Exelixis Inc (EXEL) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter one 2013 Exelixis, Inc. earnings conference call. My name is Carolyn and I'm your Operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference.

(Operator Instructions)

As a reminder, the call is being recorded for replay purposes.

I'd now like to turn the call over to Charles Butler, Vice President of Investor Relations. Please go ahead, sir.

Thank you for joining us for the Exelixis' first-quarter 2013 financial results call. Joining me on today's call are Mike Morrissey, our President and CEO; Frank Karbe, our CFO; Scott Garland, our Chief Commercial Officer; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial and development process for the quarter ended March 29, 2013.

They also will discuss priority activities for the remainder of the year and provide an update on the COMETRIQ launch and ongoing clinical development activities for cabozantinib. As a reminder, we are reporting our financial result on a GAAP basis only, and as usual, the complete press release with our results can be accessed through our website at exelixis.com.

During the course of the presentation, we'll be making forward-looking statements regarding future events or the future performance of the Company, including statements about possible future developments 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 and in particular, the Company's quarterly report on Form 10-Q filed today, May 7, 2013.

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 the risk that unanticipated developments could adversely impact the launch, commercialization, distribution and availability of COMETRIQ, the degree of marketplace acceptance and reimbursement for COMETRIQ, risk and uncertainties related to compliance with applicable regulatory requirements, market competition, the availability of data at the referenced times and risk and uncertainties related to the initiation, conduct and results of clinical trials. And with that, I'll turn the call over to Mike.

All right, thank you, Charles, and thanks to everyone for joining us on the call today. We had a productive first quarter, and I'll take a few minutes to introduce today's call before Frank, Gisela and Scott dive into the details of our progress from a financial, clinical and commercial perspective. I'll start off by saying that the primary vision for the Company remains the same, that is to build cabozantinib into a significant oncology franchise by advancing it in multiple high-value indications.

Three key topics from the first quarter will continue to be our top priorities as we move into the second quarter and beyond. First, the approval and recent launch of COMETRIQ for progressive metastatic MTC is an important milestone for the Company. We launched COMETRIQ for metastatic MTC in late January. It's important to acknowledge that any new drug launch, whether large or small, involves a substantial and concerted effort across the entire organization, and we believe that this is reflected in the results we'll present today.

Before I move into the top line COMETRIQ revenue number for the quarter, please remember that our Q1 results are based on little more than two months of scripts. I'll risk stating the obvious here, but additional data from future quarters are needed to better understand the evolving sales trends for COMETRIQ. I'll also say now that we will not be speaking to any metrics beyond MTC, our labeled indication.

With that said, the net COMETRIQ revenue for nine weeks of the first quarter was $1.9 million. This is the only product revenue-related number that we'll provide today. Frank will discuss the COMETRIQ revenue in the context of the full first quarter financials and Scott review the MTC market dynamics in more detail in the commercial update.

Second, the clinical development program for cabozantinib is moving forward in multiple pivotal trials for additional potentially larger indications. Pivotal trials for prostate cancer, renal cancer and liver cancer are either ongoing or on track to start in Q3. We're also looking very closely at the RET fusion-positive non-small cell lung cancer indication as an additional opportunity. The COMET trials continue to progress and we expect top line data in 2014. Gisela will review our clinical progress along with our plans for the upcoming ASCO meeting.

Third, we believe we're operating from a position of significant financial strength due in large part to the funds we raised in 2012, coupled with the focusing of the Company's activities in operating expenses around the cabozantinib franchise opportunity. We ended the first quarter with $567 million in cash, which we believe provides us with a strong foundation to execute on our clinical plan for cabozantinib across multiple indications.

We made good progress for the quarter across all aspects of the business and continue to focus on executing our clinical development plan to build a potential franchise around cabozantinib across multiple indications. I'll pass the call over to Frank now for a review of our Q1 financials. Frank?

