Exelixis Inc (EXEL) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the first quarter 2011 Exelixis incorporated earnings conference call. My name is Chanel and I will be your operator for today. (Operator Instructions).

I would now like to turn the conference over to your host for today, Mr. Charles Butler, Vice President of Investor Relations. Please proceed.

Thank you for joining us for the Exelixis first quarter 2011 financial results call. Joining me on the call today as usual are Mike Morrissey, our President and CEO and Frank Karbe, our CFO, who will review our first quarter financial results. They also will discuss our 2011 financial guidance, Corporate strategy and provide a general business update. As a reminder, we report our financial results on a GAAP basis and as usual the complete press release with our results can be accessed through our website at Exelixis.com.

During this call we may discuss a non-GAAP financial measure related to our 2011 financial guidance. For a reconciliation of the differences between this non-GAAP financial measure and the most directly comparable financial measure calculated and presented in accordance with GAAP please see the non-GAAP financial measures link on the investors and media section of our website at Exelixis.com.

During the call we will be making certain statements that are forward looking including without limitation statements related to key Cabozantinib-related events during 2011, the continued development plan and regulatory strategy for Cabozantinib, the clinical, therapeutic and commercial potential of Cabozantinib, future presentations and releases of data and our 2011 financial outlook. These statements are only predictions and based upon our 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 materials accompanying this call, the comment made during this call and the risk factors section of our 10-Q for the quarter ended April 1, 2011, and our reports filed with the Securities and Exchange Commission. We expressly disclaim any duty to make any updates or revisions to any forward-looking statements. And with that, I will turn the call over to Mike to begin his remarks.

Okay. Thank you, Charles. And thanks to everybody joining us on the call today.

The first quarter was very productive for Exelixis as we were able to continue the momentum from the end of 2010 with the presentation of new CFDC data for Cabozantinib, or Cabo, at the ASCO GU meeting in February and then successfully fundraising approximately $180 million in net proceeds from a public offering in March.

There are several significant Cabo related events throughout the remainder of 2011 that we expect to serve as potential catalysts for further value creation. Three key areas of near term interest include first, our participation at the annual ASCO meeting in June. Second, the planned initiation of our first pivotal trial for Cabo in CRPC and third, top line data and planned NDA filing from our Phase III pivotal trial of Cabo in NTC.

Let's first turn to ASCO. As many of you may have seen on the ASCO program website, all three of our accepted abstracts will be featured in oral presentations at the 2011 annual ASCO meeting in Chicago. On Saturday, June 4, at 4.30 PM, Dr. Robert Buckanovich of the University of Michigan will present data from the ovarian cohort of the Cabo RDT as part of the oral abstract session in the gynecologic cancer track. On Sunday, June 5, at 12 noon, Dr. Michael Gordon of Premiere Oncology will present data from the comprehensive Cabo RDT in the oral abstract session in the developmental a therapeutics track. And finally on Monday, June 6, at 1.15 PM, Dr. Maha Hussain from the University of Michigan will present data from the prostate cancer cohort of the Cabo RDT as part of the oral abstract session in the GU cancer/prostate cancer track. For obvious reasons we won't be able to say a lot about the ASCO abstracts and data today. The three oral presentations include substantial updates for the overall RDT which covers all nine tumor types as well as the latest results on the individual prostate and ovarian cancer cohorts from the RDT. The prostate cancer presentation will include more mature data from the update given at ASCO GU including additional patients and longer time of follow-up.

In addiction Cabozantinib will also be featured in the ASCO sponsored press briefing on May 18 in conjunction with the publication of the ASCO abstracts. The Cabo RDT is one of only one of seven noteworthy studies to be discussed with the press at this embargoed briefing at noon Daylight Time on May 18, ahead of the full abstract release at 6 PM Eastern Daylight Time that same day. The full details can be found at the press center on the ASCO website.

The inclusion of Cabo in the press program recognizes the efforts of our investigators and reflects the high degree of interest in both Cabo and the emerging data from the ongoing RDT. Our ASCO investor briefing be held on the evening of Monday, June 6.

So before turning the call over to Frank let me give you a brief update on our Cabo related activities. The key Cabo highlight of the quarter was the presentation of the updated interim data from the prostate cancer cohort at ASCO GU in February. The data support the earlier findings that Cabo reduces or stabilizes metastatic bone lesions in nearly all patients evaluated by bone scan. It reduces bone pain and narcotic and analgesic medication as reported by investigators, results in shrinkage of soft tissue and visceral lesions in the majority of patients, and leads to an increase in hemoglobin in patients with anemia.

