Exelixis Inc (EXEL) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2011 Exelixis financial results conference call. My name is Ann and I will be your coordinator for today's call. As a reminder this conference is being recorded for replay purposes. At this time, all participants are in listen-only mode. (Operator Instructions). We will be facilitating a question-and-answer session following the presentation. I would now like to turn the presentation over to Mr. Charles Butler, Vice President of Investor Relations. Please proceed, Sir.

Hi. Thanks, everyone, for joining us today for the Exelixis second-quarter 2011 earnings call. Joining me today from the management team are Mike Morrissey, our President and CEO; Frank Karbe, our CFO; and Gisela Schwab, our CMO, who will together review our corporate, financial and development progress for the quarter-ended June 30, 2011. They will also discuss upcoming objectives and provide an update on cabozantinib, 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 at our website at exelixis.com.

As a reminder, during this call we will be making certain forward-looking statements that are forward-looking, including, without limitation, statements related to the development in clinical, therapeutic, and commercial potential of cabozantinib; Exelixis' development plans and regulatory strategy for cabozantinib; the timeline for the EXAM trial; the filing of an NDA and a potential commercial launch in NPC; plans to initiate a Phase 3 pivotal trial in CRPC by year-end 2011; and additional Phase 3 pivotal trials in CRPC in 2012; the evaluation of lower doses of cabozantinib in CRPC; potential partnering opportunities; and our updated 2011 financial guidance.

These statements are only predictions and are based upon our current assumptions and expectations. Our actual results and timing of events could differ materially from those anticipated in such forward-looking statements because of risks and uncertainties discussed in the slides accompanying this call, the comments made during this call, and the risk factors section of our 10-Q for the quarter-ended July 1, 2011, and our other 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.

Okay, thank you, Charles, and thanks to everyone joining us on the call today.

The second quarter of 2011 was very productive for Exelixis and we continue to make strong progress on our transformation into a streamlined organization, solely focused on maximizing the clinical and commercial value of cabozantinib, or cabo for short. During the quarter we continued to advance our comprehensive development plan for cabo and achieved a number of key milestones. On today's call, Frank will walk you walk you through our financials and Gisela will provide and update on our cabo development efforts. I want to focus on a few key themes that we will expand upon throughout the call today.

First, we're working toward key cabo milestones in the second half of 2011. The EXAM trial, our Phase 3 pivotal trial in MPC, is tracking towards a readout of top-line data were around the end of the third quarter. We're also advancing our comprehensive development plan and regulatory strategy for cabo in CRPC, including our first pivotal trial that takes advantage of its truly unique clinical profile, targeting three key cell types -- tumor cells, osteoblasts and osteoclasts -- that drive the development and maintenance of metastatic bone lesions. Second, we are using the CRPC opportunity to explore lower starting doses of cabo, with the aim of maintaining the clinical activity we've seen to date with improved tolerability. We've made some significant progress in this regard over the last few months and Gisela will provide the highlights in her remarks.

Third, we are investigating potential partnering opportunities that would help us maximize the global commercial value of cabo. We are currently exploring potential regional deals that would Asian rights for cabo to a partner with clinical, regulatory and commercial bandwidth and expertise in this important region. As mentioned on a call earlier this year, we're not rushing into a deal just for the sake of doing a deal. It needs to make sense strategically from a near-term financial, development and commercial perspective and help us build additional value for the emerging cabo franchise and potential important indications, including CRPC, liver cancer and non-small cell lung cancer in a region that would be challenging for us to access independently either now or in the midterm.

We are also engaged in numerous discussions for other early-stage non-cabo assets that we hope to conclude in 2011. Finally, we continue to reduce our expenses and wind down non-cabo collaborations that will help us focus our activities and resources on advancing cabo as the primary value driver for the organization.

So I'll come back at the end of the call to make some closing remarks about the second half of 2011. For now, I'll turn the call over to Frank and Gisela to provide a financial and clinical update. Frank?

Thank you, 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. We finished the quarter with a healthy cash position of over $350 million and year-over-year the P&L continues to reflect our transition to the cabo-only company with significant decreases in all of our major expense categories, namely personnel, clinical trials, lab supplies, and rent. Subsequent to the end of the second quarter, we also announced the discontinuation of one of our collaborations with BMS under which Exelixis was still conducting work. This will result in the acceleration of a substantial amount of deferred revenue in the second half of the year, which I will explain in more detail in a few moments.