Thanks, Mike. As usual, I will focus my comments on the highlights of our financial performance in the quarter and refer you to our press release and today's 10-Q filings for additional details. Net revenue for the quarter was $9.7 million, of which $1.9 million related to the sale of COMETRIQ and $7.8 million to contract and license revenue. As is typical for first-time drug launches, we are for the initial period of our launch recognizing revenue based on the sell-through method, which means we are recognizing revenue when the specialty pharmacy ships product to patients.

Our gross-to-net discount in this initial quarter was less than 5%. It is too early in the launch to determine where this level out in the long run, but we do expect this percentage to increase as sales through programs subject to government mandated discounts increase.

During the first quarter we entered into the customary agreements to ensure access and reimbursement for Medicaid as well as Medicare patients. And we are in the process of finalizing our federal supply schedule with the VA. We expect these agreements will broaden patient access to COMETRIQ by the government mandated discounts and additional expenses to Exelixis to reduce out-of-pocket costs for certain patients.

Cost of goods sold amounted to $280,000 in Q1. These costs include manufacturing and distribution costs, as well as a 3% royalty on net sales for GSK. Please note that for the time being our cost of goods sold are not a good representation of our true manufacturing costs since the majority of the cost associated with our current inventory on hand had been expensed in prior periods.

R&D expenses for the quarter were $32.7 million, which is roughly in line with expenses in the same quarter last year. However, as compared to Q1 2012, expenses for outside services as well as for clinical trials increased, mainly driven by expenses associated with the launch of COMETRIQ, as well as the continued ramp-up of the COMET studies. These increases were offset predominantly by lower headcount expenses and lower allocations of general corporate cost.

SG&A expenses were $10.5 million for the quarter. The increase of $2.6 million as compared to Q1 last year was predominantly due to additional expenses in connection with the launch of COMETRIQ. The majority of these increase -- of this increase relates to costs for our sales force as well as advertising and promotional expenses. Lower allocations of general corporate cost to R&D also contributed to the increase in expenses.

Total costs and expenses for the quarter were $43.7 million. The increase of $2.9 million as compared to the first quarter last year mainly reflects the increased SG&A expenses mentioned a moment ago. We expect total costs and expenses for the remaining quarters of the year to be higher than in Q1, mainly driven by the COMET studies as well as activities related to the start up of our pivotal trials in HCC and RCC.

For other income expense, we incurred a net expense of $10.7 million for the quarter. The increase of $6.9 million as compared to Q1 2012 predominantly relates to the interest expenses associated with our 4.25% convertible senior subordinated notes due 2019 issued in August of last year.

Let me wrap up by commenting on our cash position. As you heard from Mike, we ended the quarter with approximately $567 million in cash. It is worth noting that in addition to funding our normal operating activities in Q1, we made our first bi-annual interest payment under our convertible notes issued in August of approximately $6 million.

We satisfied the first $10 million mandatory debt repayment under our Deerfield notes and we purchased Afinitor as the comparator drug for our RCC Phase 3 studies, worth about $6.3 million, which hit our balance sheet but not yet our P&L since the drug has not yet been received. With that, I will pass the call on to Scott.

Thanks, Frank. We made solid progress on the commercialization of COMETRIQ in MTC and are pleased with the execution thus far. With just nine weeks of product availability in the first quarter, we're obviously still early in the launch process and we look forward to continuing to drive COMETRIQ MTC revenues in the months to come. Our assumption regarding the size of the MTC market has not changed and we continue to believe that there are between 500 and 700 drug-eligible first and second line metastatic MTC patients diagnosed each year in the United States.

In the first quarter, our sales reps called on approximately 500 of the original 600 MTC targets, around 80% of our target base. Feedback from the field is that MDs are impressed with the overall efficacy of COMETRIQ in MTC and view the adverse event profile as similar to that of other TKIs in the oncology space. We have also received positive feedback regarding the support services provided by our specialty pharmacy diplomat. These services include reimbursement support, nurse adherence calls and patient assistance.

At launch we took a conservative approach when sizing our sales organization to pulling just five reps across the entire country. Since then, we have noted the MTC market appears to be less concentrated than we had originally anticipated. With fully 50% of the COMETRIQ MTC prescriptions coming from physicians that were not on our original target list. About half of our MTC scripts came from the community setting where the vast majority wrote for just one script.