In the early analysis of PFS we observed similar PFS time in both docetaxel naive and pre-treated patients. The early data from the randomized portion of the study showed a shorter PFS, a median of 40 days, for the patients randomized to placebo than for those randomized to Cabo. The data from the Cabo arm were not mature long enough at the time of ASCO GU to provide a meaningful median value.

We continue to advance our comprehensive development plan and regulatory strategy for Cabo in CRPC. As discussed previously, our plan to initiate our first potential Phase III pivotal trial in this indication is focused on resolution of bone pain and metastatic bone lesions by bone scan in CRPC patients post-Taxotere. The trial, which we referred to as the 306 study, is designed to compare Cabo to Mitoxantrone plus prednisone as the control. We expect to initiate the 306 study by the end of the year, and our goal is to have agreement with the FDA on the 306 protocol and to execute it under an SPA.

We recently held an initial meeting with a local regulatory authority in Europe to discuss our plans for the study including the proposed end points. Overall the feedback we received during the meeting was positive and we are encouraged that we will have additional productive interactions with European regulators going forward. Our end of Phase II meeting with the FDA to discuss the CRPC data from the RDT and the NRE, and the proposed 306 study is scheduled for later this month. We intend to work closely with regulatory agencies in both the US and Europe to ensure that we design our first pivotal trial to leverage the unique clinical profile of Cabo that will support our initial registration strategy in prostate cancer.

In addition to these near-term activities focused on the design and implementation of the 306 study, we are also planning two additional Phase III trials with Cabo in prostate cancer that we hope to initiate in 2012. First we are investigating a pivotal trial that will assess the impact of Cabo on extending overall survival in CRPC patients. The specific line of therapy and comparative drug will be chosen once we have further information from our ongoing RDT and NRE cohorts. In addition we are also planning to explore the potential of Cabo to prevent the formation of bone metastases in prostate cancer patients who are castration resistant but have not yet advanced to metastatic disease.

We will provide additional details as we refine our planning for these trials which will continue to be informed by our ongoing trials in CRPC.

We also continue to investigate the mechanism of action for Cabo's effects on metastatic bone lesions as visualized by bone scan. To date this unprecedented observation has been documented in five different tumor types where bone disease is common, including prostate cancer, breast cancer, melanoma. renal cell carcinoma, and thyroid cancer. Technitium 99 bone scan technology is a functional imaging assessment where regions of uptake, or hot spots, reflect area of new bone formation resulting from high osteoblast activity. CRPC, and other tumor types to a lesser degree, show a pattern of predominantly osteoblastic disease in the bone. MRI technology can more directly assess the effect of Cabo on the actual tumor located in the bone. We have seen several recent examples of bone tumor regression by MRI from ongoing trials in renal cell and thyroid cancers.

One striking example is shown here for a patient with papillary thyroid cancer who presented with an outwardly protruding focal skull metastasis at baseline. A dramatic regression of this tumor was observed by MRI after eight weeks of Cabo dosing. We're planning to systematically investigate MRI technology in several new investigator-sponsored trials, or ISTs, where sophisticated MRI techniques will be employed to characterize the extent of tumor shrinkage in bone metastases in patients with CRPC.

While we work to realize the broad potential of Cabo in prostate cancer we continue to advance Cabo in MTC, where we hope to gain our first regulatory approval in 2012. Assuming a positive outcome from EXAM, our randomized Phase III pivotal trial in MTC patients, we expect to file our first NDA for Cabo in MTC by the end of 2011.

As discussed previously the EXAM study was fully enrolled in the first quarter of 2011. The primary PFS analysis is triggered after a pre-specified a number of progression events as determined by an independent radiology facility or IRF. Assuming we meet the pre-specified number of events we expect to report top line results from EXAM around the middle of this year. We are closely monitoring the events from an IRF review and hope to provide an updated estimate of the timing at our ASCO investor briefing on June 6.

We were recently advised that Cabozantinib has received fast track designation for MTC. The fast track process is designed to facilitate the development and expedite the review of drugs that treat serious diseases and fill an unmet medical need. A drug that receives fast track designation is eligible for a rolling review. In addition, most drugs that receive fast track designation are likely to be considered appropriate to receive a priority review.

So I will close here and reiterate that we have a number of important potential catalysts to look forward to throughout 2011. Specifically, ASCO, the initiation of the 306, and the submission of our first NDA for MTC by the end of the year.

Now, I will turn the call over to Frank, who will next review our financial results for the first quarter of 2011. Frank?

Thanks, Mike. As usual I will focus my comments on the highlights of our financial performance and refer you to our press release and quarterly SEC filing for additional details.

