Exelixis Inc (EXEL) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2012 Exelixis financial results conference call. My name is Regina, and I will be your conference operator for today. At this time all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session. (Operator Instructions) Today's event is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Charles Butler, Vice President of Investor Relations. Please go ahead, Mr. Butler.

Thank you. Thank you for joining us for the Exelixis second quarter 2012 earnings call. Joining me on today's call, as usual, 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, 2012. They also will discuss priority activities for the remainder of the year and provide an update on cabozantinib, our lead clinical development program. As a reminder, we're reporting our financial results on a GAAP basis only. As usual, the complete press release with our results can be accessed through our website, Exelixis.com.

As a reminder, during the course of this presentation we'll be making forward-looking statements regarding future events or future performance of the Company, including statements about possible future development regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results of course could differ materially. We refer you to the documents that Exelixis files from time to time with the Securities and Exchange Commission, specifically the Company's most recent Form 10-Q filed today, August 2, 2012. These documents contain and identify under the heading risk factors, important factors that could cause actual results to differ materially from those contained in any forward-looking statements including risks related to the potential failure of cabozantinib that demonstrates safety and efficacy in clinical testing, Exelixis' ability to conduct clinical trials of cabozantinib sufficient to achieve a positive completion, the sufficiency of Exelixis' capital and other resources and the uncertainty of the FDA review and approval process. And, with that, I will turn the call over to Mike.

Okay. Thank you, Charles. And thank you all for joining us on the call today. We had a very busy second quarter. I'd like to briefly highlight our key achievements for Q2 and our goals for the second half of 2012. First, we reached the critical milestone of completing our first NDA submission for cabozantinib for the treatment of progressive medullary thyroid cancer or MTC. This is an important achievement for our Company and for the cabozantinib franchise which we believe has substantial clinical and commercial potential. We also advanced other aspects of the cabozantinib development program, including the presentation of nine abstracts at the 2012 ASCO annual meeting in June and the expansion of our CRADA at the NCI.

As you would expect, we won't be able to say a lot today about the cabozantinib MTC NDA submission. We're pleased to have received priority review for the application, and are working diligently with the agency to facilitate the review process. We had a prominent role at ASCO this year where we presented the latest data for cabo in eight different tumor indications. We believe this year's ASCO data helps define the broad clinical potential of cabo as a differentiated oncology drug. The data presented for the MTC pivotal trial exam and the two prostate cancer abstracts covering the non-randomized extension cohorts and the low dose for IST for mass general were well received.

We have talked previously about our view that cabo is more than just a prostate cancer drug and more than just a bone targeting drug. Key ASCO data for cabo including renal cancer, liver cancer, non-small cell lung cancer, melanoma, and breast cancer data helped reinforce this perspective with encouraging progression-free survival data and in some cases overall survival data, and were viewed positively by key oncology investigators as being potentially differentiated compared to other commonly used agents of those indications. Collectively, these data showed robust signs of clinical activity that support the expansion of the cabo development program already underway with CTEP. With our singular focus on cabozantinib, we have a clear set of priorities that will support the continued progress of cabo throughout the second half of 2012 including facilitating the cabo MTC NDA review, expediting the COMET trials and advancing the cabozantinib IST and CTEP programs. We obviously have a lot on our plate right now and our focus remains solely on driving cabo forward as quickly and as broadly as possible. Gisela will discuss some of these topics in further detail in a moment.

First, I'll turn the call over to Frank who will provide an overview for our second quarter financials. 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 today's 10-Q filing for additional details. In summary, our Q2 financial performance was pretty much in line with the financials from the first quarter this year. As you heard from Mike, we've made significant progress in the second quarter by initiating COMET-1, expanding the cabo development program under the CRADA with the NCI as well as through IST's and, of course, with the filing of our first NDA. We expect these accomplishments to impact our operating expense in the second half of the year. Consequently, expect our quarterly operating expense to increase as compared to Q1 and Q2 of this year. Our financial guidance, however, that we provided in February for 2012 full-year revenue, operating expense, and projected year-end cash remains unchanged.

Let me turn to our second quarter financial results in a bit more detail. Revenue, as expected and in line with the development we saw in the first quarter of this year, decreased $24.3 million to approximately $7.8 million mainly due to the transfer of the development activities pertaining to the PI3K assets, XL147 and XL765 [Santafe] in April 2011, the wind down of the Santafe discovery collaboration in December 2011 as well as the termination of the Bristol-Myers Squib 2008 cancer collaboration for XL281 in October 2011. So, in summary, as these collaborations ended in the course of last year, the recognition of deferred revenue stopped as well.

