Exelixis Inc (EXEL) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Exelixis earnings conference call. My name is Amanda, and I will be your coordinator for today. (Operator Instructions) At this time, I'd like to turn the call over to your host for today, Mr.Charles Butler, Vice President of Investor Relations. Please proceed, sir.

So thank you for joining us on the Exelixis second quarter 2010 earnings call. Joining me on today's call are Mike Morrissey, our new President and CEO; Frank Karbe, our CFO, who will both jointly review our corporate financial and development progress for the quarter ended June 30, 2010. They will also discuss upcoming objectives and provide an update on XL 184, our lead clinical development program. As a reminder, we are reporting our financial results on a GAAP basis only; and as usual, the complete press release with our results can be accessed through our website, at exelixis.com

Before we get started I'd like to note that during this presentation and question-and-answer session today, we will be making certain statements that are forward-looking, including without limitation, statements related to the future development of XL 184 and our plan to relate it thereto; the therapeutic and commercial potential of XL 184; data to be presented at EORTC in November 2010; expectations regarding business development activities; and our 2010 financial outlook. These statements are only predictions, and are based upon current assumptions and expectations.

Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements because of risks and uncertainties discussed in the presentation materials, the comments made during this presentation and the Q&A session, and the risk factors section of our 10-Q for the quarter ended July 2, 2010, and our other reports filed with the Securities and Exchange Commission. We expressly disclaim any duty to make any update or revisions to any forward-looking statement. With that, I'll turn the call over to Mike.

Thanks, Charles, and thanks to everyone joining us on the call today. As most of you know, I officially became CEO of Exelixis just over two weeks ago on July 15. I'm taking this position at a turbulent time, and I'm excited to lead the Company with a clear sense of focus, urgency and transparency as we advance our key compounds into late stage development and potential commercialization. The stability of our senior management team and the collaborative approach of our Board remain at the core of the Company. We've been working together as a team for many years, and we will continue to do so. Despite our recent challenges, we remain focused on advancing XL 184, which has generated encouraging early clinical data in a variety of tumor types, including some with significant commercial potential.

While we have numerous other compounds advancing in the clinic, including the PI3K inhibitors, XL 147 and XL 765 with Sanofi, our most important near-term objective is to generate additional clinical data that will enable us to concisely frame the near-term development and commercial opportunities for XL 184. While we readily acknowledge the concerns that are shared by many investors about regaining the rights to XL 184, we're optimistic that this compound can serve as a potential catalyst for building positive momentum as new data become available from the randomized discontinuation trial or RDT study in the fall. I'll state here and now that we're moving forward with a renewed sense of urgency and commitment in order to execute on our key next steps in a thoughtful and pragmatic manner.

We've made significant progress on the XL 184 development program since our most recent update in June. Our near-term plans, which we presented at ASCO, are based on sound clinical developments and commercial rationale, and consist of three main priorities. First, the RDT study continues to enroll quickly, which we believe reflects a high level of investigator enthusiasm for the study. We've expanded enrollment in the hepatoma, melanoma, non-small cell lung cancer, ovarian and prostate cancer cohorts. Key elements of the early clinical activity highlighted at ASCO, including the improvement of bone scans in patients with metastatic castration resistant prostate cancer are potentially novel and differentiating compared to other TKIs and/or standard of care, and continue to be of great interest to us and our investigators as this broad data has grown since ASCO. We're planning an updated presentation of the expanded RDT data at the upcoming EORTC meeting in November, where six abstracts have been accepted. We hope to frame our 2011 development priorities and plans for XL 184 at our R&D day on December 2.

Second, we expect to initiate a phase three pivot trial in recurrent glioblastoma with single agent XL 184 by the end of 2010 based on the encouraging IRF-confirmed response rate of 30% and the median duration of response of 5.1 months, highlighted in an oral presentation at ASCO in June. Third, we continue to actively enroll our phase three pivotal trial in medullary thyroid cancer on a global basis and diligently focus on key activities to support a potential filing of our first NDA in MTC in the second half of 2011. The early data emerging from the RDT study continue to be encouraging and provide the foundation for our future development priorities to advance XL 184 beyond MTC and GB. As part of a comprehensive analysis, the Exelixis senior management team, along with our Board, is currently engaged in a review of the various options for advancing XL 184, including the clinical data and priorities, potential partnering scenarios, regulatory strategies, competitive landscape, and financial considerations to maximize the therapeutic and commercial potential of XL 184.