Overall the first quarter financials reflect our successful stock offering in March of this year and the significant impact of the restructuring undertaken last year. We ended the quarter with over $390 million in cash and the change in strategic direction and exclusive focus on Cabozantinib continues to drive improvements throughout the P&L.

In addition to our 2010 restructurings we further reduced head count during the first quarter. It is however important to note that the full savings impact of our various restructuring activities is still not fully reflected in our Q1 expenses.

Revenue was down about $6.3 million, or 15% year-over-year, mainly due to $7 million milestone under our MEK collaboration with Genentech, which was recognized in full as revenue in Q1 2010.

Operating expense decreased by approximately $30 million or 33% compared to the first quarter last year, mainly due to lower restructuring expenses as well as significant reductions in the wages and benefits, lab supplies, rent and utilities, and stock-based compensation expenses as a result of our 2010 restructurings.

The reduction in our R&D expense also reflects lower clinical trial expenses as compared to Q1, 2010, resulting mainly from the elimination of unfunded clinical programs as well as a decrease in the allocation of general corporate costs.

G&A expenses increased marginally. However, this is primarily driven by the lower allocations of general corporate costs to R&D mentioned previously. Excluding the shift in allocations, G&A expenses have decreased mainly driven by lower FDE expenses and lower rent and utility costs.

So the Q1 expense numbers clearly reflect the difficult steps we took to reduce expenses but they are not necessarily representative for the remaining quarters in 2011. Mainly for two reasons. Firstly we expect R&D and G&A expense in the second half of the year to be lower than in the first half of the year because a meaningful number of people that have already been terminated are still providing services and are therefore still on our payroll. Many of these employees support the transfer of our clinical PF3K assets, Exel 147 and Exel 765, to Sanofi-Aventis, for which we also carry the development expenses in our books until the transfer is complete by the middle of the year. Note that these expenses are, however, cash neutral to us since they are fully reimbursed.

Secondly, we expect to record additional restructuring charges in the range of $20 million to $25 million later this year mainly driven by the ongoing consolidation of our real estate footprint.

Other income and expense changed by approximately $8 million mainly due to a one-time gain of $4.5 million in Q1 2010 in connection with the sale of the Plant Traits business and an increase in interest expense by about $3.3 million in Q1 2011, mainly driven by the Deerfield financing we entered into in the summer of last year. Net loss has decreased by approximately 36%, from $43.2 million in Q1 2010 to $27.4 million in Q1 2011, resulting in a net loss of $0.24 per share.

Let me finally turn briefly to our financial guidance for full year 2011. Our guidance for revenue and operating expense remains unchanged. Year end cash, however, is, now expected to be approximately $380 million, taking into account the $180 million in net proceeds from our recent public offering.

With that, I the turn the call back over to Mike for closing remarks.

Okay. Thanks, Frank. I would like to take a brief moment to thank all of our employees for their hard work and dedication in tirelessly advancing Cabo to help patients and build value for shareholders. I say this both to the employees that are working at Exelixis today and to all of those who have departed as part of our recent restructuring. Your individual and collective contributions have been absolutely critical to the success we enjoy today and the vision we are working towards in the future.

We are looking forward to seeing investors on the road over the next several weeks at various healthcare banking meetings, namely Deutsche Bank and B of A before ASCO, and then Jefferies and Goldman right after ASCO. And we are certainly very excited to be heading to ASCO very soon to present the next set of data for Cabo in Chicago.

With that I will stop and thank you all for joining us and be happy to take questions.

(Operator Instructions). Our first question comes from the line of Joel Sendek of Lazard Capital.

Great. Thanks a lot. As you look to ASCO, can you help us at all kind of bracket what the PFS duration will likely be. I know you can't help us too much with that but what would you consider to be a good number there? And then with regard to the second and third Phase III trials when might they start? Could they possibly start in the end of the year or would that be more of a mid 2012 event? Thanks.

Okay, Joel. So let me start with ASCO. Again, I can't say a whole lot around what is either in the abstracts or what we expect to present. I think the -- certainly the PFS data from ASCO GU was I think very important new data that came out in February. It is data that we are looking forward to updating in June at ASCO. The overall follow-up time, if you will, you could do the math there between February and June in terms of what is theoretically possible and again we will be excited to be speaking to those kinds of durability issues in the context of ASCO. Stay tuned. We are almost there. And really looking forward to having that data out.