R&D expenses decreased by approximately $10.3 million or 24% to $32.6 million compared to the second quarter last year, mainly due to lower clinical trial expenses, lower allocations of general corporate costs, and lower headcount expenses. The decrease in clinical trial expenses reflects the winddown of the exam trial as well as our randomized discontinuation trial. This was partially offset by an increase in expenses associated with the initiation of COMET-1 and the continued ramp up of COMET-2, our two pivotal trials in metastatic (inaudible) resistant prostate cancer. We expect the expenses associated with the COMET trials to ramp up further in the second half of 2012 which we expect to be the main driver for our operating expense in the second half of the year to be higher than in the first half.

G&A expenses decreased by approximately $2 million or 23% to $6.8 million despite low allocations of general corporate costs to R&D. Expenses decreased across most cost categories, but the biggest contributor is lower rent expenses as a result of having successfully subleased significant portions of our campus. Operating expense overall decreased by approximately $9.6 million or 19% to $40.5 million compared to the second quarter last year which, in addition to the aforementioned reductions in costs, also incorporates an increase in our restructuring charges year over year by approximately $2.7 million. And, finally, we ended the quarter with approximately $295 million in cash. With that, I will turn the call over to Gisela to give an update on the cabozantinib development program.

Thank you, Frank. It achieved significant progress in our cabozantinib development program over the second quarter and have focused on activity that will further advance cabozantinib over the next several months and into the future. The FDA formally accepted the NDA that was submitted in May. The NDA was submitted under the FDA's [past direct] designation which is designed to potentially accelerate the review of investigational therapy for an unmet medical need. FDA has now granted our application priority review which means we should have a decision by the FDA by the end of November 2012. In addition to our focus on completing the NDA process with the FDA, we are also preparing to file a marketing authorization application, or MAA, for cabozantinib and MTC in the European Union in quarter for 2012.

Let me now move from MTC to our development strategy for cabozantinib in metastatic CRPC. As Mike (inaudible) initiating each of these trials was an important achievement, we have focused now on opening sites for each trial and getting patients enrolled rapidly. Our goal is to have about 285 for COMET-1 and about 50 sites for COMET-2. COMET-1 is designed to involve 960 patients with CRPC while COMET-2 is designed to enroll 246 patients. Both trials will enroll men who have previously been treated with Docetaxel and Abiraterone and/or Flutamide in any sequence. Expediting the initiation of clinical sites and enrollment of patients in the COMET study is a top priority for Exelixis in addition to completing the NDA process in MTC.

Now I'd like to take a few moments to provide some additional detail on our CRADA with the National Cancer Institute and our IST program. The high level of excitement for cabozantinib in the investigative community continues to drive progress for both of these initiatives. I'll discuss each in turn. First, the CRADA. As you know, we agreed on an initial slate of 13 trials with the National Cancer Institute. First trials to prioritize future development such as our six planned randomized Phase 2 trials in the settings of first-line renal cell cancer, second-line hepatocellular cancer, [platinum] resistant or refractory ovarian cancer, ocular melanoma, and two trials in non-small cell lung cancer. Second, signal surge trials to identify indications for further study including single arm Phase 2 trials in endometrial cancer, bladder cancer, sarcoma, and differentiated thyroid cancer. And, third, other trials which include Phase 1 combination trials in additional tumor types including CRPC in combination with Docetaxel, melanoma in combination with vemurafenib as well as a trial to evaluate cabozantinib in pediatric malignancies.

We continue to make progress in these trials. For many of the 13 trials including the randomized Phase 2 trials, detailed protocols have been developed by leading investigators and reviewed by CTEP and Exelixis. We expect that many of these protocols will be completed soon and start the [IRB] approval process during the next several of months. It is possible that some of these trials will start later this year. In fact, CTEP has recently submitted the IND for the first study. Second, our ISP program continues to see progress as trials begin to read out and behind them new trials come on line. For example, at ASCO the IST program was in the spotlight when investigators from Mass General presented data from a trial of low-dose cabozantinib for the treatment of men with CRPC and bone metastases. We now have 10 ongoing ISPs including the more recently announced two additional ISP's in non-[cell] lung cancer and multiple myeloma.