We believe this data indicates that with two approved drugs in the MTC space, community physicians are becoming more comfortable treating MTC patients, and treatment is moving away from being consolidated in large academic medical centers. Based on this new data, we have decided to increase the sales team to 15 reps and 2 regional managers.

The additional 10 sales reps will allow us to more than double our list of MTC targets going from around 600 to over 1,400 MDs, thereby broadening our reach to the MTC prescriber base. The increase will also allow us to optimize the frequency with which we call on MTC targets, giving our reps more opportunity to educate prescribers on the risk benefit profile and proper use of COMETRIQ in MTC.

Finally, increasing the number of sales reps significantly reduces territory size, thereby decreasing what we call windshield time and improving sales reps' efficiency. Despite the increase, 15 sales reps is still small, even by oncology standards, and we continue to ensure that our resourcing for the MTC launch remains commensurate with the size of the market opportunity.

In terms of marketing, we have launched several waves of non-personal promotional programs, including direct mail, journal advertising, peer-to-peer programs and online advertising via traditional and mobile platforms. On the payer side, our payer field team has now called on all of our target payers, representing over 95% of covered lives.

While formal coverage decisions can take three to six months to be completed, several payers have already implemented coverage policies. As expected, these policies cover COMETRIQ for the labeled indication. Those payers that have not implemented formal coverage decisions continue to approve COMETRIQ through manual review processes.

Reaction to COMETRIQ has been favorable and we continue to believe that COMETRIQ will be covered to the labeled indication and consistent with COMETRIQ's Category 1 NCCN rating. As anticipated, our payer mix remains skewed towards commercial payers, which we believe is primarily driven by the demographics of the MTC market.

As Frank mentioned, we now have signed contracts in place with Medicare and Medicaid and we've begun to see use within these payer groups. In summary, it's been a busy quarter for Exelixis on the commercial front and I look forward to providing future updates on future calls. I'll now turn the call over to Gisela.

Thank you, Scott. In the next few minutes I will provide an update on progress of the development program for cabozantinib, specifically I will cover the status of the COMET trials, the startup of the RCC and HCC Phase 3 studies and activities in non-small cell lung cancer, particularly in RET fusion gene-positive non-small cell lung cancer. I will also cover at a high level planned presentations at this year's ASCO meeting.

But let me start with a brief update on our activities in MTC, both the clinical and regulatory activities and the medical affairs support for COMETRIQ. With the approval of COMETRIQ in the US for progressive metastatic MTC achieved and submission to the EMA in November 2012, we have made significant progress in bringing COMETRIQ to MTC patients.

The FDA approval was based on the primary endpoint of progression-free survival, or PFS, that showed a significant increase in median PFS from 4 months on placebo to 11.2 months on cabozantinib. We are projecting the mature data for the secondary end point of overall survival will be available in the 2014 timeframe.

As you recall, COMETRIQ has received a Category 1 NCCN rating for MTC in January 2013. We have deployed a small six person medical science liaison team as part of our medical efforts and the MSLs are supporting the product in the approved indication and they're also importantly supporting enrollment in ongoing studies for cabozantinib.

The review process of our EU filing is proceeding. The filing was accepted for review in November 2012. We're addressing the EMA's questions, and while we are awaiting the final opinion from CHMP, we have set up the infrastructure to make COMETRIQ available under a named patient use, or NPU program, in countries of the EU and in other regions.

This activity is part of our agreement with a Swedish Orphan Biovitrum, or SOBI. A named patient use program provides access to unapproved drugs for a single patient or a group of patients in a particular country. Products offered through NPU programs can be investigational, that is still in clinical trials, or approved in one country but not yet approved in the patient's home country.

Regulations governing NPU programs vary by country, but companies offering products through NPU can sometimes charge the product being administered. I'm happy to say that we have completed the start up activities and have now begun shipping drug to SOBI for NPU in the EU and other exUS regions. With those efforts underway, the clinical and regulatory effort is intensely focused on expanding the cabozantinib opportunity.