In terms of the next two pivotal trials, again, the OS trial and the bone met prevention trial, it is difficult to give guidance on when those would start. They certainly won't start in 2011. Those are definitely 2012 events. We need more data from -- first from Cabo in both the RDT and the NRE to really understand best how to situate those from the context of actually powering the trial and those kinds of things. And we also want to understand I think in more detail the different compounds in those two different segments and how they might impact what we choose to be a comparator of where we go with the details. So that is all work that is in progress with I would say a second priority after we get 306 up and running but certainly this comprehensive development plan and broader regulatory strategy is one that we believe in and one that we think we can really, again, build value with as we take Cabo forward in prostate cancer.

Thanks, Mike.

The next question comes from the line of Eric Schmidt of Cowen and Company.

Good afternoon. Thanks for taking my call. Mike, a question on the ASCO press release briefing on May 18. I'm just wondering if we are going to see more data on Cabozantinib beyond what was included in the abstracts at that point in time? And I guess I ask the question because I think I'm correct in recalling that the abstracts were submitted even before the ASCO GU meeting.

Yes, so, it is again, I think we need to defer that question relative to what would be presented at that embargoed meeting with the press. It is I think a bit of a challenge to project that right now relative to what we would or what the investigator would say to the press and then what they would then take forward with any articles they might write. So, I don't mean to be evasive here but in terms of how that actually plays out we have to wait and see how that goes.

So you are just not sure what part of the embargo will be kind of broken at that point in time.

Well, I think the embargo will be around the RDT trial itself. That is the study that is the focus of that segment of the briefing.

Okay. And then on the exam study could you just remind us what the powering is and what the assumption on the PFS duration and the control arm, the placebo might be?

Yes, yes, for sure. So it's a 90% power to show a 75% increase in PFS. Placebo was modeled to be approximately eight months and then the drug was modeled to be 14 months in terms of median PFS.

Okay. Thanks a lot.

Yes.

Your next question comes from the line of David Miller, Biotech Stock Research.

Hi, great, good afternoon, thanks for taking my questions. First question I have is whether you expect to have any data or meetings at the AUA Urology meeting this month?

We are not planning to present any data at AUA this month.

Okay. I have a question about the 306 trial. I mean with Cabozantinib, you've got a very differentiated drug compared to the other three drugs that are in or about to be in the marketplace but you chose to follow the same dev pathway as Abiraterone and 3100 instead of leap frogging them. Can you talk about why you are thinking that way?

Well, I think the overall development strategy has focused on first showing that again, as you said before, that we do have a differentiated profile in the clinic. One of the stark differences is the apparent impact on not only bone scan resolution but also providing clinical benefit in terms of bone pain. So we think the 306 study is a very potentially efficient way to show clinical benefit with an accepted regulatory end point that would allow us to move relatively quickly in a relatively small trial in a population that has an unmet medical need and is under served in terms of the control of their pain. So that is I think one area that we are actually different even though, as you said, we would be working again post Taxotere in a space where other compounds are at . In terms of that then going forward, again in terms of this broad development strategy looking at survival, we haven't decided what line of therapy, what the comparator will be. That would require more data and more I would say really clear crisp understanding of the durability of the response in this, in the broad RBT and NRE population to pick the detail, really define the details of how we run that trial. And then going forward then in terms of the bone met prevention, that is a space that is I would say relatively under served right now. Certainly the 147 trial with Dmab, which we will hear more about at AUA, provides the first traction there. We would certainly like to be in that space. Large -- extremely large patient population. Those patients could be on drugs for years. So again, I would argue that the first pivotal trial looks at a different endpoint than is currently, I would say, encompassed by the labels for are certainly Cabazitaxel, Abiraterone, I don't believe have pain label in the label that just came out and the Medivation compound is still relatively early in that whole process. So we are different, we're trying to capitalize on the different phenotype of our compound clinically and build value in

Can you talk about how the approval and especially the pricing of Abiraterone might have affected your positioning here and how you think about it going forward?

Well, I guess we weren't surprised by the approval or the pricing from the standpoint of how that's evolved. Again, I think we are a very different compound, different clinical profile in that space certainly from the standpoint of how we are operating mechanistically. As well as the impact on the bone with Cabo. So, it's certainly an important new player in the space, we're actually very excited to -- and have planned IST to look at combinations of Cabo with Abi in regard to some of the earlier lines of therapy to be able to really address what appears to be an important mechanism of resistance with hormonal therapies that actually up-regulate [MET] to then drive tumor metastasis. Again, lots of opportunities where. We think Cabo is a very different agent with a unique profile that we can again focus with our overall development plan and build value as we go forward.

All right. Thank you.

Your next question comes from the line of Terence Flynn, Goldman Sachs.

Hi, this is actually Vish in for Terence. I was wondering, can you just give us an update on the enrollment in the prostate cohort of the NRE?