Revenue was down by $15.4 million for the quarter, largely attributable to Exelixis having regained the rights to cabo, as well is the transfer of the clinical work for our PI3K assets, XL147 and 765 to Sanofi, which is now essentially completed. Operating expense decreased by approximately $23 million, or 31%, which mainly reflects the significant impact of the large scale restructuring undertaken last year. Compared to Q2 2010, there are nearly 200 fewer FTEs, we have significantly lowered our consumption of lab supplies, lowered our clinical trial expenses, and substantially reduced our real estate costs, largely as a result of successfully sub-leasing significant portions of our excess lab and office space.

On July 14 we announced the termination of the collaboration agreement with BMS for XL281. XL281 and cabo were originally part of the same collaboration and with the XL281 termination, this collaboration now ends in its entirety, resulting in the acceleration of a significant amount of deferred revenue. Specifically we expect to recognize revenue of about $110 million in Q3 and about $10 million in Q4 of this year related to the termination of this collaboration.

Let me finally turn briefly to our financial guidance for 2011. We are updating our financial guidance for the full-year 2011 by increasing our expected revenues to a range of $220 million to $250 million as a result of the acceleration of deferred revenue mentioned a moment ago. Our guidance for operating expenses for the full year remains unchanged, in the range of $190 million to $220 million, and our guidance for year-end cash also remains unchanged at approximately $380 million. As previously stated, our cash guidance assumes a certain amount of cash inflows from expense reimbursement, milestones, stock-option exercise activity, as well as cabo and non-cabo related BD activities. A substantial portion of these cash inflows has not yet been realized, and therefore are still at risk.

With that, I will turn the call over to Gisela.

Thank you, Frank. The cabo clinical development program continues to make significant progress in multiple areas. Today I will briefly discuss the status of the EXAM trial, our Phase 3 study in medullary thyroid cancer, or MTC, our efforts in castration-resistant prostate cancer, or CRPC, and additional trial efforts for cabo. The EXAM trial continues on track and we expect a readout of top-line data around the end of the third quarter of this year and plan to present the full data set at a subsequent medical meeting. The plan remains unchanged since the call a few weeks ago and we remain encouraged for a potentially positive outcome. We are preparing the preclinical and CMNC sections for initiation of a potential rolling NDA filing at the end of 2011 that would be completed with the clinical section in Q1 of 2012.

Regarding CRPC; as we said in July, we submitted the 306 protocol to the FDA for a special protocol assessment, or SPA. The 306 trial is the first of three planned pivotal trials in patients with CRPC, and it will use a combined endpoint of bone scan response and resolution of bone pain. We will describe the trial design in more detail when the SPA process is completed and expect to initiate this trial by year end. Detailed internal planning is underway for the 2 other pivotal trials in patients with CRPC. The 307 trial will assess cabo's ability to extend survival in a well-defined CRPC population that can most benefit from cabo's unique clinical profile. We plan to select the optimal patient population, line of therapy and comparator once we have longer-term data from the patients currently on study in the RDT and NRE cohorts. We expect to be in a position to finalize key elements of the survival trial and to initiate the trial in 2012.

We also continued to refine our plans for the third projected trial in CRPC. The 308 trial will evaluate the ability of cabo to prevent the formation of bone metastases, a setting that represents a large commercial opportunity due to the sizable number of patients and a potential long duration of treatment. The design of this trial will be informed by regulatory feedback of the supplemental biologics license application, or BLA, for denosumab based on the 147 study and in the short term, by the upcoming order of discussion on endpoints and trial designs for the prevention of bone metastases in prostate cancer on September 14, 2011.

As part of our preparation to initiate multiple pivotal trials in prostate cancer beginning later this year with 306, we are also taking into account a detailed evaluation of optimal doses and/or dosing regimens to serve the earlier lines of therapy in prostate cancer. Given cabo's unique impact on bone scan, we the have the ability to quickly generate data with lower doses of cabo and to assess their differential impact in prostate cancer. To that end, Doctor Matthew Smith at Massachusetts General Hospital is conducting investigator-sponsored trial to determine the lowest effective starting dose for cabo in CRPC. Using bone scan readouts as the primary endpoint, the trial is designed to evaluate sequential cohorts of prostate cancer patients with bone metastases on bone scan at baseline.

