary thyroid cancer, non-small cell lung cancer, and glial blastoma starting in the second half of 2007. We are excited about the data in the Phase I trial where we are seeing signs of initial anti-tumor activity in patients with medullary thyroid cancer. We plan to submit Phase I data for presentation at the upcoming EORTC meeting in late October. Finally, the Phase I trial of XL820 is also progressing as planned. This compound is designed to inhibit KIT, VEGFR2, and PDGFR, all of which play important roles in diverse tumor types. We expect to advance XL820 to Phase II trials in GIST, melanoma, and acute myelogenous leukemia starting in the second half of 2007. So by the end of this year, we expect to have 5 compounds in Phase II development across multiple trials and indications. This is truly a remarkable accomplishment for a company of our size. We believe the aggressive development of a diverse set of compounds will provide the most opportunities for success.

Finally, we made tremendous progress with the early part of our development pipeline in the second quarter as well. In this regard, we filed INDs for XL765, a dual PI3k/mTOR inhibitor -- and XL019, a potent and selective JAK2 inhibitor, in the second quarter. In addition to these two INDs, we initiated seven Phase I trials for XL228, 281, 518, 418, 765, 147, and 844 -- the latter in combination with gemcitabine. All of these trials are actively enrolling patients and we expect to report data for many of these compounds at the upcoming EORTC meeting in late October. We also plan to report preliminary data from the Phase I trial of XL228 in patients with CML and the Phase I trial of XL019 in patients with myeloproliferative disorders at ASH in December. So the Exelixis pipeline continues to grow and advance. We believe our pipeline of 14 compounds has great potential and diversity. And we are extremely excited to have our most advance compounds moving through Phase II evaluation towards POC and in later stage development in the near future. This gives us the potential to have multiple clinically active compounds and Phase II trials in the first half of next year with a robust pipeline of advanced Phase I compounds following close behind. And with that, I'll turn the call back to George.

Okay. Thanks, Mike. Look, I hope everyone has a sense of the excitement of the company -- an appreciation for the progress that we've made, the diverse opportunities ahead of us, and the tremendous potential that we have to bring forward a number of important new [medicines]. Importantly, both our partnered and wholly owned assets are maturing, generating clinical data, and the ownership of the compound from the GSK collaboration has begun to be clarified. I think this maturing set of assets gives us tremendous flexibility in the ways we pursue our financing strategy. We will retain key assets and partner others while retaining substantial equity even in those partnered compounds. We'll use the cash from the partnered compounds to defray the cost of development of a proprietary compound. Again, this is the same strategy we've utilized up until now which has worked extremely well because of the number of high quality compounds in our pipeline.

I know we've been talking for a while. I want to take a couple minutes to summarize upcoming events for everyone. Just to remind you, in September, we'll present the 647 Phase II data at the International Association for the Study of Lung Cancer meeting in Seoul, South Korea. We expect to have multiple presentations at the EORTC meeting in October in San Francisco, including Phase II data for XL880 from a trial in papillary renal cell carcinoma, additional 647 Phase II data, Phase I data for XL184, and a [planning] and preliminary Phase I data for several earlier stage compounds. In early November, we expect to present the Phase II data for XL784 at the American Society for Nephrology, which will also be in San Francisco. We expect to present 228 and 019 Phase I data at ASH. And of course we'll provide a year-end company update and outlook for 2008 at our annual R&D day on December 4th in New York. We also expect to submit proof of concept data for 880 and 784 for GSK and to initiate Phase II programs for 184 and 820 by the end of this year.

So that gives us five programs in Phase II trials, and I believe that puts us in an exciting and somewhat uncommon position in our industry. Remember, we filed our first IND for a proprietary compound only a little more than four years ago. So, our catchphrase at the bottom of our slide says "A Better Way to Better Medicine". And I think where the pipeline is today demonstrates that that is actually a reality, not just a catchphrase. We know Exelixis isn't there yet -- we're not over the hump -- but I can't imagine another company that's better positioned to get there than Exelixis is. So before I close, let me just take a moment to thank all the employees at Exelixis for their hard work and their dedication, without which all of this progress would not have been possible. So I know we've covered a lot of ground, and so I think we'll stop here and open up the call for questions. Thank you, all, for your attention.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed.