As we have discussed previously, we have a robust strategy for evaluating the compound in a variety of indications using internal resources for support of Phase 3 trials and working in partnerships with a wide array of individual physicians as well as cooperative groups through our collaboration with the National Cancer Institute's cancer therapy evaluation program, or CTEP, as well as through an investigator-sponsored trial program.

Now let me turn to the ongoing COMET trials, which are our two Phase 3 pivotal trials in metastatic castration-resistant prostate cancer. As you know, COMET-1 is focused on improving overall survival and COMET-2 is focused on pain reduction. We now have activated the majority of clinical trial sites and our patient recruitment and enrollment trajectory are in line with our expectations and we continue to expect the top line data from both COMET trials will be available in 2014.

If both trials are successful, the combined data package would demonstrate a survival benefit and improvement of pain associated with bone metastases. We believe that this would differentiate cabozantinib from other agents used in the treatment of CRPC and support the products activity profile in this indication. We are also advancing our plans to evaluate cabozantinib in the earlier line of treatment of CRPC patients prior to chemotherapy.

We are working on the details of the design of two Phase 1/2 studies. One evaluating the combination of cabozantinib with enzalutamide and one evaluating the combination of cabozantinib with abiraterone. We are planning to start these trials in the second half of 2013. Importantly, at the recent AACR Conference, interim data was presented from a Phase 1 investigator sponsored clinical trial of cabozantinib combined with abiraterone in men with CRPC. The data showed no dose limiting toxicities when cabozantinib at 20, 40 or 60-milligram daily was combined with full dose abiraterone of 1,000 milligrams daily. This is important Phase 1 information for our planned combination study with abiraterone.

Beyond enrolling the COMET trials, we are working very actively on the initiation of our two new Phase 3 pivotal trials in metastatic renal cell cancer and hepatocellular cancer, or RCC and HCC respectively. We have completed pre-Phase 3 meetings with regulatory authorities and are working very actively on starting these trials in Q3 of 2013.

Just as a reminder, the Phase 3 trial in RCC will be a 650-patient randomized open-label study that will compare cabozantinib with everolimus in patients who have received and progressed on at least one prior VEGFR Tyrosine Kinase Inhibitor. The primary end point will be progression-free survival, or PFS, and the secondary end point overall survival. No crossover between treatment arms will be allowed. Patient-reported outcomes, bio markers, safety and pharmacokinetics will be evaluated as exploratory end points. We are in the midst of study site selection and are planning a global execution of this study with balanced accrual weighted towards Western Europe, North America and Australia.

The HCC trial is a 760-patient study and will compare overall survival between patients who are treated with cabozantinib and those receiving placebo. Overall survival is the accepted end point in this indication and was the end point used to support approval of sorafenib as first line therapy for HCC. There is tremendous amount of enthusiasm for these trials in the community based on the early stage data and the planned Phase 3 trial designs.

The Exelixis team is in place and working hard to ensure that we initiate these trials later this year and we hope that these studies will support the next wave of indications for cabozantinib after metastatic prostate cancer.

In addition to these activities, we are actively considering a study in non-small cell lung cancer patients carrying the RET fusion gene. This genetic alteration is seen in about 1% to 2% of non-small cell lung cancer patients and it is seen in patients whose tumors are negative for EGFR, KRAS or ALK mutations.

Cabozantinib potently inhibits RET with nanomolar IC50 values. We have initial clinical data in a small group of such patients who received cabozantinib. This data has recently been published in Cancer Discovery by the group led by Naiyer Rizvi from Memorial Sloan-Kettering Cancer Center. Among three heavily pre-treated patients carrying the RET fusion gene, two patients received a durable partial response and one long-lasting stable disease.

Additionally, we had seen a response in a non-small cell lung cancer patient with the RET fusion gene in our ongoing Phase 1 study in Japanese patients. This data had been presented at the European Society of Medical Oncology Conference last fall. So three out of four patients with the specific mutation have shown durable response on cabozantinib.