The first cohort has been enrolled at 40-milligram per day, and based on the observed high rate of bone scan response in this cohort, the study will now involve subjects in the next cohort at a lower 20-milligram per day dose. In addition to bone scan response, further data will also be collected from this trial, including duration effort of response, the impact on circulating tumor cells, MRIs and DXA scans and impact on bone biomarkers. So between the RDT, NRE and the low dose work, we will have a solid data set supporting the design of our planned pivotal trials in CRPC; the 306 trial, which we plan to start by year end with an SPA, and the 307 and 308 trials, which we plan to initiate in 2012.

Although much of the focus has been on CRPC and MTC, at ASCO we released data on 5 tumor types in addition to CRPC; ovarian cancer, melanoma, liver cancer, breast cancer, and non-small cell lung cancer. Additionally, in a separate study, we have observed encouraging activity in differentiated thyroid cancer and in renal cell cancer. We are planning on presenting these data sets later in the year at medical conferences, starting with an oral presentation of the DTC, or differentiated thyroid cancer, data at the American Thyroid Association in the fall.

All these data sets warrant further follow up and have generated a high level of interest in the oncology community. We are leveraging this interest to collaborate with leading investigators to plan future investigator-sponsored trials that we expect to begin in 2011 and 2012. These trials will generate important data that will allow us to focus our internal resources on the most promising indications in later stage development. We believe that the broad antitumor activity observed with cabo to date can potentially support a broad development plan across multiple different indications that represent a significant commercial opportunity.

With that, I will turn the call over to Mike.

Okay, thanks, Gisela. In closing, we expect the Company to advance towards several key milestones in the second half of 2011, including the readout of the EXAM trial and the potential initiation of the 306 trial in CRPC under an SPA. We are currently putting together plans to present additional data on lower starting doses of cabo in CRPC and new updates for non-CRPC cohorts of the RDT at medical meetings later this year. Finally, we'll hold our annual R&D date in early December, where we will outline our plans for 2012. So I'll leave it there for now and reiterate that the team at Exelixis is looking forward to a strong second half of 2011 as an opportunity to provide meaningful benefit to patients and build shareholder value.

So with that, I will turn the call back to the operator and be ready to take questions.

Thank you. (Operator Instructions). And our first question comes with the line of Eric Schmidt with Cowan and Company. Please proceed.

Hi, good afternoon, thanks for taking the question. Gisela, on the Matthew Smith study and the decision to move from 40-milligrams to 20-milligrams, I guess I'm going to ask the obvious question. Is there a specific pearl in terms of bone scan resolution that had to be achieved to warrant that dose reduction? What is it, if so?

Obviously with the (inaudible) effect on bone scan that has been described and presented previously, we have a very sensitive readout and -- so the trial, although I cannot go into great detail, requires a large proportion of patients in a given cohort to have bone scan responses that signal activity and then one would decrease the dose. So we are at an early stage right now, and the bone scan response data in terms of magnitude and numbers are consistent with what we've seen previously in the RDT.

Okay. And when will we see data presented from that trial?

We're hoping to present data -- or Matthew's planning to present data later this year.

At what forum?

Likely at EORTC.

Okay. And on the 306 study, I don't know exactly how many days it's been said you submitted the SPA, Mike, but is there any update you can provide? Did you receive any response from the FDA? I know you're going to be leery about getting into details, but can you characterize any way?

Yes, Erik, as we talked about previously, it's a fair question, but were going to stick to our plan of not commenting on that process until we're all said and done. Again, we don't want to negotiate that in public with the FDA, so we're going to keep that to ourselves until we have the final protocol locked and the SPA in place.

Okay, thanks.

And our next question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Hi, thanks a lot. I'm interested in knowing, once you have the Matthew Smith study, what are you going to do with that? What are the potential outcomes with regard to -- are you trying to nail down a dose, do you want to have dose flexibility, do you want to rule out the lower dose? Can you just tell us what the likely outcomes so we'll be so will be able to assess it when we review the data?