That is moving ahead nicely. I'm not prepared to give numbers today but we have the majority of sites up and that is advancing quite well as we go forward. We are pleased to have that trial in place and I think it is a very effective way to again further profile the compounds in the post chemo population with very rigorous data collection that would be useful to again help us plan additional trials going forward.

All right, great. And then what would be the earliest time point at which you guys think you would be providing us with top line data for that?

Yes, hard to estimate right now if we'll do that at one of the meetings in the fall or back at ASCO GU in the spring of 2012. That remains to be seen right now.

All right, thank you very much.

You bet.

Your next question comes from the line of John Sonnier, William Blair.

Thanks for take the question. Michael, it sounds like a lot of the CRPC planning is predicated on successful MTC registration. So, I was trying to gain some additional insights into how you guys risk assess the exam trial. I know it went straight into Phase III from Phase I. And I guess the broader question is how different would the Cabo prostate program look if MTC fails? In other words, if prostate is your first indication versus the supplement does the registration program look a lot different?

Okay, good afternoon, John. So I think the best way to answer your first part of the question is to again refocus on the data we had at ASCO last year in 2010 in terms of the durable nature of their responses and the overall Phase IB, if you will, MTD cohort of 35 or so patients we had with MTC. So again, very, I would say very compelling evidence for tumor shrinkage in the vast majority of patients. Nice response rate in the 30% or so range and good levels of durable responses in patients and we still have patients on from that trial that has been going on for many years. I think the overall preliminary data set which then drove us into the exam trial,including responses in patients that had previously progressed on Vandetanib really underscores the activity of the compound in that tumor type.

I'm not sure I would characterize the prostate cancer development plan and regulatory strategy as being highly dependent upon the MTC program. I mean we are very excited about the activity we see with MTC and we are pushing that forward very aggressively. I think the prostate cancer plan is designed to cover in essence the major segments of that population that have the highest degree of unmet medical need -- early, middle, late if you will in terms of the bone met prevention looking at overall survival and looking at pain as an accepted regulatory end point with the largest patient population. We have carefully examined the prostate cancer space and to a large degree been very selective in how we have then gone forward in building this comprehensive regulatory strategy and development plan. I think it is the right way to go. We have got very strong advisors both from an academic point of view and a regulatory point of view who are advising us in this process and we are excited with the data that we have to date and looking forward to getting more data out at ASCO to really frame the opportunity across these different segments as we go forward.

That is actually very helpful. And just to be clear, if MTC fails -- I understand why there is reason to be optimistic -- the program as you have described it in prostate would suffice as a stand alone registration program?

Well, again, the prostate cancer program is designed to be a standalone registration program.

That answers the question. I appreciate it, thanks, Michael.

You bet.

(Operator Instructions). Your next question comes from the line of Cory Kasimov of JPMorgan .

Hi, good afternoon guys. Thanks for taking the question. I did have some ASCO related questions for you, but I will refrain from asking them and instead I'll ask something else that will also probably be difficult for you to answer and that is whether you can say anything about the recent Bloomberg reports that you hired a bank to field potential offers for the Company?

Cory, as you know we don't as a policy comment on market rumors. Just not good policy to do so, we don't do that. But let me reiterate kind of where we are at. Our mission and our number one priority is to build value for patients and shareholders. That is where we are at. That is what we focus on literally every hour of every day. We just raised additional money to aggressively develop Cabo in CRPC and potentially other indications and we really plan to do that in such a way to minimize risk along the way while maximizing the upside in our ability to build value and I think the discussion around some of the points that John just raised really speaks to that around prostate cancer. So we are focused right now on execution and on delivering on our key goals that will take Cabo to the next level.

Okay. And then on Cabo and its development have you guys made any changes to the inclusion exclusion criteria for patients in the NRE studies?

There are certainly subtle modifications and differences between the RDT and the NRE. I would say the most important one is that the NRE is only for patients that are post Taxotere so it is, again, in the single post chemo setting, number one. There is no requirement for measurable soft tissue or visceral disease as was in the RDT. So we expect in that post Taxotere population to have a much more typical, much more normal distribution of patients with bone disease versus no bone disease with soft tissue disease that is measurable versus not measurable. It should be a very typical population for most GU oncologists see in terms of their normal practice in terms of that population.

Okay. That is helpful, thanks and I will see you soon in Chicago.

Yes, I look forward to it.

There are no further questions. I would now like to turn the call back over to your Vice President of Investor Relations, Mr. Charles Butler.

I will take that and again thank you all for your time today. Appreciate the interest and the feedback and looking forward to seeing you all in Chicago very soon. So we'll break here and thanks again.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.