On the basis of this data, we are currently evaluating the initiation of a study in RET fusion gene expressed in patients with primary end point of overall response rate. In such a limited and selected population, we believe a robust response rate could potentially lead to regulatory approval in the US.

Now turning to our IST and CTEP programs. The IST program and our collaboration with CTEP are also making good progress. The focus of both programs is to evaluate cabozantinib in different tumor types and to generate data that allows us to prioritize the next potential indications to enter into late-stage development. There are now over 25 ongoing or planned investigator-sponsored studies and 13 studies under the IND held by CTEP. The first randomized Phase 2 study under the CTEP IND have been initiated and more will follow in the next couple of months.

Now regarding these randomized Phase 2 studies, with a trial comparing cabozantinib versus weekly Paclitaxel in the treatment of platinum-resistant ovarian cancer that has started already. Two Phase 2 randomized studies conducted by the Cooperative Group Alliance are expected to start in quarter two. These are a first-line study in RCC comparing cabozantinib versus sunitinib and a study in ocular melanoma comparing cabozantinib versus temozolomide.

Also, a randomized trial in EGFR wild type non-small cell lung cancer patients who have failed chemotherapy that compares cabozantinib versus erlotinib versus the combination of cabozantinib and erlotinib conducted by ECOG has started patient enrollment recently.

So to summarize, we have made very good progress on multiple fronts. The COMET trials are actively enrolling, the new Phase 3 studies in HCC and RCC are expected to initiate in quarter three of 2013 and we are working on the initial steps for a potential start of a study in non-small cell lung cancer patients with RET fusion genes. And the IST and CTEP programs are advancing well.

Now to conclude the development overview, I will provide a brief preview of planned presentations at this year's ASCO Conference. For this year's ASCO meeting, nine abstracts have been accepted for presentation. Among these are a detailed analysis of overall survival and potentially predictive factors in our non-randomized expansion study in 144 CRPC patients treated with cabozantinib, which will be presented in a poster discussion session. Separately, imaging data from that study will also be presented.

A detailed translational analysis of our EXAM medullary thyroid cancer Phase 3 study assessing the population by RET or RAS mutation status will be presented as an oral presentation. And long-term treatment data from the Phase 1 study in patients with medullary thyroid cancer will be presented as a poster. Phase 2 experience of in-house IST and CTEP studies will also be presented and include poster presentations on a uveal melanoma cohort from our RDT study.

Pre-clinical data on cabozantinib's activity in urethral cancer and separately the clinical study designed and initial data for a Phase 2 study of bladder cancer conducted at CTEP. A Phase 1b CRPC study evaluating the combination of docetaxel and cabozantinib will also be presented, and the latter two presentations will be part of the trials in progress session.

And lastly, data from an investigator-sponsored trial in chemotherapy naive CRCP patients will also be presented. So we are looking forward to a comprehensive data update at ASCO in a few weeks. And with that, I will turn the call back over to Mike.

All right, thank you Gisela. I will keep my closing remarks short so we can move on to your questions. I'd like to thank all of our great employees for their hard work and dedication in helping Exelixis attain it's key goals, including the commercialization of the first indication for COMETRIQ, the continued advancement of the COMET trials, the expansion of the broad development program for cabozantinib and the aggressive management of cash and expenses.

Our commitment to patients and investors is to stay focused on these goals, to advance cabozantinib in multiple applications and to continue to build Company value. So we will stop here and thank you for your time and interest, and be happy to take your questions. Operator?

Thank you, Mike.

(Operator Instructions)

Lee Kalowski, Credit Suisse.

First one for you, Frank, on guidance, you had previously given us some OpEx guidance and cash year end guidance, has anything -- I didn't see anything in the press release or in your commentary, has anything changed on that front?

No, nothing has changed. I'm happy to reiterate those numbers, so the full-year revenue guidance we provided on the last earnings call was $16.3 million in contract and license revenue. Remember we did not provide, and will not for the time being, provide any revenue guidance related to the product sales of COMETRIQ. On operating expense, our total cost and expenses to guidance was $200 million to $230 million. And on cash, we expect to end the year at about $400 million. And all of those numbers still hold.