The non-small cell lung cancer trial is a Phase 2 trial that will evaluate cabozantinib in patients who have a fusion of the [Q5B] and RET genes resulting in activation of RET, one of the key targets of cabozantinib. The multiple myeloma IST is a Phase 1 study of cabozantinib in patients with relapsed or refractory disease. Multiple myeloma typically has a high level of bone involvement. This is the first study evaluating cabozantinib in a hematologic malignancy in which [met] is thought to be of high importance, and we are very much looking forward to the data generated in this study. The IST program allows us to evaluate cabozantinib in a variety of new indications quickly. This may open doors to new indications or combination regimens and we expect to initiate further investigator sponsor studies in the second half of the year.

I would now like to briefly turn to the data presentations planned for the second half of 2012 at key international conferences. These include the European Society of Medical Oncology annual meeting in late September as well as the European Thyroid Association annual conference and the American Thyroid Association meeting which both take place in September 2012. The planned presentations include further data from our ongoing Phase 2 trial in CRPC as well as additional analyses from our pivotal study exam in MTC. We believe that these presentations will be important opportunities to further demonstrate cabozantinib's clinical potential and differentiated activity profile, and to drive additional interest in cabozantinib. We have a great deal to do and we are highly motivated to get it done and to get it done right. And we're looking forward to sharing the results of our efforts with you in the months ahead. With that, I'll turn the call back to Mike.

Okay. Thanks, Gisela. I'll keep my closing comments brief. It continues to be an exciting and busy year for us with the successful ASCO meeting and our first-ever NDA filing. Our priorities are clear and simple, to successfully navigate the NDA process with the FDA, to aggressively enroll the COMET trials, and to advance the cabozantinib IST and CTEP programs. Collectively, we believe these efforts will serve our ultimate goal of helping patients and building shareholder value.

Let me end here today by taking a moment to thank all of our employees for their individual and collective talents, hard work, and efforts across every component of our business. So, with that, we're happy to take your questions. Operator.

(Operator Instructions) And your first question today is from the line of Eric Schmidt with Cowen and Company.

Good afternoon. Thanks for taking my questions. If we just start on MTC for a moment. I guess is it too early to speculate on whether there may be an Odak meeting here? And, secondly, the update that Gisela mentioned from the exam study in September, would that include an overall survival update?

Thanks, Eric. This is Gisela. Regarding your question on Odak, we have not been notified at this time of an Odak panel. And regarding your second question, the overall survival for the study was assessed, as you know, at the time of the primary analysis of progression-free survival, and the overall survival analysis at that time was a planned interim analysis. Recall that progression-free survival is the primary end point and that the study is being conducted under an SPA that was agreed with the FDA. The final OS analysis is planned when 217 events have occurred and we anticipate that currently to be in the 2013 or '14 timeframe.

So, there are no additional interim OS looks?

Correct.

Okay. And then I guess also on MTC, does the second half expense ramp that Frank guided up -- guided to, does that include any pre-commercial activity?

Eric, it's Frank. It does, but it's very minor. The main driver for the ramp in the operating expense by far is the ramp-up in COMET-1 and COMET-2.

Okay. And then just I guess maybe the last question pertaining to the randomized studies that you hope to conduct in renal cell -- first line renal cell and second line HCC, obviously this was quite a bit of interest in those two trials at ASCO. Are they going to be two of the earlier trials that CRADA prioritizes, is there a possibility of those two starting in late 2012?

All these studies are in active protocol development stage. And it's difficult to predict when each one of them start because it depends to a large degree on the IRB process and how the individual trials are being reviewed and the timing thereof, but there's certainly high interest in these two studies.

Thank you.

And your next question is from the line of Joel Sendek with Stifel Nicolaus.

Hi. Thanks a lot. A couple of questions. Might be kind of early, but can you give us any idea as to how many patients you've enrolled so far in the COMET trials? And then I have a followup.

We have initiated enrollment in both COMET-1 and COMET-2. We won't comment on specific enrollment numbers because they change all the time. So, our near-term focus is certainly to get trial sites open and involvement in these studies is highest priority for Exelixis.

Okay. And has it been going according to plan? A little bit faster? Slower? Can you give us any directional commentary?

I can't really add much to what I just said.