Hi, this is Karen Buchkovich sitting in for Jeff. Would you say that it is likely that you'll partner at least one [IND] ready compound this year?

Well, Karen, we're in a number of discussions. There are certainly a lot of interest in the compounds from a variety of pharma companies. And so, I feel optimistic. I think it's always difficult to predict the timing of the partnerships. And of course, we have other options available to us other than pharma partnerships, as well. So we are talking about those partnerships, we're having lots of discussions. But we'll see what happens as the year goes on.

Okay. How many MET inhibitors are in Phase I clinical trials? Including small molecules and antibodies? And do you comment on a competitive landscape?

Sure. Mike, you want to take that question?

Yes. At least from our perspective, XL880 and XL184 are leading the pack in terms of having compounds that are either in Phase II or moving rapidly into Phase II. Behind them, there is a whole range of compounds moving forward. I think that's due to the level of interest that most biotechs and pharmas have had in the target over the last three or four years. I'm aware of compounds. Small molecules from big pharmas -- I think Pfizer and Merck both have compounds in Phase I right now. [Arkell] has a compound that's Phase I moving to Phase IIb, maybe Phase II -- antibodies from Amgen, as well as I believe Genentech either for the ligand or for the receptors. And I'm sure that's not a comprehensive list. I'm sure there's more. I think from our perspective based upon our competitive intelligence, we are still in front with not one, but two compounds that are moving either into Phase II or are already in Phase II.

Okay. And lastly, just a quick question. Does XL880 inhibit VEGFR1 at an [IC50] comparable to VEGFR2 and MET?

I believe so. It's in the same general ballpark, yes.

Okay. Thank you.

Your next question comes from the line of William Sargent with Banc of America Securities. Please proceed.

Hello, thanks for taking my question. Was wondering if we could get an update also on XL999. And for the 784 data presentation for ASN, I was wondering if that's just going to be the primary end point or if we would expect also potentially to see some of the exploratory endpoint data?

Mike, sounds like a question for you.

The restart of XL999 in Phase I -- in a Phase I trial focused on patients with non-small cell lung cancer is ongoing. That's back moving forward. In regard to your question with XL784, it's hard for me to project exactly what will be contained in that presentation. Right now I would assume it will have as much primary and secondary endpoint data as we have when the data cutoff happens a week or so before the actual presentation.

Is the Glaxo decision based solely on the primary? Or is it also based on the exploratory data?

I think Glaxo's decision is based on whatever they want it to be based on. And they'll see all of the data and they'll make their decision.

Okay. Great. And one quick housekeeping question. The 3% royalty that Glaxo would be able to receive on 647 -- does that apply only to compounds that Glaxo passes on? Or would that apply to all ten compounds should they be commercialized under the agreement?

Frank, you want to take that?

Yes, I believe that only applies to compounds that GSK passes on.

Okay. Excellent. Thank you very much.

Your next question comes from the line of Ted Tenthoff with Piper Jaffray. Please proceed.

Great. Thank you very much for the thorough update. I guess my first question has to do with 647. If you do do partnerships OUS, would that require -- would that likely require a triggering or a buyback of Symphony? And how would that factor into timing considering that you wouldn't necessarily have mature data yet on 784 or 999?

If we are to partner 647, I think it would likely although not automatically trigger a buyout of Symphony. But remember, if we partner it, that would likely bring the large upfront payment as well. That would either cover or defray the cost of buying that back. I think the timing, we'll have 784 data by mid October. So I think we're going to have those data pretty quickly. And so we'll know both about 647 and 784 in the near future.

Okay. Good. And can you comment, Mike, on the applicability of MET beyond the activating mutation indications that you're initially pursuing?