Okay, thanks. And as far as gross margins, I wanted to better understand your commentary. So it looks like we're about 15% COGS or 85% gross margins. Were you saying that you expect margins to actually deteriorate from here?

No, we certainly don't expect it to deteriorate. So the short answer to your question is that we expect gross margin to increase and that is mainly due to the fact that going forward not all components of our cost of goods sold will scale proportionally with product sales. And so gross margins I expect it to go up.

Okay and maybe one last question. You had talked about in Europe a named patient program and product is being shipped to SOBI, so should we expect international revenues to start flowing through next quarter or this current quarter?

Yes, we have in fact already made the first shipment to SOBI. And so in Q2 you can expect to see some revenue coming from that -- from those sales.

Okay, thank you very much.

Ted Tenthoff, Piper Jaffray.

Great, thank you very much and thanks for the thorough update, looking forward to an exciting ASCO and a lot of clinical trials getting started and ongoing. I have two quick questions, if I may. I guess the first one has to do with the kidney cancer space and some recent competitive updates that maybe changed the landscape, or maybe not so much changed the landscape with respect to how you guys have been looking at it. Does the panel outcome for tivozanib change the way you guys are prioritizing the liver cancer and/or kidney cancer studies that you've been considering for cabo? And then I have a quick follow up on new NSCLC study.

Yes, this is Gisela. So the plans for our renal cell cancer study have not changed in view of the outcome of the ODAC committee meeting. We have designed the study such that the primary end point is progression-free survival, which is an end point that has supported approval of multiple agents in kidney cancer before and in our regulatory interactions prior to start of the -- start up activities on the study has been positively received by regulatory authorities. We have sized the study such that we can access overall survival as a key secondary end point. We are not planning any crossover, and in that regard, the trial design has not changed at all. I think the issues at ODAC were really attributable to the fact that there was PFS benefit and there was obviously not an [OS] benefit but it seemed to be a decrement. Yes, so no change really.

Okay, cool, that's helpful. And then the question, Gisela for you as well, on that NSCLC study. So you said that you're going to go specifically after RET mutations in lung cancer, is that correct?

That is correct, that's under discussion right now.

Now remind me because I recall that this is both a RET and VEGF inhibitor and I think if I recall correctly, some of the Phase 2 data that you did in thyroid cancer showed that it was less of the RET, the activity was less RET driven than it was that is was VEGF driven. So maybe you can expand on that a little bit more with respect to how you see cabo hitting RET and maybe a little bit more on that rationale with respect to what you've seen in terms of potency against RET and some of the prior human experience.

Sure, thank you. So to speak for a minute about the MTC data, the medullary thyroid cancer data. RET mutations are very frequent in this population and we have seen, as you know very good activity and that ultimately got the product approved on the basis of large progression-free survival benefit. We've seen activity both in patients who had activating RET mutations and those who didn't. And we're certainly evaluating all the populations, so continue to evaluate all the populations. And the data that is to be presented at ASCO will drill a little bit deeper into the genetic makeup of the patients. But as you said, we've seen activity regardless of the genetic options. And now ask Peter Lamb to speak a little bit more about the RET population in lung cancer.

Yes, so the RET fusion-positive population in non-small cell lung cancer, which is about 1% to 2% of all non-small cell, looked like an interesting population to specifically target as we have pretty robust pre-clinical data that says that cabozantinib is a potent inhibitor of a wild type RET both in vitro and in cells and in pre-clinical pharmacodynamic studies. In addition of course, the data that was just published that Gisela referred to in cancer discovery from the Rizvi group, showed the very early experience with two confirmed partial responses and a third patient was prolonged stable disease. And then there was a fourth patient that was part of a Japanese Phase 1 study who also had a partial response on cabozantinib. So taken in combination, that's what's really leading us towards a focus trial in the RET fusion-positive population. That's not to say, as you alluded Ted, that we won't have benefit in other non-small cell lung cancer populations that don't have the RET fusion.