Okay. Kind of a separate question. Post the approval if you get it, how will patients and physicians go about potentially using cabo in a compassionate use and/or off label -- in an off-label way? Will you facilitate that? Will that be possible to do? Have you thought about that at all?

Hi. This is Scott Garland, Chief Commercial Officer. Obviously, we can't facilitate off-label usage of cabozantinib. We can't promote it in any way, shape, or form. That's pretty much all I can say about it at this time.

Okay. I guess going backwards then, is it available now for compassionate use or I guess you're trying to channel everyone through to the various NCI studies? But if you -- if someone would want it, could they get it?

We don't have at this time an official compassionate use program. We're -- generally the focus is to get patients on clinical trials in order to generate the meaningful data.

Thanks. And then just one final question. Is it possible for CTEP or NCI to preview Phase 3 trials through them or would you have to pay for those on your own?

In general, it is possible to conduct Phase 3 trials through the CTEP mechanism. Does that address the question?

Yes, that's it. Thanks a lot.

Your next question is from the line of Terrence Flynn with Goldman Sachs.

Hi. Thanks for taking the question. I was just wondering in terms of the prostate cancer data you mentioned you're going to be presenting later this year from one of the Phase 2 trials, can you just give us any more details there, what we might see incremental and above what we saw at ASCO this year?

So, we're anticipating further data from the non-randomized extension study. I think further than that I can't really comment on details at this time.

Okay. And then can you give us any sense if it's more patients or longer duration?

I think we'd have to wait until the conference which is in September.

Okay. Okay. And then any new thoughts on met prevention trial? I know that's something you guys have talked about before. Any latest thoughts there?

So, the near-term focus is definitely on the execution of the two COMET studies as I alluded to. And I think we are working obviously on various combination studies, CRPC and that includes a study as I mentioned in combination with Docetaxel but also one with Abiraterone, and so these will pave the way then forward into earlier settings in CRPC.

Okay. Thank you.

Your next question is from the line of Cory Kasimov with JPMorgan.

Hi there. It's actually Matt Lowe in for Cory today. Just wondering if you could share any more details on your commercial strategy for MTC? Perhaps how many reps you plan to hire and when they may be hired? Thanks.

Yes. This is Mike. It's a little bit early for us right now to be commenting on the details of our commercial plan for cabo in MTC. We're in the process of finalizing both our plans and our specific tactics on the commercial side. As we've said in the past, we're looking at this very pragmatically and I would think anticipate that our efforts will be commensurate with the size of the MTC opportunity. So, as time goes on and we get -- make additional progress, hopefully with the filing we'll certainly have more information to share.

Okay. Thank you.

Your next question is from the line of David Miller with Biotech Stock Research.

Thanks for taking my question. When would you -- I understand you don't know about an Odak yet. What would -- when is the deadline, for lack of a better word, for finding out about when you might have one?

There is no official deadline to that and we will certainly let the FDA go through its normal processes, and we will notify when you appropriate, when we've been notified.

Okay. As you're -- I understand that you don't have your sales strategies finalized, but can you talk about what you see as the competitively pertinent distinction between cabo and MTC?

Are you referring to the -- David, this is Mike -- the competitive landscape within MTC itself or --?

Sure, sure. The competitive -- the pertinent distinctions between cabo and [Vandi].

Yes, it's probably a little bit early for that right now. It's a fair question and it's a question that I think we'll be prepared to address at the appropriate time as, again, we've made more progress either with the filing or we have a definitive answer. I think that the exam Phase 3 data is out now and you can look at the data that was generated with [andepmib] as well and come to your own conclusions there. But I think right now it's probably best if we leave that one alone.

Okay. Have you provided a target date on when you expect the COMET trials to be enrolled? And could you if you haven't?

I don't believe we've talked about a date, a specific date when we would have enrollment completed. We have guided that we expect to have top-line data in the first half of 2014 and that's still the plan going forward.

Okay. And then a quick question for Frank. Can you let me know what your cash used during the quarter was?

Well, you can -- I think you can do the math yourself. We ended the quarter with 295 and at the end of the last quarter we were at 332.

Okay, great, thank you.

Your next question is from the line of John Sonnier with William Blair.

Thanks for taking the question. I'll ask Joel's question just slightly differently. If you look across the broad development campaign that you guys have ongoing with cabo, is there a scenario under which data from some of the ongoing trials could be peer reviewed, published, compendia listed prior to the COMET readout and, if so, which trials would those be? Thanks.