Sure. So the desired outcome is to identify the lowest active dose with cabozantinib in order to introduce a low dose in the early line of therapy in prostate cancer. In particular, in the bone metastases prevention setting [whose] we anticipate there for the therapy to be extended over many months. So, some [chronic] therapy, really, which we want to enter with a low dose.

Okay, but you don't -- is that required, do you think, in order to go to earlier lines of therapy? Could you still do it with the dose you have, or --?

I think that would be desirable to go forward with a lower dose because that patient population is clinically asymptomatic.

Right, right. Okay. Great. And then just a question on timelines. You say, obviously, you expect to initiate the 306 study by the end of the year. Obviously, we want you to have aggressive goals and things like that, but I'm wondering if it might be too aggressive if -- obviously you want to do the best you can and not rush it. I'm wondering what you're thoughts are along those lines. Are you holding yourself to a firm December 31 deadline, or are you just doing the best you can in order to get it in by then?

Well, we're working towards the timeline. Obviously, we will [abate] the FDA feedback and make revisions if necessary to the protocol. So we get the regulatory feedback, we also get more information regarding lower doses, as well, and we will move forward on the basis of solid data. I think the end of year timeline is realistic as it stands right now and so we're working towards that.

Okay, that's all I needed to know. Thanks a lot.

(Operator Instructions). And our next question comes of the line of Terence Flynn with Goldman Sachs. Please proceed.

Hi, thanks for taking a question. I apologize if this was already answered or asked before, I jumped on a little bit late, but is there any update on the NRE study for prostate cancer? Just wondering where enrollment stands there and when we might see data out of that study. And in the last part of it is just what type of data would you like to see to inform the design of the overall survival trial, the Phase 3? Thanks.

Thank you. So the NRE study is very actively evolving and the numbers change day by day so we don't really provide accounts of that. The data set, I think, once mature will be presented in an upcoming medical meeting, as appropriate. In terms of what we are looking for in terms of additional information that will inform the overall survival study, we're looking, obviously, to multiple data sources to the NRE, as well as the RDT study, and we want to see a longer follow up, in particular that relates to PFS and overall survival in the patient populations that have been pretreated with different prior regimens, such as those who are chemotherapy naive versus those who have received prior doxetaxel or multiple lines of prior therapy. Plus we will see additional information, also, on biomarkers, including circulating tumor cells, which are of interest, obviously, in this setting. So there are multiple data points that will become available that will help us design the overall survival study.

Also, clearly, the issues to address are for the overall survival study, the patient population, the comparator, and the line of therapy. In that context we are thinking about in terms of the patient population that might best benefit from cabozantinib and, obviously, we're seeing very interesting activity on bone, we're seeing very interesting activity on pain. And when you think back on [subset] analyses, a retrospective analyses of TAX 327 Phase 3 trial, it is actually interesting to look at the patient population with pain and their outcomes in the overall context.

There's a publication that was dealing with this that has been published in 2008 that clearly shows the patient with pain at baseline do much worse than asymptomatic patients, number 1. And number 2, intriguingly, patients who actually have a pain response on study do much better than those who do not have a pain response. And really, the overall survival outcome is markedly different between these 2 populations of those with pain responses versus not, and the difference is 6 months. So those data points all will come together to inform the 307 design.

Great, and could I just ask 2 follow ups? So medical means -- so is ASCO next year a reasonable expectation in terms of thinking about potential data from the NRE study? And then, with respect to the TAX 327 study that you cited, what percentage of patients had pain at baseline in that study and had the worst outcome? Thanks.

So in terms of the publication, ASCO next year is a possibility, we haven't decided that as yet, just depends on the status of the data set and if everything comes together on the timeline. And regarding the number of people with pain at baseline in this retrospective analysis that I just spoke about, which is been published by Berthold, et al in 2008, 374 of the 815 people [assist] had major pain.

Thank you.

Ladies and gentlemen, with no further questions this concludes today's question-and-answer session. I would now like to turn the call back over to Mr. Mike Morrissey for closing remarks.

Okay, thanks again for joining us today and we'll look forward to following up on all these issues in the future. Thank you.

Thank you. Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a good day.