Or that you wouldn't get the added benefit of the VEGF activity in those patients.

Yes, exactly.

Awesome. Thank you very much for the update.

Imran Babar, Cowen

Yes, guys, great progress, very exciting. Was wondering couple questions, one if you could comment on COMET-1 and how compliance is looking for instance for that trial? And also if you could comment on the percent of patients that are being dose reduced.

Yes, so COMET-1 is ongoing as you know, and as I described actively accruing patients. As you would expect for a large global study, there is a lot of activity ongoing and monitoring the study, making sure that physicians adhere to the protocol and the trial is conducted in a compliant fashion. So that's all I can say at this point about the compliance aspect. And in terms of dose reductions, that's too early to say at this point.

Okay, any comments on enrollment timelines, any updates on that?

So as I said earlier, there's -- the trial is actively enrolling and our guidance towards data availability in 2014 has not changed.

Okay, great. And then I guess my last question is, going back to the lung cancer, wonder if you can give some -- potentially any color you would have on the [child], I guess the clinical development that you would have going forward for that, if there's any more color you can give on that?

Yes, I think if the encouraging early clinical data were to hold up and we have a high response rate in this population, I think in such circumstances single arm studies showing a high rate of [durable]responses can support regulatory approval in the United States. And so -- and that is an avenue that we are actively exploring right now.

Okay and do you have any thoughts on number of patients that might be needed for that?

Sure, so other -- in other examples that is in the order of 100 or so patients.

Great, thank you so much.

Joel Sendek, Stifel.

I have a follow up to that question, I guess when you're designing the lung study, will you go right for naive patients or would the -- aren't you there yet, I guess? Then I have a follow up on the marketing in MTC.

That is a very interesting question and certainly one that we will be discussing in detail both with key opinion leaders and have already discussed and then also with regulatory authorities. I think if there's a very robust response rate that emerges and one can make the case that line of therapy really should not be of much relevance. So one could potentially make an argument to go up front.

Right, okay, so you're still at work on that. Okay, and then as far as the marketing of -- and the increase in the sales force, I'm trying to figure out how to interpret that because on the one hand, you came in with decent numbers and things looked good. I'm wondering if you need to increase it in order to get more coverage which would be maybe bearish, or is it that the market is even bigger than you thought and therefore you need more sales people to exploit it? I'm wondering if you could help me with that?

Yes, Joe, it's Mike. I think it's a really good question. The data is obviously very early, we have a single data point here. Arguably two thirds of the data point from the standpoint of the Q1 numbers. But I think it's really a mix of both from the standpoint of being able to reach out and cover a wider target area at the same time as being able to I think really connect with all of the MDs that are prescribing or could prescribe the drug for MTC relative to the label, the AE profile, et cetera. So it's -- I think it's a very important component of what we're doing. We got data over the last quarter or so and I think based upon that data we are moving forward in this direction. Scott, do you want to -- ?

Yes, as I said on the call, we haven't changed our assumptions around the size of the MTC market opportunity. We did go out of the gate at launch with what I would call a conservative number of sales reps. We did that just because this was some uncertainty in the MTC's market opportunity and it's always easier to go out small and then expand if you have to. But this is really more about market concentration than anything else. We had made an assumption going into it that we would see these patients concentrated in large academic medical centers and we're seeing more use in the community. That's not surprising, I've actually seen this a lot, I saw it a lot at other companies. You see this with the renal cell market where more drugs become available, physicians in the community become more comfortable using them and they tend to refer at a later stage. So to me this is more about market concentration than anything else.

Got it. Okay, thanks a lot.

Thank you for that question, we have no questions at this time.

(Operator Instructions)

Okay. Well is there's no further questions then I again say thanks for your time and interest. We'll look forward to seeing you at ASCO in a few weeks. As a heads up, we'll have our investor briefing on Sunday night and we'll get the details out to you shortly. So thanks again and we will see you in Chicago. Bye.

Thank you. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect, have a good day.