Well, as you know, we have conducted very extensive Phase 2 work in the context of the randomized discontinuation study. And we've certainly presented data on the various different cohorts. We intend to publish these data sets and that is work that is in progress. So, depending on the timelines to publication, that is entirely possible that there are publications, quite robust publications available.

And I guess which specific areas do you have, do you believe the data are most compelling? There's a lot of data.

I think when you reflect back on the ASCO meeting earlier this year, as shown data set in CRPC, in lung cancer, in breast cancer, in renal cell cancer and hepatocellular cancer and also differentiated thyroid cancers, it's a broad data set, and melanoma as well. These are certainly experiences that we intend to publish.

Thank you.

Your next question is from the line of Lee Kalowski with Credit Suisse.

Great. Thanks for taking my question. A few if you don't mind. I guess the first is if you receive approval for the MTC indication in late November, do you expect to be ready to launch in Q4 or would that potentially be early 2013? And then, secondly, Frank, it sounded like you are basically reaffirming guidance revenues of $40 million to $60 million and OpEx of $190 million to $220 million as I recall. With deferred revenue coming in, coming down basically and OpEx basically $80 million, $81 million for the first two quarters, can you say whether you think both of those might be on the lower end of the range? And then I have one last question, I can follow up though.

I'll comment on the last question you had and then on your first question I'll defer to Mike. But we did reiterate the guidance in my prepared remark today and ranges you put out there were correct. The previously provided guidance was for revenue $40 million to $60 million, for operating expense $190 million to $220 million, and for year-end cash, approximately $200 million. We'll not go beyond providing more guidance as to where we expect to come out in these ranges.

Okay.

Yes, Lee, it's Mike. In terms of your first question, I think it's probably wise for us to defer answering that until, again, more time has passed, we get closer to the action date and we can provide I think all the details around our commercial plan and activity. So, again, fair question but I think it's one that we should answer a little bit later.

Okay. Thank you. And if you wouldn't mind one last followup question. In terms of the COMET-1 trial, patients being able to take the [Abby or insen] in any order, I believe the [abby] pre chemo PDUFA is in December, so there may be a mix of patients who do in fact, get it in different order who get that before (inaudible) versus after. Do you expect that that would have any impact on the response in the trial in the order that they get it?

We don't really expect that. The criteria and the protocol require prior treatment with Docetaxel, Abiraterone and/or Flutamide. I think the order of the compounds is really not going to -- not expected to affect the outcome here.

Okay. Thank you.

(Operator Instructions) Your next question comes from the line of Biren Amin with Jefferies.

Hi, guys. Thanks for taking my questions. How should we think about cabo pricing in MTC?

Biren, it's Mike again. Very important question. One that we will I think cover in the context of the broad commercial strategy rollout that we'll do later in the year. So, again, fair question but not that we're not ready to answer today.

Okay. I guess on HCC, given cabo's met pathway, would you potentially seek to develop in met high patients in the second line sighting?

This is Gisela. Still, we are planning a study in the second line setting that includes patients regardless of their met expression status. We certainly have collected some information on met expression in the existing data set and we did not see a difference in terms of tumor shrinkage as one parameter with respect to or as a function of met expression. And really you wouldn't expect that necessarily either with the target profile of cabozantinib that includes VEGFR met (inaudible). Still, I think there are other mechanisms that contribute to the activity as well.

Okay, and then on CRPC for COMET-1 and 2, can you maybe discuss how many of the sites have started to enroll patients?

Not really. That is really a number that also changes day by day. We're not providing any guidance at this point regarding the (inaudible) patients.

And then I guess maybe one last question on COMET-1 specifically. With the PFS end point definition, is it consistent with the definition that you used in the NRE trial?

The PFS end point definition? I don't think we've talked about the PFS end point definition in detail. It uses the working group definition.

Great. Thank you.

And also, COMET-1 it's overall survival that we are evaluating. And also in COMET-2, overall survival is a secondary end point.

Ladies and gentlemen, this concludes the question and answer portion of our broadcast today. I'd like to turn the call back to Michael Morrissey for some closing remarks.

Okay. I want to thank you everybody for their time, attention, and interest. And we'll look forward to seeing you in the near future. Thank you.

Ladies and gentlemen, thank you so much for your participation today. This does conclude our presentation and you may now disconnect. Have a great day.