So I'll finish my introductory comments here by emphasizing that we're at a critical point in time and are moving forward in a focused, pragmatic and thoughtful manner as we remain committed to our mission of developing new drugs for patients with cancer and building shareholder value. So I'll stop here and turn the call over to Frank, who will review our financial results for the second quarter and provide updated guidance for the remainder of 2010. Frank?

Thanks, Mike. Starting on this call, we will change the format of the financial section of our prepared remarks. The objective of the changes is to streamline this part of our call, make it easier to follow and more focused on the highlights of our financial performance in the quarter. I will refer you to our press release and quarterly SEC filing for additional detail, and of course we can address questions during the Q&A portion of this call as well.

From a financial perspective, we had a very positive second quarter as a result of implementing the financial strategy we announced last year. The impact of our partnering, cost containment and financing activities is now becoming clearly visible in the improvements of our financial performance. Revenues are up almost 75% over Q2 last year, mainly due to our new collaboration with Sanofi-Aventis around some of our PI3K assets, and to a lesser degree, due to increased reimbursements from our collaborations with BMS. R&D expenses are down slightly despite significant progress of our late stage clinical development activities for XL 184 mainly due to cost containment efforts which includes most notably our reduction in force in March of this year.

And as a result, our net loss decreased by 50% from the same quarter last year, despite approximately $9 million in further restructuring charges this quarter which were primary related to successfully subleasing our largest building to Onyx Pharmaceuticals. And lastly, we had over $200 million in cash inflows during the second quarter, which includes approximately $160 million from our financing transactions with Deerfield and Silicon Valley Bank, as well as almost $40 million from our collaborations. This brings our cash balance to close to $310 million at the end of Q2. So overall, we're pleased with the progress we're making financially.

I would now like to explain a couple of specific items relating to our Q2 and second half 2010 results in more detail. Although the collaboration with BMS on XL 184 has ended, we still expect to continue to book license revenues related to the $240 million in upfront and license fees through August 2013, as the XL 281 portion of the agreement is still in effect. The $17 million payment that we received from BMS in connection with the termination covers BMS's portion of the development expenses for XL 184 through Q3 of this year, and it will be recorded as revenue in the third quarter. You will note that our G&A expenses were up slightly year-over-year. This is mainly due to increased patent filing costs and a change in the allocation of overhead cost as a result of our restructuring in March of this year. I would now like to provide you with an update on our financial guidance for year-end 2010.

We are decreasing our revenue guidance to $190 million to $210 million, mainly driven by better insight into anticipated revenue recognition in connection with potential new BD activity which is likely to shift more revenue into future periods than originally anticipated. Our operating expense guidance remains unchanged at $280 million to $310 million, and we do not anticipate any further material quarterly charges related to our March 2010 restructuring. And as for year-end cash, we're increasing our cash guidance by about 25%, as we now expect to end the year with approximately $250 million in cash. With that, I'll turn the call back to Mike.

Okay, thanks, Frank. So we'll close here by thanking all of our employees for their resilience during the last few months. Their continued hard work and dedication are reflected in our organization and our progress on a daily basis. We look forward to updating you on our progress on our next call, and at this point we'll be happy to take any questions. Operator?

(Operator Instructions). Your first question comes from the lean of Joel Sendek of Lazard Capital Markets. Please proceed, sir.

Hi, thanks a lot. So let's see, I'm going to have to try to ask all my questions all wrapped up into one, and it has to do with the partnering as well as the financial guidance, because I'm a little bit -- I guess I'm a little bit confused. Is the -- do you have any update on the time line for partnering 184, and is that impacting the newer revenue guidance at all, which seems to have to do with future business development activities? Or are they two separate things? Thanks.

Yes, Joel, this is Mike. Those are two separate issues. The analysis of the 184 plan that's underway now by the senior management team and the Board will analyze all the components of the 184 world, including the data, commercial potential, obvious potential partnering scenarios, finances, regulatory strategies -- all that holistically is being reviewed in one analysis that's ongoing right now. The updated guidance that Frank can speak to does not include that at the present time. Do you want to --

Okay, that's great. I totally understand now then in that regard. But actually, before Frank, you go forward, I just wanted to ask a follow-up question on what you just said, Mike, with regard to this process on 184. I mean, presumably there's data that you don't know yet, or at least that we don't know yet, that will be at EORTC. To what extent are you waiting to get more data from the randomized discontinuation trial before you come to a conclusion on that 184 partnering plan analysis?

Yes, we're getting regular, daily if not more frequent, updates on the trial. So we have a lot of additional data based upon what we talked about with the early data set that was presented in June at ASCO. So we expect to have a lot more data certainly in the November timeframe in terms of both depth and breadth. We have the flexibility to look, again, broadly at different scenarios in the context of data that we have between June and now and then now going forward. So, it's a fluid process. The data that we see a regular basis is certainly informing us about where we have a novel and differentiated signal, and that certainly is going into our current analysis right now.