Well, Ted, as we talked about in the past, MET is one of these really truly pleiotropic targets. RTK appears to be involved in literally every aspect of tumor biology. And that can be manifested by having activated mutations having the gene for MET amplified, which leads to overexpression of the protein -- overexpression of the ligand. So I think the activating mutation approach in terms of trying to target a specific population or enrich a population is just the lowest-hanging fruit we can address early to get POC. The breadth of potential applicability either as single, the single agent or in combination with other compounds is very broad. And we're very excited about the potential of both XL880 and XL184 to be able to play a key role in really defining the clinical utility of MET inhibition in that -- in this manner moving forward.

All right. Thank you. Looking forward to the data.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Eric Schmidt with Cowen and Company. Please proceed.

Thanks for taking my question. On the 784 proof of concept milestone with GSK. Is that proof of concept milestone as simple as the trial meeting its primary endpoint?

The proof of concept milestone would be -- we'll receive that if GSK selects the compounds.

I guess, I mean, George, if the trial meets its primary endpoint, does that count as the study?

It does not obligate GSK to take --

No, I'm not questioning on GSK's decision, which I realize is a separate process. I guess I'm questioning whether the achievement of proof of concept is exactly the same as the achievement of the study's primary endpoint?

Maybe I'm not understanding the question. The proof of concept program will be complete when this trial is complete. And we will submit that data package to GSK regardless of whether or not the trial has met its primary endpoint. That's the body of work we have to do. And so, again, GSK will make its decision.

Okay. That's helpful. I think what you're saying therefore is that even if the trial misses its primary endpoint, you still submit that body of data to GSK and they still make the decision regardless of what the data are.

That's correct.

Okay. Thanks. That's very helpful. And just second question on XL647 and the potential for an ex-US partnership. Can you frame how you're thinking about the right partner internally? Is it purely financial? Or are there other capabilities that you want to see brought to the table here?

No, there certainly are capabilities. I think we're quite realistic about what our capabilities are. And we do not, as we sit here today, have the capabilities for developing a compound on a worldwide basis. We're great in North America, we are developing capabilities in Europe, we have no capabilities in Asia. So in addition to financial health, we'd certainly like a partner who can bring to the table clinical development and even marketing expertise in those geographies.

Thanks a lot.

Your next question is a follow-up question from the line of Ted Tenthoff with Piper Jaffray. Please proceed.

Great, thank you very much for taking the followup question. I guess just quickly on the PI3k program, can you give us an update there? And also what does that competitive landscape look like in your view at this point? And just remind me, is that one that is or is not covered under GSK?

Sure. Mike, why don't you take that?

Yes, so this is a program that is entirely owned 100% by Exelixis. So it's not part of any collaboration currently. The two PI3k compounds, 147, which is a selective inhibitor of PI3k, and 765, which a dual inhibitor of PI3k and mTOR, are both enrolling patients in the Phase I trial. We are very excited about those compound and have designed our Phase I programs to be able to learn a lot about those compounds very early on from a not only tolerability perspective, which is why you do Phase I, but also from a PK and PD perspective. So we're really trying to maximize the information and the value we can get out of those Phase I trials, due to the importance of this pathway. I would -- from a competitive point of view, I would frame PI3k is today where MET was maybe 4 years ago. It's a pathway and a target that I think literally every pharma and biotech is currently pursuing due to its important role in driving tumor proliferation, tumor cell growth, both primary and in some cases secondary resistance to a variety of both chemotherapeutics as well as targeted therapy. It's a very, very important target that we hit very hard starting literally a couple of years ago, and we're able to advance two compounds with completely different chemotypes, different scaffolds and different target inhibition profiles forward. So from a competitive point of view, we believe we're either in the lead or close to the lead. There are very few compounds that are currently in the clinic. I believe Novartis has one -- that's the only one I'm really aware of right now for cancer. So we're up in front and that's where we should be. We're going to push this hard and take it as fast as we can.

Great. Thanks, Mike.

There are no further questions in queue. I would now like to turn the call back over to management.

Okay. Well, if there are no further questions. Let me thank you all for your attention, your interest in the company. And we'll sign off. Thanks a lot, everybody.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.