Okay, thanks.

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

Great, thank you very much, and, Mike, I just want to say congratulations on assuming the role. I think you're going to be a great CEO, and really look forward to your fingerprints on the Company and the compounds. Just, I guess, picking back up with 184, I know we're either just at or pretty close to submission date for EORTC, but just run us back through what we should be expecting in terms of data this fall. And how -- obviously the focus is on 184 here, but I'm wondering just kind of what kind of other assets are, in your view, kind of partnerable now? Does the fact that Bristol returned 184 -- you got 184 back -- kind of heighten the need to outlicense those or maybe decrease the focus on some of those other assets?

So in the context first of the EORTC topic, so again, we submitted six abstracts for the meeting in November. All of those six abstracts were focused on the RDT study for 184. All six have been accepted. We'll have one abstract that covers the broad trial's design and update across all nine tumor types, and then we'll have one abstract covering each of melanoma, non-small cell lung cancer, hepatoma, ovarian and prostate cancer. So we'll have an opportunity to do a very deep data release and dive into the data set that we have in the fall time frame. And again, as I mentioned on the script, we've expanded those five cohorts recently. Enrollment has gone well.

So my expectation is that we will have a pretty interesting data set to be able to share with the community to update people on the progress, and again the signals that we saw at ASCO that will now be certainly more evolved over the next four or five months. The next question was around what other assets we have to partner. Again, we are engaged in (multiple speakers) -- yes, we're engaged in a variety of discussions for both compounds and capabilities in terms of new business development. Those are maturing as we would expect. Certainly we've got compounds in the clinic, compounds that are in preclinical and our core discovery preclinical capabilities that can deliver INDs in a very high quality rapid way. So now, I guess I don't want to give too much information on what those discussions are going -- how those are going right now and what's kind of on the docket, but to say that we're confident that we'll have at least one deal in the back half of 2010.

Great. Good luck, and let us know how we can help.

Okay. Thank you.

Your next question comes from the line of George Farmer of Canaccord. Please proceed, sir.

Hi, thanks for taking my question. Frank, regarding the guidance again, so we should think about booking all that $17 million that you're expecting from BMS in the third quarter. Is that correct?

Yes, that is correct.

Okay, and then this revised cash guidance, I guess maybe Mike answer that in the last question. Your previous guidance you said was -- I think you'd last time we met -- you'd said was dependent on concluding business development activity this year. That is still your plan, correct? And you also are including the debt repayment to GSK in the fourth quarter?

Yes, that is correct.

And all that, okay.

Our guidance still assumes that we repay GSK in cash. And I'll echo what Mike said earlier, we do expect to sign at least one deal before the end of the year.

Okay. And then, do you need to partner 184 before you go into your GBM registration studies?

The plans that we outlined at ASCO, the short-term plans to finish the 301, the MTC trial, initiate the GBM pivotal trial, and then expand the RDT trial. So that core set of short-term objectives is operational and is -- and remains a clear focus for us in the short-term outside of any we would do with XL 184.

Okay.

Yes, again, I want to reiterate, with the numbers that Frank gave, we're in a solid financial position in the near\-term. We have time and we have room to be able to put together a very thoughtful and pragmatic plan for how we're going to deal with 184 going forward. We don't want to rush that. We want to do this in a very detailed, thoughtful, thorough sort of way. So we've got the cash to be able to move in the short-term and we've got some time to be able to figure out the right plan going forward.

Okay, and then just thinking about the organization of senior management at Exelixis now with your new role, do you intend to bring in anyone to replace your old role, or do you think you can multi-task and do it all by yourself?

Absolutely not. We have an extremely strong R&D team in place. Gisela Schwab, our CMO, will be taking over all the responsibilities for drug development, including developments and then CMC, as well as translational medicine, will report into her. Peter Lamb, our CSO who's been with the Company from 2000, will now be responsible for all of drug discovery, including his old responsibilities in discovery as well as some additional chemistry. So my main direct reports in my old role have now stepped up, joined the senior management team, and will be responsible for R&D.

Great. All right, thanks very much for answering the questions, and congratulations, again, Mike, for your new position.

Thanks, George.

(Operator Instructions).

Okay, well, if there's no further questions, then I want to thank everybody for joining us on the call today, and we'll look forward to our next earnings update in the fall. Thank again.

This concludes today's presentation. You may now disconnect. Have a good day.